Commerce and Consumer Affairs Secretary David Clark has called for a planned investigation into lending law changes to be introduced. Photo / Dean Purcell
Commerce and Consumer Affairs Secretary David Clark has called for a planned investigation into new home loan regulations amid concerns that banks are getting too hard on the guidelines.
The government made a number of changes to the CCCFA late last year, with officials saying the move would mean the Kiwi can expect better protection from high-cost loans and unsustainable debt.
But since it was introduced in the lead-up to Christmas, there have been numerous reports of potential homebuyers being held back on mortgage applications due to their spending habits — including the amount of takeaway or restaurant meals they’ve bought, or local travel.
Tonight Clark said: “As we are in the early days of new regulations to protect at-risk borrowers, I have asked the Council of Financial Regulators (COFR, which includes the Reserve Bank, the Treasury, the Financial Markets Authority, MBIE, and the Trade Commission) to direct their investigations into whether banks And lenders are implementing the CCCFA as intended.
“Banks seem to be managing their lending more conservatively at the moment, likely due to global economic conditions.
“It may also be that in the first weeks of implementation of the new CCCFA requirements there was a decision to unjustifiably err on the side of caution.”
Clark said that “a number of factors that affected the market occurred at the same time as the CCCFA changes,” including increases in the official cash rate (OCR), loan-to-value (LVR) changes and increases in home prices and local government rates.
“The COFR investigation will determine the extent to which lender behavior is, in relation to the CCCFA, a significant factor in changes to banks’ lending practices,” Clark said.
Law leader David Seymour said the “good news” is that Clark has asked the Council of Financial Regulators to quickly investigate changes made in December to the Credit Contracts and Consumer Finance Act.
But he said what he wanted was “a realization” that “must be real”.
“I keep hearing about people getting rejected or being rejected for strange reasons,” Seymour said.
“Today I heard about someone who missed out on credit for spending so much on his cat, and another because their kids were sharing a room. The Minister should take this craziness seriously and not accept a weak investigation.
“David Clark needs to recognize that this issue is serious and will not go away. With the madness spreading, he needs to take responsibility. I will continue to pressure the Finance and Expenditure Committee to address this issue if the Secretary does not detail a serious investigation.”
When the changes were introduced in early December, Clark said: “Today’s changes require all lenders to complete comprehensive checks to ensure loans are appropriate and affordable for their clients, preventing them from entering into debt that they simply cannot afford.
“It is extremely important to protect the Wanau people from falling into the trap of taking on unsustainable debts, and to stop those who take advantage of those in vulnerable circumstances.”