One mother said a bank told her he would not consider giving her a mortgage unless she returned to work within 90 days of giving birth.
She is one of the many people who have spoken to Otago Daily Times Following government changes to the Credit Contracts and Consumer Finance Act (CCCFA).
The rule changes were intended to protect borrowers from loan sharks, but they have prompted banks to scrutinize more closely the spending habits and personal finances of mortgage seekers.
the woman who ODT Agreeing not to be named, she said she felt “totally shocked and totally discriminated against” after ANZ told her, through its mortgage broker, that it had changed its policy on maternity leave for borrowers.
A spokeswoman for the bank acknowledged that as a result of the CCCFA, it imposes stricter standards for customers who take parental leave for more than 90 days, but said there has been no change in policy.
In early December, when the woman was in the late stages of pregnancy, she and her partner were looking to refinance their home.
A family member, who had recently passed away, financed them at home but after their death they were looking to get a mortgage through a bank.
The couple, who now has a 3-week-old baby, was working with a mortgage broker to help them secure a loan.
The woman finished her job in early December and planned to take 12 months of leave, nine of which would be paid – three months by the employer and six months covered by the government’s paid parental leave scheme.
The woman said that after her last pregnancy, she took seven months off but wanted to take a full year this time to be able to spend more time with her newborn.
“It’s a really special time and I wanted to be there for him.”
The couple applied to ANZ, which returned with questions such as their financial situation, but also asked if they intended to return to work after maternity leave.
She said she expected to face questions about their financial situation – “which I totally understand” – but the question about her plans beyond the 12-month period was “very personal”.
“The decisions I make after that time should be my own and not depend on the bank,” she said.
On January 7, the mortgage broker sent them an email from ANZ stating that the bank had changed its maternity leave policy.
The bank said it will now no longer offer mortgages to people who have opted out of work for more than three months.
The woman said she thought they could afford the mortgage with or without her income.
“I mean, we knew we could afford it — and if we didn’t, we wouldn’t have applied,” she said.
While she was confident she would be back at work, she didn’t think it was the right place for the bank to tell new moms when they should come back.
“It’s completely discriminatory and there’s no need for it,” she said.
The couple was now looking to borrow through other banks.
When called for a response, an ANZ spokeswoman said the bank had not changed its parental leave policy.
But under the new CCCFA rules, a lender must take any potential income changes into account when assessing affordability, she said.
“Our policy reflects that requirement,” she said.
If a customer applying for a home loan is taking parental leave and has confirmed that they will return to work within 90 days of the approval date, the bank will include their potential verified income at return in their affordability assessment.
But if the customer is to return to work after more than 90 days, the bank will need additional confirmation from the customer’s employer that they intend to return to work and confirmation of their potential income upon return, she said.
Lending laws intrude on people’s personal status: Seymour
New Zealand law leader David Seymour says denying women a mortgage because of their 12-month maternity leave is another example of government lending laws not working.
Mr. Seymour wrote to Commerce and Consumer Affairs Secretary David Clark and Parliament’s Finance and Expenditure Committee earlier this month outlining his concerns about the effects of the rules.
The Dunedin Woman case was an example of how CCCFA rules affect personal life.
“The rules interfere in people’s personal affairs to a level that serves no real purpose whatsoever,” he said.
Mr. Seymour believes that banks were only reacting to poorly written legislation, especially now that senior managers and directors are personally responsible.
“If they get it wrong, they are liable to a fine of $200,000.”
After several days of public pressure last week, Dr. Clark ordered an investigation into whether banks had overreacted to the new lending rules.
He said banks are likely to cut back on lending due to global economic conditions.
“I have asked the Council of Financial Regulators (the Reserve Bank, the Treasury, the Financial Markets Authority, the Department for Business, Innovation and Employment and the Committee on Trade) to submit their investigations into whether banks and lenders are implementing the CCCFA as intended,” Clark said last week.
Mr. Seymour welcomed the investigation, but said he needed to consider the real implications it had.
“He needs to talk to real people about the real problems they are facing,” he said.
Mr. Seymour believed that a Select Committee inquiry, carried out by Parliament, would be more transparent.
Dr. Clark declined an interview request.