Government improves access to home loans

Commerce and Consumer Affairs Minister Andrew Bayly. Photo: RNZ/Samuel Rillstone.

The Government is reforming financial services to improve access to home loans and other lending, and strengthen customer protections, Commerce and Consumer Affairs Minister Andrew Bayly and Housing Minister Chris Bishop announced today.

“Our coalition Government is committed to rebuilding the economy and making life simpler by cutting red tape," says Bayly.

"We are revoking 11 pages of overly prescriptive affordability regulations, introduced by the last government, to enable Kiwis to access finance with confidence.

“These regulations created unnecessary compliance costs and are an excessive barrier for lending. And worse, the regulations failed to protect the most vulnerable Kiwis – the very people they were intended to safeguard.

Bayly says when the affordability regulations were introduced into the Credit Contracts and Consumer Finance Act 2003 (CCCFA) in December 2021 it threw a bucket of cold ice over banks and financial providers by prescribing minimum steps to assess the affordability of a loan.

"The overly arduous checks meant the time it took to process loans dramatically increased," says Bayly.

"Lenders told me that a small loan that used to take two hours to process suddenly took up to eight hours.

“This meant it was no longer affordable for many providers to offer small loans. It became very difficult for everyday Kiwis, who need $500 to fix their broken-down car, to access a safe line of credit.

"They were effectively frozen out of the market and many vulnerable Kiwis were instead forced to borrow from high-interest loan sharks,” says Bayly.

Housing Minister Chris Bishop says the time it took to process a home loan increased substantially and thousands of Kiwi families, who would have previously qualified, were locked out of the market.

“The changes announced today will make the home loan application process simpler for hardworking Kiwis who have diligently saved to buy a house," says Bishop.

“Home buyers have had it hard enough over the past six years under Labour, what with extraordinary house price inflation, interest rates that went through the roof causing untold pain, and these ridiculous CCCFA changes making it much harder to get a mortgage.

“The previous government tried to amend the regulations, but they failed to fully address these unintended, bad outcomes. Lenders are still required to treat all borrowers with the same amount of risk regardless of whether they want a $1,000 overdraft or $1 million home loan."

Bayly says today’s changes will still require lenders to act responsibly and ensure lending will not cause hardship, but lenders will not have to follow a prescriptive, one-size-fits-all process.

This announcement is part of the National-ACT coalition agreement to update the CCCFA to protect vulnerable consumers.

Revoking the affordability regulations is accompanied by a package of reforms also announced today.

The government has made regulations that:

  • Improve dispute resolution to better protect consumers.
  • Exempt councils from the CCCFA so they can offer low-risk financial products to help households improve their energy efficiency by installing heat pumps and insulation.
  • Remove duplicate reporting requirements.

“This is only the first phase of financial reforms. We will open public consultation on a range of matters in the coming weeks, including other known pain points,” says Bayly.

"Kiwis must be able to access financial services safely without unnecessary hurdles. These reforms reinforce our government’s commitment to provide regulatory clarity, protect vulnerable consumers, and grow the economy.”

Financial dispute resolution schemes

Today’s announcement is accompanied by changes to the dispute resolution scheme, which will improve dispute resolution services to better protect customers.

The rules of the four approved financial dispute resolution schemes will be aligned and the maximum amount the schemes can award will increase to $500,000. This means that more consumers will be able to settle financial disputes without going to court.

A further step for improving access to high quality dispute services is the Government’s support for the proposed merger of the Insurance & Financial Services Ombudsman Scheme (IFSO) and the Financial Services Complaints Limited (FSCL) from July 1,2025, which was announced earlier this week on Friday April 19.

This will help streamline services, create operational efficiencies, and remove duplication.

The four approved financial dispute resolution schemes are the Banking Ombudsman, the Insurance and Financial Services Ombudsman, Financial Services Complaints Limited, and the Financial Dispute Resolution Service.

New role for Financial Markets Authority
Today’s announcement follows the proposal to transfer the responsibilities for overseeing CCCFA from the Commerce Commission to the Financial Markets Authority, announced by Minister Andrew Bayly in January this year.

FMA is already the conduct regulator for the financial sector. Moving the CCCFA into their remit, makes sense as it relates to financial conduct. This change better aligns with the existing roles and responsibilities of the various financial service regulators.

Financial services reforms
Cabinet has agreed to the following phase one changes:
• The rules for the four approved financial dispute resolution schemes are being aligned. The regulations providing for Dispute Resolution Scheme rules changes will be in place by July 18. Financial Service Providers (Rules for Approved Dispute Resolution Schemes) Regulations 2024.
• Local authorities will be exempted from the CCCFA to allow them to administer voluntary targeted rates schemes – such as loans to install insulation or heat pumps – without incurring unnecessary compliance costs. This exemption will take effect by April 25. Credit Contracts and Consumer Finance Amendment Regulations 2024.
• Entities whose primary business is non-financial goods and services, such as certain car dealers, will be fully exempted from duplicative reporting requirements under the CCCFA by 25 April. Credit Contracts and Consumer Finance Amendment Regulations 2024.
• The detailed requirements for assessing the affordability of loans will be revoked in coming months.
• The Responsible Lending Code will be updated to clarify for lenders how they are expected to ensure lending is affordable once the affordability regulations have been revoked.
• Redundant Covid-19 exemptions from the CCCFA will also be removed.

Phase two reforms:
The next stage of reforms will further streamline the CCCFA, Financial Markets (Conduct of institutions) Amendment Act 2022 (CoFl) and Financial Service Providers (Registration and Dispute Resolution) Act 2008. Public consultation on these reforms will commence in the next few weeks.

Cabinet has agreed to progress the following phase two changes:
• Reviewing the CCCFA to address areas of under-performance, including the liability settings and disclosure obligations.
• Reviewing the CCCFA’s high-cost credit provisions to ensure there is adequate regulation surrounding these lending practices.
• Improving the effectiveness of the financial dispute resolution system.
• Making amendments to support transferring responsibility for the CCCFA from the Commerce Commission to the FMA.
• Clarifying the requirements of the CoFI regime and reviewing the conduct licensing  framework in the Financial Markets Conduct Act to ensure there is balance and flexibility

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