How the updated Credit Contracts and Consumer Finance Act (CCCFA) may affect you or your organisation?

With the imminent updates to the Credit Contracts and Consumer Finance Act on the 1st of December 2021, organisations and consumers are starting to think about how this may affect them and the markets they operate in. We spoke to Justin Lane, the Chief Risk Officer of ICBC NZ to understand the implications of these changes. 

What is CCCFA?

When you borrow money, the Credit Contracts and Consumer Finance Act (CCCFA) ensures that you can make informed choices, know what you are agreeing to, and can keep track of your debts.

The CCCFA requires lenders to act responsibly at all times. It provides protection when you: 

  • Take out a personal loan or mortgage
  • Use a credit card
  • Borrow money on an agreed overdraft
  • Buy products and services on credit (hire purchase)

What is CCLAA?

The Credit Contracts Legislation Amendment act put in simple terms, is an amendment that the government made to the act in 2019 which was recently delayed due to the latest lockdown.

How does this affect consumers?

If you want to buy a house, use a credit card, or get a loan (any consumer loan) then this will affect you in terms of very specific information you will need to provide to verify your income and expenses. Essentially, if you want something you can't pay for in full immediately, you're going to have to show that you have the means to pay it back. From December 1, the level of scrutiny around responsible lending will become tighter. 

Who is affected the most?

Aside from the consumer, any institution that lends money will need to ensure they have policies and procedures in place that have been reviewed and made fit for purpose. Senior Managers and Directors have specific due diligence obligations, which cannot be passed on to a single responsible person. Organisations that to an extent have so far stayed under the radar of the FMA or the Reserve Bank or other governing bodies may feel the pinch more than most.  

What does this mean for hiring?

Organisations may interpret the changes differently and it will impact organisations differently depending on how they work and what their consumer procedures currently look like. One thing is for sure though, the amendments are a dramatic shift in how lenders must assess consumer loans and the oversight Senior Managers and Directors must have over consumer lending. The Commerce Commission is the regulator and they have issued several very useful guidance documents. ComCom will decide in the end if each organisation is complying with the new world of consumer lending. 

The Senior Managers and Directors will need to make sure that everyone (or any automated activity) that is involved in the lending process is going about their business with the new compliance in mind. And eradicating anything that isn't. 

So, if you are involved in lending or consumer finance, it could be timely to reassess your capability when it comes to Compliance Management, Internal Audit and those who survey controls and processes. 

If you’re interested in discussing this further, please contact me on the details below:

Joe Whitfield
P: 09 374 7340
E: joe.whitfield@robertwalters.co.nz

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