National has proposed a draft Bill to undo the adverse impact prescriptive credit regulations are having on mortgage lending, National’s Housing spokesperson Nicola Willis says.

“We have written to Commerce Minister David Clark asking that he urgently adopt Andrew Bayly’s Credit Contract and Consumer Finance (Reasonable Inquiries by Regulated Financial Institutions) Amendment Bill.

“The Bill would ensure regulated financial institutions, including the major trading banks, are able to apply appropriate discretion over their lending decisions, as has historically been the case.

“We share widespread concern that regulations issued by the Government under the amended CCCFA, combined with the threat of large fines, are forcing banks to become overly conservative in approving home loans, particularly to first time buyers. 

“The regulations have resulted in banks engaging in intrusive auditing of potential borrowers’ spending histories and Kiwis having their loan applications rejected for absurd reasons like buying takeaways too often, subscribing to Netflix or going to therapy.

“The CCCFA amendments were intended by Parliament to target predatory and high-risk lenders, not to force Reserve Bank regulated financial institutions like banks to reduce their mortgage lending nor to remove the discretion they have historically exercised over lending criteria.

“The Government has taken a blanket approach which subjects banks to the same set of highly prescriptive and draconian regulations as high-risk pay-day lenders – despite banks already being subject to an overarching set of mortgage lending standards enforced by the Reserve Bank.

“To date the Minister has kicked these issues for touch, commissioning a review to be conducted by the same Government agencies who created the problematic regulations in the first place.”

National’s Commerce spokesperson Andrew Bayly says the Bill amends the regulation-making powers of the CCCFA 2003 to allow for different sets of regulations to be issued for regulated financial institutions than other types of lender.

“There is a categorical difference between regulated financial institutions issuing long-term mortgages at low interest rates and other types of higher-risk, shorter-term loans issues by other lenders for different purposes. This Bill would require the Minister to take their differing scale and risk profiles into account when setting regulations for their lending activity.

“We want to work with the Government to get this legislation passed. This an immediate issue with the hopes and financial futures of thousands of Kiwis at stake. We urge the Government to properly consider our proposal.”

You can read our letter to Minister Clark here, and a copy of our new amendment Bill here.