On Sunday, we announced that the Government is reforming financial services to make it simpler to get a personal loan, while also strengthening protections against bad lenders.

When the affordability regulations were introduced into the Credit Contracts and Consumer Finance Act 2003 (CCCFA) in December 2021 by the previous government, the 11 pages of highly prescriptive regulations increased processing times for loans dramatically.

As journalist Luke Malpass put it in The Post, “it was a rare instance where the politically inept meets the practically stupid. Credit became far more difficult to get while the legal small money lenders suddenly found compliance costs – time primarily – driving them out of small loans. The thing meant to spare vulnerable people from predatory lending opened up a new market for loan sharks, while middle class people out for a mortgage – first home buyers especially – were made to feel under cross-examination.”

I heard stories of gangs targeting people in social housing and peddling loans to them. It is absolutely unacceptable that the very people these regulations were meant to protect have ended up being hurt the most.

The new changes mean that highly regulated lenders, like banks, credit unions and finance companies, will again have flexibility to decide how they assess whether someone can afford to take out a loan or arrange an overdraft.

I want to be absolutely clear: the CCCFA is not being revoked. There will still be a requirement for lenders to make sure that borrowers can afford loans. But lenders will no longer have to treat someone who wants a $1,000 overdraft the same as someone who wants a $1 million home loan.

And there’s more. While on the one hand it is important to make finance more available, it is equally important that safeguards are in place to help Kiwis who fall victim to bad lending practices. As part of these reforms, financial dispute resolution schemes will be strengthened.

There is more work to be done in phase two of the reforms to improve financial services for Kiwis. I will be consulting with businesses in the coming weeks on a further raft of reforms.