Source: FinCap
FinCap is disappointed that the Consumer Affairs Minister has indicated changes to current legislation that could lead to directors and senior managers no longer being held personally liable for breaches of the Credit Contracts and Consumer Finance Act (CCCFA).
Currently, a director or senior manager can be fined up to $200,000 if their bank or finance company has inadequate processes in place to ensure it lends responsibly.
FinCap senior policy advisor Jake Lilley says financial mentors have observed that the due diligence duty and personal liability settings are likely a factor in lenders across small and large institutions taking community concerns about potential CCCFA breaches more seriously.
“We have recognised less irresponsible lending since the introduction of the due diligence duty and personal liability for decision makers at lenders,” he says.
FinCap is also disappointed that the Minister’s earlier view that high-cost credit provisions should be lowered to contracts with 30 percent per annum interest has not transpired.
“Loans with over 30 percent per annum interest are high cost for most whānau and especially for those seeking financial mentor’s support.
However, we are pleased to see the high-cost credit protections endure through a change of Government. These are preventing a repetition of some of the most egregious and predatory lending from the past.
“FinCap will continue to work closely with regulators and encourage borrowers and their financial mentors to reporting irresponsible lending to the relevant regulator.”
Meanwhile, Cabinet has also agreed to require consumer credit lenders to hold a licence with the Financial Markets Authority (FMA).
Mr Lilley says FinCap supports this move.
“We believe licensing will allow the FMA to prevent irresponsible lending practices in a more timely manner. Now is also a good time to improve regulator visibility of debt collection markets through licensing.
“We want regulators to keep an eye on debt collectors and to prevent harassment or coercion to meet unreasonable demands for payment that can potentially lead to child poverty.”
As previously signalled, the FMA will become responsible for overseeing the CCCFA. Permanent Commerce Commission employees who currently do this work will be offered jobs at the FMA.
