Government unveils changes to responsible lending rules

11 March 2022

On 11 March 2022, the Government announced that it will be making practical changes to the responsible lending rules to curb any unintended consequences caused by the amendments to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) and the Credit Contracts and Consumer Finance Regulations 2004 (Regulations), which came into effect on 1 December 2021. 

"The amendments we are making are informed by the feedback I received from banks, other lenders and consumers and sit comfortably within the intent of the Act,” Commerce and Consumer Affairs Minister David Clark said.

We understand that the initial changes to the Regulations and the Responsible Lending Code include:

  • Clarifying that when borrowers provide detailed breakdown of future living expenses there is no need to inquire into current living expenses from recent bank transactions
  • Removing regular 'savings' and 'investments' as examples of outgoings that lenders need to inquire into when assessing the borrower's future expenses
  • Clarifying that the requirement to obtain information in ‘sufficient detail’ only relates to information provided by borrowers directly rather than relating to information from bank transaction records
  • Providing alternative guidance and examples for when it is ‘obvious’ that a loan is affordable.

David Clark in a media release also stated:

"Following my meetings with the banks at the end of last month to hear their concerns, I detected little enthusiasm for wholesale changes to the CCCFA, but instead a preference for some practical amendments to be made to ensure the purposes of the legislation are best met.

"Meanwhile, a broader investigation, led by the Ministry of Business, Innovation and Employment and the Council of Financial Regulators, into the early implementation of the CCCFA amendments is ongoing.

"It must be stressed, today’s changes are not the final word and any further changes to credit laws and the Responsible Lending Code will be considered as part of the remainder of the investigation which is due next month."

It is not surprising to us that the prospect of further wholesale changes to the CCCFA were not met with enthusiasm.  We think this reflects more on the battle-weariness of lenders rather than whether the recent amendments are fit-for-purpose and we will watch with interest what further changes (if any) result from the investigation. 

Earlier this year, we published our thoughts on the recent amendments to the CCCFA and whether there is a case for a more "principles-based" approach to affordability requirements, following the approach taken in Australia.

If you would like advice on how this announcement may impact you, please contact a member of our financial services regulation team.