Latest / Best of Business / Jenee Tibshraeny: NZ Herald Wellington business editor on the Government's new reforms to lending laws

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Jenee Tibshraeny: NZ Herald Wellington business editor on the Government's new reforms to lending laws · Best of Business

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  Speaker 2: From today, the strict loan affordability regulations are gone or
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  Speaker 2: certainly changed from the Credit Contracts and Consumer Finance Act,
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  Speaker 2: henceforth known as the Triple CFA, which is a lot
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  Speaker 2: more catchy. And this ends the bizarre inquisitions that the
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  Speaker 2: banks used to make into your personal life before they
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  Speaker 2: denied you alone. Here's the big question that I've got
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  Speaker 2: for our Wellington Business editor, Jeanne tim Trady. Hello, Jenna,
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  Speaker 2: Hey Andrew. This is going to make getting money easier.
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  Speaker 3: I don't think it's going to make a really big
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  Speaker 3: difference in the current environment unfortunately. But the positive is
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  Speaker 3: it should be quicker to get a loan. So basically
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  Speaker 3: Commerson Consumer Affairs Minister Andrew Bailey has taken an ax
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  Speaker 3: to the Triple CFA. He's basically put a red pen
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  Speaker 3: through eleven pages of regulations. These are the ones that
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  Speaker 3: require lenders to be really prescriptive about the checks they
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  Speaker 3: do and whether you can or can't afford to take
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  Speaker 3: out a loan, so a mortgage or another type of
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  Speaker 3: loan for a car or for some shopping you need
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  Speaker 3: to do with something like that. So instead of requiring
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  Speaker 3: lenders to check your bank statements with a fine tooth
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  Speaker 3: comb to see if you can afford the loan, now
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  Speaker 3: lenders can use their own discretion, so they can take
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  Speaker 3: different approaches for different customers. It's really putting the onus
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  Speaker 3: on the lender to decide how best to assess affordability.
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  Speaker 3: The issue, Andrew is at the moment, interest rates are
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  Speaker 3: really high, and that is the thing that's preventing people
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  Speaker 3: from getting loans. So you know, whether you buy too
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  Speaker 3: much takeaways or whatever isn't as much of an issue
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  Speaker 3: as the pure fact that the interest rates are just
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  Speaker 3: really high. The thing that will help is if these
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  Speaker 3: processes that the lenders have to follow are a bit
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  Speaker 3: more simple, that should speed up the loan application process.
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  Speaker 2: I was talking earlier to such a lockly who's from
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  Speaker 2: the social lender money sweet spot, and I said that
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  Speaker 2: the rules were drawn up to stop loan sharks in
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  Speaker 2: the first place, but the problem with them, the unexpected
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  Speaker 2: consequence was that it also stopped banks from issuing smaller
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  Speaker 2: loans in particular, which ironically drove people back to loan
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  Speaker 2: sharks again. So now my question will be now, with
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  Speaker 2: all those regulations gone, will the loan sharks be back
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  Speaker 2: in business?
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  Speaker 3: Well, that is such a good question, Andrew, and I
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  Speaker 3: mean I don't know the answer to that. That the
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  Speaker 3: tinkering that's happened with this piece of legislation has been extensive.
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  Speaker 3: So the previous government relaxed the rules in May twenty
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  Speaker 3: twenty three in July twenty twenty two after changes made
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  Speaker 3: in December twenty twenty one were deemed to be too
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  Speaker 3: heavy handed and too problematic. So it's yet to be
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  Speaker 3: seen whether Andrew Bailey has struck the right balance here.
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  Speaker 3: I mean, it is really difficult when so many different
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  Speaker 3: types of lending are captured by one piece of legislation.
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  Speaker 3: You know, it's very different if if you're trying to
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  Speaker 3: get a five hundred thousand dollars mortgage versus if you're
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  Speaker 3: trying to get one thousand dollars for groceries, if you
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  Speaker 3: know what I mean.
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  Speaker 2: I absolutely know what you mean. But also today, I
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  Speaker 2: mean it was like it was like right after a budget,
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  Speaker 2: you know, this was the day. It was like Match
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  Speaker 2: thirty first. Really, so many changes loans to value ratio
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  Speaker 2: went as well, and everybody say, this is all a
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  Speaker 2: great day for first home buyers, and I decided I
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  Speaker 2: came up with the idea that maybe we're still in
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  Speaker 2: the dark tunnel, but we're a third of the way
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  Speaker 2: through and we can see the light right now, and
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  Speaker 2: it's about time we started getting our mojo back.
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  Speaker 3: What do you reckon, Well, I'd love love it if
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  Speaker 3: we got our mojo back. I mean, you know, some
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  Speaker 3: of these rules are really there to protect us from ourselves,
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  Speaker 3: you know, in terms of the loan to value ratios
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  Speaker 3: are another one. You know, it is important that people
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  Speaker 3: don't take out more debt than they can realistically service.
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  Speaker 3: So I think with the triple CFA changes, he said
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  Speaker 3: LVR rules, the Reserve Bank is loosening them only a
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  Speaker 3: little bit, so they're not as heavy handed in terms
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  Speaker 3: of the sign of the deposit that you need when
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  Speaker 3: you borrow money. But then they are introducing a new
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  Speaker 3: rule which is requiring you to have a certain amount
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  Speaker 3: of income compared to the debt that you want to
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  Speaker 3: take out. That's those debt to income rules that have
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  Speaker 3: been debated now for many years. So there's quite a
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  Speaker 3: cocktail of things happening in the background. The thing that
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  Speaker 3: I think everyone is looking out for is interest rates
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  Speaker 3: and interest rate cuts and whether the first i CR
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  Speaker 3: cut will in fact be in coming months.
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  Speaker 2: Yes, but at the same time today we hear about
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  Speaker 2: inflation in Australia and we're expecting interest rate rises over
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  Speaker 2: there to the four percent level, so you know, you know, boy,
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  Speaker 2: it is a big milanch. Hey, Jinny, I thank you
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  Speaker 2: so very very much for your time today, Jenne Tebrishaney
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  Speaker 2: Tim Triney, who is our well int business editor.
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