The CCCFA debacle

Luke Malpass writes:

OPINION: Minister of Commerce and Consumer Affairs Andrew Bayly has announced that the Government will be revoking the affordability regulations contained within the Credit contracts and Consumer Finance Act. …

The new CCCFA made getting a mortgage far more onerous and made people looking for mortgages feel like they were in front of some sort of star chamber. …

In one of the really stunning — but largely unacknowledged — own goals of the Ardern government, the CCCFA introduced some 11 pages of prescriptive instructions to banks and financial institutions. Taken together they were called affordability regulations. …

Prior to the changes being brought in, the Government was warned by the banking sector that the new requirements would add to the cost, time and complexity of new lending as well.

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.

Bayly seethes at the idea that the previous regime helped protect the most vulnerable.

“At the moment, there is no discretion: If you front up and say ‘I want 500 bucks’ or if you fronted up and said ‘I want a million dollars to buy that that’. Lenders should be able to use their judgment on a case-by-case basis and we’re going to reinstate that,” Balyy said.

The regulations were a debacle, and a great example of how good intentions and a lack ion real world understanding can lead to awful outcomes.