The government is making changes to its controversial credit laws, following allegations that it was preventing mortgages and other loans from being granted to some well-off people.
By Kathryn Armstrong
The rules were changed in December in an attempt to protect people from loans they couldn’t pay back.
However, it meant that banks and other lenders had to take a much closer look at people’s spending when assessing financial situations, especially when it came to their spending.
“Someone would go bungee jumping and then the bank would say, ‘How often do you go bungee jumping?'” said economist Tony Alexander.
He believes that part of the problem was that banks were worried about receiving huge fines if they didn’t implement the new rules correctly, they became incredibly cautious.
Trade Minister David Clark said the problem was how the rules were being interpreted.
He said that the rules have now been clarified to make it easier.
This includes specifying that when borrowers provide a detailed breakdown of future living expenses, there is no need to refer to current living expenses from recent bank transactions.
Lenders also don’t need to treat a loan applicant’s regular savings as expenses.
“In very simple terms, it means that banks don’t have to dig through your bank statements for the past several months,” Alexander said.
They can take your word for what your expenses will be in the future.”
In the meantime, a broader investigation into the early implementation of the December CCCFA changes continues.
David Clark said that, so far, there is no reason to believe that the new laws are the main driver of the loan reduction.
ACT leader David Seymour welcomed the clarification of “exaggerated lending rules that made people choose between Netflix and a mortgage.”
Seymour said ACT had been calling for changes to the law since January after the effects of “were crippling for those looking for a loan.”
“The occasional flat white should never have been a reason to keep a first-time homebuyer off the market.”
Tony Alexander said that while it is too early to see a big change in the amount of money being lent, there have been other noticeable effects.
“Applications that were being sent to banks, to mortgage brokers, really started to go down substantially from probably just before Dec. 1, in part because of loan-to-value.”
Financial mentor group FinCap said they have noticed positive changes since December’s change in the law on lending.
North Harbor Budget Service financial mentor David Verry said the reforms have meant payday or mobile lenders like truck shops have mostly disappeared.
“The number of people who came to us before, had clients who had five or six payday loans, now I don’t see any payday loans, or anything like a payday loan,” he says.