New regulations to make lending requirements clearer
Published: 03 December 2020
New regulations under consumer credit legislation will ensure the requirements for companies that provide loans to consumers are clear, consistently applied and easy to enforce.
The regulations, made under the Credit Contracts and Consumer Finance (Lender Inquiries into Suitability and Affordability) Amendment Regulations 2020, mean that before approving a loan all lenders will need to:
- make consistent inquiries about the borrower’s needs and objectives, to help ensure the credit product is suitable
- verify the borrower’s income and expenses to be satisfied that the repayments are unlikely to put the borrower into significant hardship.
These requirements will not affect lending for business purposes. The requirements will be complemented by the Responsible Lending Code, which provides guidance for lenders on their obligations. The Ministry of Business, Innovation and Employment will soon consult on the Code to ensure it is updated in time for the new requirements coming into effect next year.
The regulations are a key part of reforms to the Credit Contracts and Consumer Finance Act. The reform package also includes interest and fee caps on high-cost loans, and increased penalties for irresponsible lending.
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