Commerce minister David Clark has asked MBIE to undertake a review and last week told a finance conference that he intended to move quickly to make tweaks to the law.
Speaking after Heartland Group Holdings declared a net profit of $47.5 million for the six months to December 31 Flood said the CCCFA change was something it had been thinking about a lot.
"From my perspective the way the regulations are written it is very prescriptive, so there are certain things you have to do and then you are also confronted with some vague concepts like obvious and reasonable."
Flood said he was less concerned about the bank's mortgage lending as it only did loan refinancing to low loan to value ratio customers and those with a high income to debt ratio.
Heartland Bank has a largely digital-only strategy for its New Zealand home lending but will this week rope in its motor vehicle processing team to help with the home loans - previously they had been two separate teams.
But Flood is much more concerned about its motor vehicle lending.
"The area that I am most concerned about is our motor lending. If you look at the intent of the law - I haven't spoken to a banker that doesn't like the intent of the law, let's get rid of predatory lending and I think it is a curse on the lower socio-economic who can get caught in those debt traps.
"But what we are seeing is our decline rate in motor vehicle increase, it doesn't mean those borrowers aren't buying cars, but what they are doing is financing them further down the non-bank market and typically paying higher interest rates and I think it has the potential to create the exact opposite of what the act was intending to drive. I think clarity from the review will be important."
Flood said its loan impairment rate was historically low before the CCCFA was introduced and while it had risen slightly in its half-year financials it was still below the bank's prior periods.
But its decline rate had blown out dramatically.
"It has seen my decline rate for motor vehicles increase three-fold while I have increased the number of staff I have assessing that by four times. I am writing less business, got more staff employed to do it, and I think that the people we are saying no to are probably getting their finance somewhere else, it is problematic."
Flood said it believed those who were approving the loans could be in breach of the law although it may be a difference in risk appetite as well.
"It is often not a level playing field and some organisations are prepared to take more risk.
"Our advice from our commercial lawyers, and it is not just one firm but two is that we are compliant. And if we were to do the things that we are turning down we would not be compliant.
"As a commercial enterprise I don't want to employ more staff to lend less money. There is no incentive for me at all."
Flood said he was hopeful the review would come out with some sensible guidance.
"We still clearly have to take care of the vulnerable but most people we lend to don't fall into that camp. And it must be incredibly frustrating for middle New Zealand who now have to go through an interrogation process when they want to change mortgages from bank to bank or look for some more consumer debt."
He did not believe banks should be excluded from the law change.
"I think everyone should be captured by that but the actual reality of how it is written - the requirements are such that it is prescriptive and you have to do certain things.
"Add that to the fines that my staff or me or the board if they get it wrong means you have this position you have now where fewer homes are being sold, you can see car sales drop and it has the potential to be - in my view it needs to be remediated."
