Commerce and Consumer Affairs Minister David Clark says he wants to move quickly to make changes to the consumer credit law but they are likely to be tweaks rather than a major rewrite of the law.
The Credit Contracts and Consumer Finance law was tightened on December 1, forcing lenders to require much more information from borrowers about their financial circumstances before deciding whether to lend to them.
That prompted a raft of complaints by consumers turned down for mortgages over their spending on Netflix, takeaways or even being told they need to cut visits to a counsellor in order to meet the lending criteria.
Last month Clark announced a review of the changes by the Ministry for Business, Innovation and Employment and today he told a conference held by the Financial Services Council that he had asked officials to analyse media reports to see whether they were attributable either to the Act's intended protections, to unintended consequences or to any other external factors like global economic conditions, consumer willingness to borrow, the OCR or loan-to-value ratio changes.
"I'm expecting to receive official advice not too far away but banks have suggested their preference for tweaks rather than wholesale changes and they have made some very constructive suggestions which we are taking into consideration."
Clark said it was important to keep the context in mind.
"The changes to the CCCFA were introduced to address issues that we were hearing directly from consumers who had taken on debt they couldn't afford across all types of credit products and all types of lenders.
"In 2019 nearly one in five consumers reported some sort of credit repayment difficulty and that meant they were living in hardship either moderate or severe according to consumers."
He said the Government wanted to make sure lending wasn't causing ongoing hardship.
"Ultimately we know that every customer can become a vulnerable customer if they take on the wrong debt, if they take on debt they can't afford, and that is what this legislation is trying to prevent."
Clark said the purpose of that Act had been agreed by the banks, by the sector and the Opposition who supported the bill.
"We do want to make sure that people don't fall into hardship. We want to make sure our financial markets are more sustainable in the long term."
Asked how quickly tweaks might be made Clark said he wanted it to be sooner rather than later.
"There are some things the banks, when I have met them have come to me with, which I think are really sensible and need to be properly considered - some of the ways in which things are counted as expenses - like savings - just don't feel right at an intuitive level to me.
"I want to pick through that carefully and I do want to make some no regrets changes sooner rather than later because ... we want the legislation to be effective."
He said there were other factors at play which were hard to separate out.
"I got a list of all the media stories over the summer and a significant portion, if not the majority, mentioned were stories about people that didn't have a 20 per cent deposit and the story was it was the CCCFA. Well it may have been LVRs playing a role in there or banks being reluctant to take on risky lending - we have to be careful to pick out what different factors are."
He also pointed to the seasonal drop in lending which happened every year in December and noted that while it was down on 2020 it was still up on prior years.
'We have got to be careful to work out what is the intended effect, because any borrower can become vulnerable if their life circumstances change and they have taken on debt that was not affordable to them and that is the lending we want to stop.
"We want to see people getting good advice, having confidence and taking on debt where they can afford it. But we want to separate out if there are unintended consequences in there - of course we want to stop them and make sure the legislation is working as intended."
But Andrew Bayly, National's spokesman on Commerce and Consumer Affairs, who spoke after Clark at the conference, said while all parties supported the bill, the intent of it was to deal with high-cost lenders.
"Where we have ended up through the regulations is capturing everyone in terms of the regulated financial institutions such as banks and credit associations but right through to the high-cost lenders.
"I think the balance there is wrong. We have still to suggest how to fix it quickly. And we just hope we will be able to be part of that process.
"We do need to make sure we get it right that people can get access to credit but also we protect the vulnerable which was the intent of the bill."