The Government has passed a new law requiring finance companies to be licensed but they will have until May 2015 to comply - nine years after the first finance company collapsed.

The Non-bank Deposit Takers Act 2013 is expected to come into force by May 2014 and will give the Reserve Bank new powers to detect and intervene should a company become distressed or fail.

Non-bank deposit takers, which include finance companies, building societies and credit unions, will have up to a year after the law comes in to become licensed - a move which requires them to have suitable directors and senior officers.

A Reserve Bank statement said the law would not eliminate the risk of a firm failing but aimed to reduce the risk and prevent significant damage to the financial system.


But Tim Rainey, a lawyer who represents some former Hanover Finance investors, said it was disappointing the legislation would take so long to come into force.

"Obviously this was part of the legislative sweep up in response to the systematic failure of non-bank deposit takers," Rainey said. "It was clearly regarded as important in trying to protect against another Hanover or Bridgecorp. From that perspective it really is an example of the problem with regulators failing to keep up with current problems of investors."

Rainey said the law change would not help those who had already lost money in the collapse which saw 45 companies fail and up to $6 billion worth of investors' money put at risk.

He questioned why the new law was not introduced years ago when the finance company guarantee scheme was brought in.

"Why at the time that was going on more work wasn't being done in terms of a more comprehensive scheme to address those issues I don't know."