Community groups which help families with crippling debt are alarmed that new lending rules are being reviewed just two months after they were introduced.
Budgeting advisers and community advocates said they had fought for the changes for more than 20 years, and that their positive impact would not be apparent for at least six months, probably longer.
The Government this week outlined further details of a review of the lending rules following protests by banks and mortgage brokers which said they were too restrictive.
Smaller-scale lenders like credit unions have also asked for urgent changes, saying that more intensive affordability checks were preventing them from issuing small loans to poor and vulnerable members.
But groups which dealt with the fallout from predatory and risky lending said the review was premature and should not result in a dilution of protections for borrowers.
Kathryn Burton, who trains budget advisers, said her sector had been pushing for the lending changes for decades.
"I actually cannot articulate how hard we fought or how long we fought for these rules - it has been as long as I've been in the sector, over 20 years."
Burton challenged lenders' claims that the new rules were overly restrictive.
"The rules actually haven't changed, what has changed are the processes," she said.
"Banks have always had to ensure that their loans are affordable. Now the requirement is that they have to provide evidence that they did that and that they applied a robust process. And they can't do it."
She said most of the pushback appeared to be coming from brokers and banks which had relied on algorithms or automated assessments to decide loans. They were now required to do more detailed, in-person assessments, which required more staff and costs, she said.
Lenders were previously able to issue a loan if they had been reassured by the borrower that they could pay it.
"That was always very problematic," Burton said. "Because when we had people who are being coerced or under duress to get those loans, the people would say anything. And there would be no requirement for lenders to verify that information."
Under the new rules, lenders have to be able to prove the borrower can afford it while also meeting other basic costs like food for their family.
Furthermore, budgeters have the legal right to ask lenders to produce this evidence. If they are not convinced they can complain to the Commerce Commission.
FinCap policy adviser Jake Lilley said the new complaints process had given the law some teeth and was already being used regularly to challenge unfair loan practices.
"One mentor mentioned to me she made eight complaints in one day … to the Commerce Commission and dispute resolution services, so that's really positive."
Since the changes came into force, there have been a number of reports by people getting turned down for a loan or mortgage top-up because of their spending habits.
Auckland-based financial mentor David Verry said he was sympathetic to people who were saving hard for their first mortgage. But with house prices remaining high, and interest rising, there was an even greater need for lenders to look closely at what they were spending money on, he said.
"We often counsel those saving for a house deposit and typically we do discuss some of the smaller stuff like Netflix, other entertainment, holidays, Christmas and birthday presents, coffees - one $4 takeaway coffee a day equals nearly $1,500 per year - but that is to get the focus on the number one priority.
"Once the mortgage is in place people can then start to think about the other things they might be able to afford."
He said banks had probably overreacted to the rule changes in the first two months and erred on the side of caution.
"The real upside to the legislation may not be evident for a few months but I am confident that the good stories - fewer requests for financial mentoring, fewer bankruptcies and less hardship on families - will start to come through."
Commerce Minister David Clark agreed, saying earlier this week that similar changes in Australia took time to bed in.
He also said that some banks may not have been prepared for the changes.
"My hunch is what we're seeing is the result of the changes making an impact in the right way," Clark said, adding that the review would establish the facts.
Natalie Vincent, the general manager of Ngā Tāngata Microfinance, said Government officials were asking her organisation for feedback on the lending rules next week as part of the review. But she said her sector would not notice the downstream effects for months.
"We haven't actually got time to say whether they are working for our clients. We believe it will."
"It filters down to us a lot later, when people have either been lent to irresponsibly and they're in trouble, or they can't lend from a mainstream lender and they come to us."
Credit unions last week joined the clamour for a review of the lending rules, saying they were having to reject members for small loans despite them having never missed payments. They are lobbying to be exempted from the requirements.
Budgeting experts opposed this suggestion.
"It's really important for financial mentors that we have consistent rules that provide safe lending laws for all loans," Lilley said.
"People may be making payments, but there could be a whole story behind that, where someone's found themselves in a position where it's really difficult to make a payment and they're going without essentials to make a payment.
"That's why affordability assessments are so, so important."