The Ministry of Business Innovation and Enterprise has confirmed that the much-awaited investigation into the changes introduced in the responsible lending code a few months ago has now been completed and handed over to the Minister of Commerce and Consumer Affairs Dr David Clark.
An MBIE spokesperson told the Indian Weekender that the Minister of Commerce and Consumer Affairs has now been provided with a final report and advice from officials on the initial implementation of changes to the Credit Contracts and Consumer Finance Act (CCCFA).
This was provided at the end of April.
"This follows an investigation by MBIE, in consultation with other members of the Council of Financial Regulators. The objective of the investigation was to identify any impacts of the recent CCCFA changes that came into force on 1 December 2021, considering the scale and nature of the impacts, to assess what, if any, further actions are needed."
"Decisions on next steps are expected to be made this quarter. This report is also expected to be published this quarter, subject to Cabinet approval," the spokesperson said.
Earlier in the beginning of the year, the Minister had called for an enquiry after reports emerged that the changes introduced in the credit contracts and consumer finance act from December 1, 2021, were causing trouble for genuine borrowers in the form of an unusual level of scrutiny by banks and financial institution in the credit applications.
The government had brought in changes in the responsible lending code with an intention to safeguard vulnerable people from irresponsible lending and placed a requirement on lenders to follow a robust process and ensure that lending is affordable and suitable.
However, since then, an unusually high number of applications seeking credit from banks, who would have otherwise got their applications approved, were denied access to credit, even for petty amounts, sighting seemingly trivial expenses as daily coffees and takeaways.
Following a lot of media reporting, the Minister had called for an investigation by MBIE to ensure that the banks and financial institutions were not acting in a manner that would have unnecessarily compromised the intent of changes brought into the responsible lending code.
Additionally, the Minister had also announced some changes in March this year to responsible lending rules to curb any unintended consequences being caused by the Credit Contracts and Consumer Finance Act (CCCFA), introduced in December 2021.
The changes included clarifying that when borrowers provide a detailed breakdown of future living expenses, there is no need to inquire into current living expenses from recent bank transactions. Clarifying that the requirement to obtain information in 'sufficient detail' only relates to information provided by borrowers directly rather than relating to information from bank transaction records.
Providing alternative guidance and examples for when it is 'obvious' that a loan is affordable.
The changes though welcome then, had yet not made any significant impact in relaxing the availability of credit for genuine borrowers, which is most visibly impacting the housing market in the form of tightening of credit.
Minister is considering advice on the report.
Meanwhile, Minister Dr David Clark has confirmed that he has received the report and now considering the next steps.
"I've received the final report from officials and the Council of Financial Regulators on the initial implementation of changes to the Credit Contracts and Consumer Finance Act (CCCFA)."
"I am now considering the advice and decisions on Government's next steps will be made this quarter," Dr David Clark said.