Last month the government introduced the Credit Contracts and Financial Services Law Reform Bill. The Bill amends the Credit Contracts and Consumer Finance Act 2003 (the CCCFA), and repeals the Credit (Repossession) Act 1997 which will now be covered (with amendments) under the CCCFA. A small amendment is made to the Personal Property Securities Act 1999, and the Bill also amends the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (the FSPA).
The proposed amendments to the CCCFA are aimed at strengthening protection for consumers. In particular, it introduces principles of responsible lending. In addition, existing consumer protections are being strengthened by changing current CCCFA provisions on disclosure, fees, hardship and oppressive contracts. This is consistent with other financial sector reforms that improve protection for investors. The responsible lending principles are also consistent with the improvements being made to other consumer laws through the Consumer Law Reform Bill, and with aspects of Australia's National Consumer Credit Protection Act 2009. These principles will be elaborated upon, and guidance on their implementation will be provided, through a Responsible Lending Code. The Code will not include rules that are binding on lenders, but compliance with the Code will be evidence that lenders have complied with the lender responsibility principles in the Bill.
The proposed amendments to the FSPA complement other reforms being progressed in the financial markets sector, and seek to protect the integrity of the financial service providers registration regime. The Ministry of Business, Innovation and Employment has released the Cabinet paper behind the proposed amendments, which is available here.
The Bill addresses issues relating to overseas-based entities registering in New Zealand solely for reputational reasons. The Registrar of Financial Service Providers and the Financial Markets Authority will be given additional powers to assess whether a financial service provider should be declined for registration or deregistered. Disqualification criteria for registration purposes will also now include conviction for certain offences in other countries. Those with New Zealand criminal convictions are already disqualified.
The Bill also removes the requirement for the government-established reserve scheme to promote cost-effective financial dispute resolution.
An opportunity to make submissions on this Bill will arise during the select committee stage following the first reading of the Bill. We will keep you informed of future developments.