Consumer Lending Changes – What You Need to Know (Updated 2024)
Since late 2021, New Zealand’s consumer lending rules have undergone significant changes under the Credit Contracts and Consumer Finance Act (CCCFA) and the Responsible Lending Code. These reforms were introduced to protect borrowers from unaffordable debt and ensure lenders act responsibly. However, the journey from strict rules to a more balanced approach has been complex.
This page explains:
- What changed in 2021
- Why adjustments were made in 2022 and 2023
- What the major relaxations in 2024 mean for you
- How First Credit Union applies these rules today
Why Did the Rules Change?
The Government’s goal was to prevent hardship caused by unaffordable loans. In 2021, regulators introduced prescriptive affordability checks requiring lenders to verify income and expenses in detail. While well-intentioned, these rules created unintended consequences:
- Longer application times
- Higher decline rates for creditworthy borrowers
- Increased compliance costs for lenders
Industry feedback led to a series of amendments and, eventually, a major policy shift in 2024.
Timeline of Changes
December 2021 – Initial Tightening
- What happened:
- Mandatory verification of income, debts, and expenses using bank statements.
- Detailed inquiries into discretionary spending (e.g., entertainment, subscriptions).
- Personal liability introduced for directors and senior managers.
- Impact on borrowers:
-
- Loan applications became slower and more intrusive.
- Many previously approved loans were declined due to strict surplus requirements.
Mid-2022 & 2023 – Practical Adjustments
- July 2022:
- Removed savings and investments from mandatory expense checks.
- Allowed lenders to benchmark expenses using statistical data instead of full bank statements.
- Introduced exceptions for “obvious affordability” cases.
- May 2023:
- Narrowed scope to essential expenses only.
- Provided flexibility for revolving credit and Buy Now Pay Later products.
- Impact:
- Reduced friction for borrowers.
- Still, many lenders found compliance burdensome.
2024 – Simplified Lending Rules
- April–July 2024 reforms:
- Repeal of prescriptive affordability regulations. Lenders no longer required to apply rigid expense verification rules.
- Updated Responsible Lending Code (July 2024):
- Focus on essential expenses only.
- Discretionary spending (e.g., takeaways, holidays) excluded from affordability checks.
- Removal of personal liability for directors and senior managers.
- Regulatory oversight shifting from Commerce Commission to Financial Markets Authority (FMA) for streamlined enforcement.
- Impact:
- Faster, simpler loan applications.
- Greater lender discretion while maintaining consumer protection.
What This Means for You Today
- Loan applications are quicker and less intrusive.
We still check affordability, but we use a common-sense approach. - Responsible lending remains our priority.
We ensure loans are suitable and manageable for your financial situation. - Discretionary spending won’t block your loan.
We focus on essential expenses and income stability.
Practical Example
Before (2021):
Applying for a $5,000 personal loan required detailed checks on every expense, including Netflix subscriptions and takeaway meals.
Now (2024):
We focus on your income, essential living costs, and existing debts. Discretionary spending is not a barrier if your overall financial position is sound.
Why These Changes Matter
The reforms strike a balance between protecting consumers and ensuring access to credit. By removing unnecessary complexity, lenders can help more Kiwis achieve their financial goals responsibly.
Need More Information?
- https://www.mbie.govt.nz/business-and-employment/consumer-protection/review-of-consumer-credit-law/review-of-december-2021-credit-law-changes/summary-changes-to-the-credit-contracts-and-consumer-finance-regulations-2004-and-responsible-lending-code-following-the-2022-review
- https://www.fma.govt.nz/business/legislation/cccfa/