Government Removes Strict Loan Affordability Rules to Ease Access to Credit

“The previous regulations imposed excessive and specific criteria that made the loan application process confusing and stressful for customers,” said Mr. Bayly.

The New Zealand Government is eliminating stringent loan affordability regulations to simplify access to credit for consumers. Commerce and Consumer Affairs Minister Andrew Bayly and Housing Minister Chris Bishop announced that, effective 31 July, eleven pages of detailed affordability requirements under the Credit Contracts and Consumer Finance Act (CCCFA) will be removed.

“The previous regulations imposed excessive and specific criteria that made the loan application process confusing and stressful for customers,” said Mr. Bayly. “These rules not only burdened consumers but also increased compliance costs for lenders, especially impacting the availability of small loans under $5,000.”

Mr. Bishop highlighted the frustration experienced by home loan applicants due to the intrusive nature of the regulations, which included overly detailed checks on personal expenses. “The regulations were overly prescriptive, requiring lenders to verify information against external sources and scrutinize minor personal expenses, which was both inefficient and intrusive.”

The removal of these regulations aligns with the National-ACT coalition’s pledge to reform the CCCFA to balance consumer protection with fair access to credit. The updated approach involves replacing the prescriptive rules with a revised Responsible Lending Code, which offers guidance on reasonable inquiries for assessing loan affordability while allowing flexibility for lenders to consider individual circumstances.

Mr. Bayly assured that lenders will still be required to assess affordability responsibly and will face penalties for failing to make reasonable inquiries. “Our focus is on managing the risk of unaffordable lending without imposing unnecessary constraints,” he stated.

The changes have been informed by consultations with lenders and budgeting services, many of whom have expressed support for the revised framework. “Today’s reforms are about restoring flexibility and enabling Kiwis to access credit more easily, while ensuring that loans are only extended to those who can afford them,” Mr. Bishop added.