Govt targets rules that “have locked consumers out of the market”
The Government has revealed it is working on reforms to the financial services industry that are designed to make it easier for consumers to access finance.
Commerce and Consumer Affairs Minister Andrew Bayly said that “after many years of successive changes”, the financial system had become overly complex and bureaucratic.
“This has led to a conservative lending environment with overlap in the roles of various institutions, unnecessary compliance burden for businesses and excessively prescriptive lending rules which have locked consumers out of the market,” he said.
As a result, Minister Bayly said the Government's reform package would:
- Clarify the rules and responsibilities of financial institutions.
- Ensure there were good licensing and enforcement tools in place so firms adhered to the rules.
- Improve transparency for financial dispute resolution services so consumers could get help more easily when things went wrong.
“Financial services are foundational for economic success and are woven throughout our lives. Without access to finance our economy grinds to a halt. The regulation of financial services is therefore vital for a well-functioning economy. Kiwis may not realise it, but financial regulation affects everything from how quickly and easily you can get a loan through to what safeguards are in place if trouble strikes,” he said.
Minister Bayly said the reform package would also:
- Remove the personal liability for directors and senior managers of financial institutions and shift it back onto businesses.
- Reduce the number of incidences in which lenders were punished despite a lack of financial harm.
“There will still be repercussions for lenders who make mistakes or issue bad loans, but the changes will move towards a more proportionate, risk-based approach. We want to focus enforcement efforts on instances where there has been genuine financial harm,” he said.
FMA to be given stronger oversight role
The Government previously announced that consumer lending regulation would transfer from the Commerce Commission to the Financial Markets Authority (FMA). Minister Bayly said this new announcement took that process further by ensuring the FMA would be fully equipped to be the leading financial conduct regulator.
“Lenders will transition to a licensing model, at no cost, to bring consumer lending in line with other entities regulated by the FMA. The FMA will be given a stronger role in protecting consumer interests when any financial firm licensed with the FMA changes owners and a new onsite inspection power to help them proactively monitor market conduct,” he said.
“These changes are a significant shift in consumer credit regulation, away from the prescriptive and restricting landscape of old, and towards a more common-sense approach.”