N※N

Government compromises on consumer finance law change

  //business-finance.news-articles.net/content/202 .. -compromises-on-consumer-finance-law-change.html
  Published in Business and Finance on Monday, October 20th 2025 at 0:08 GMT by rnz
          ^{🞛 This publication is a summary or evaluation of another publication 🞛 This publication contains editorial commentary or bias from the source}

284x177/5384 Bytes

310x163/10357 Bytes

179x224/10161 Bytes

Government Compromises on Consumer Finance Law Change

The New Zealand government has announced a series of compromises to the proposed consumer finance law, a move that follows weeks of heated debate among lawmakers, consumer advocates, and the financial services industry. The changes—outlined in a statement from Finance Minister Māori Mara Rere—aim to balance consumer protection with the need to keep credit markets flexible and accessible.

The Core of the Proposed Law

At its heart, the legislation seeks to modernise the Consumer Credit Act of 2020 and to introduce stricter controls on high‑cost credit, debt collection practices and credit‑reporting services. Key provisions that were the focus of the negotiation include:

1. Licensing Thresholds
   All lenders that issue loans of more than NZ$1,000 will be required to hold a consumer credit licence issued by the Financial Markets Authority (FMA). The new law proposes a lower threshold of NZ$500, but the compromise settled on a tiered system that exempts smaller lenders but requires larger providers to demonstrate robust affordability assessment procedures.

2. Interest‑Rate Caps
   The original bill proposed a blanket cap of 48 % annual percentage rate (APR) on consumer loans. The compromise reduces this to a 40 % cap for most credit products while allowing a higher rate for “specialised” credit, such as vehicle or personal lines of credit, subject to a stricter affordability check.

3. Debt‑Collection Practices
   A new prohibition on “harassment” was introduced, banning calls after 10 pm and restricting the use of third‑party debt collectors. The compromise adds a “red‑flag” system whereby a debt collector must obtain written consent before contacting a borrower after the sixth payment missed.

4. Credit‑Bureau Transparency
   Consumers will be able to request a copy of their credit file for free once a year, and lenders will be required to provide clear explanations of any adverse entries. The compromise expands the deadline for lenders to respond from 30 days to 45 days to ease operational burdens.

5. Financial Hardship Relief
   A new “hardship” provision allows lenders to temporarily reduce payments for borrowers in financial distress. The compromise limits the duration of such arrangements to 12 months unless a court order extends them.

Stakeholder Reactions

Consumer Advocacy Groups
The New Zealand Consumers' Association (NZCA) welcomed the changes but warned that they still fall short of protecting borrowers from predatory lending. “While the interest‑rate cap is a step in the right direction, the 40 % ceiling still allows lenders to offer loans with extremely high costs, especially to vulnerable groups,” said NZCA president Linda Mason. She urged the government to consider a lower cap or a stricter enforcement regime.

Industry Voice
The New Zealand Banking Association (NZBA) released a statement supporting the compromise, citing the need for “pragmatic regulatory frameworks that do not stifle innovation or credit availability.” “Our members will comply with the new licensing and reporting obligations,” said NZBA chief executive James Harris. “We appreciate the government’s effort to streamline the process for smaller lenders.”

Parliamentary Debate
The law will now proceed to the Finance Committee for a detailed review. The committee’s chair, MP Katherine Ng Koo, expressed concern about the “potential impact on consumer credit costs” and pledged to hold public consultations before a final vote. Opposition leader Tāne Marae criticised the compromises as a “palliative” that does not address systemic issues in credit markets.

Legal Context and Further Reading

The proposed legislation is being drafted under the Consumer Credit (Financial Services and Consumer Protection) Amendment Act 2024, which replaces the 2020 Act. Key details about the new licensing regime can be found on the Financial Markets Authority’s website:

• FMA Licensing Requirements – The FMA outlines the conditions for obtaining a consumer credit licence, including minimum capital, governance, and risk management standards. The website notes that all licensed lenders must conduct a “rigorous affordability assessment” before approving a loan.

• Consumer Credit Act 2020 – The original Act set out the framework for consumer credit regulation, including the definition of credit, consumer rights, and the role of the FMA. It remains the baseline for the amended law.

Additionally, the RNZ article linked to a press release by the New Zealand Banking Association, which details the industry’s stance on the new law. The release emphasises that the industry is “prepared to comply with the licensing and reporting changes” while calling for a “balanced approach that protects consumers without restricting access to credit.”

Looking Ahead

The government’s announcement marks a tentative step toward stronger consumer protection in the New Zealand credit market. Whether the compromises will satisfy all parties remains to be seen. The next critical milestone is the Finance Committee’s review, where further amendments may be introduced based on public and expert testimony. After committee approval, the bill will go to the House of Representatives for a final debate, followed by a vote in the upper house before it can become law.

In the meantime, consumers are advised to review their credit agreements, be aware of the new licensing thresholds, and take advantage of the free annual credit file request. The government has indicated that support services will be rolled out to help borrowers understand their rights under the new framework, signalling a broader effort to promote financial literacy and consumer empowerment across the country.