Yesterday, Commerce and Consumer Affairs Minister Dr David Clark announced "practical amendments" to try to curb the unintended consequences of the Credit Contracts and Consumer Finance Act (CCCFA).
Late last year, the Government bought in changes to the CCCFA intended on cracking down on loan sharks.
Instead, it caused banks to closely vet mortgage applicants’ personal finances and spending habits.
The Otago Daily Times reported multiple stories about people struggling to gain mortgages because of Kmart shopping trips, Netflix accounts, restaurant eating habits and therapy sessions.
Dr Clark fast-tracked an investigation, undertaken by the Ministry of Business, Innovation and Employment (MBIE), in January after coming under pressure.
The changes include removing regular savings and investments as an example of outgoings that lenders need to inquire into.
It also clarifies when borrowers provide a detailed breakdown there is no need to inquire into current living expenses from recent bank transactions.
The amendments would go through a consultation period and it was hoped they would be in place by June, Dr Clark said.
He would not say whether he thought the Government had got the legislation wrong, but said it was clear that some changes needed to be made.
The changes should make it easier for banks and reduce the amount of time they spent dealing with consumers.
He would consider further changes when he received the final report from the MBIE next month, Dr Clark said.
Kim Anderson-Robb was one of the first people the ODT spoke to about the matter earlier this year.
Her mortgage application for urgent repairs for her house was declined because of a Kmart shopping trip last year.
Ms Anderson-Robb said she was "thrilled" that by sharing her story she might have made a difference for other people.
But it did not change much for her because she had locked in her mortgage for six years because of the interest rate rises, Ms Anderson-Robb said.
She was now "saving hard" to get the repairs completed.
"It was a stupid law right from the start ... but I’m pleased David [Clark] has done something about it."
Dunedin’s MortgageMe director Daryl Taylor said the changes were "very much welcomed".
The changes would provide lenders with more flexibility in how they interpreted the law, which would "loosen up" the lending criteria, Mr Taylor said.
SBS Bank chief executive Mark McLean said it was a "very good first step".
The bank was pleased there had been acknowledgement that the law was not working.
"It has had a real impact on mainstream consumers’ ability to secure credit."
He would have liked to see the changes made quickly rather than waiting for the consultation, Mr McLean said.
Act New Zealand leader David Seymour wrote to Dr Clark in January about the "poorly written legislation", and was pleased to see the changes.
Mr Seymour said the time it would take to implement them was "absurd".
National Party deputy leader Nicola Willis said the law was the biggest blow to first-home buyers in a generation.
She wanted the minister to make the changes now, she said.
"He needs to show up and fix the red-tape bungle he has caused."
The changes
- The removal of regular savings and investments as examples of outgoings that lenders need to inquire into.
- Clarifying that when borrowers provide a detailed breakdown of future living expenses there is no need to inquire into current living expenses from recent bank transactions.
- Clarifying that the requirement to obtain information in "sufficient detail" only relates to information provided by borrowers directly rather than relating to information from bank transaction records.
- Providing alternative guidance and examples for when it is "obvious" that a loan is affordable.
