Christians Against Poverty’s Response to the
December 2021 CCCFA Amendments

February, 2022

Executive Summary

Christians Against Poverty (CAP) supports the investigation into whether lenders are applying the recent changes under the Credit Contracts and Consumer Finance Act (CCCFA) correctly. In doing so however, it is important to remember why the CCCFA reform was needed and is still needed. Irresponsible and unethical lending behaviour has continued to happen up until 1 December 2021 due to a lack of clarity and loopholes in the existing legislation; hence necessitating these latest amendments. Effective lending laws to mitigate the risks of unsafe and harmful lending is particularly important for Aotearoa as we have a relatively poor financial capability score and more New Zealanders are exposed to financial hardship due to the COVID-19 pandemic.

Therefore, while CAP agrees that some impacts of the reform, such as making it harder for first home buyers to be granted a mortgage, should be reduced as much as possible, it is important this is not done at the cost of protecting vulnerable borrowers from unethical lending behaviour. Changes such as ensuring proper affordability assessments are carried out, have been hard won and the benefits of the reforms are overwhelmingly positive. CAP would therefore appreciate being consulted as part of the review, and on any proposed changes to the legislation.

We recommend the following next steps:

  • Maintain the scope of the CCCFA changes
  • Maintain the expectation that lenders adhere to thorough affordability assessments
  • Provide lenders with clearer guidance around the specific circumstances of director liability and how a surplus or buffer can be interpreted
  • Provide mortgage lenders a period of grace to adjust behaviours while more specific guidance is developed
  • Hold a wider consultation across the sector


CAP supports the latest changes to the CCCFA that aim to reduce irresponsible lending and the resulting consumer harm. Inadequate affordability assessments are a significant factor in hundreds of unaffordable loans approved to CAP clients and the wider New Zealand population. As a result, consumers are trapped in a debt spiral and often sacrifice essential living costs to make debt repayments towards their house, car, or other household appliances. Among CAP clients, 67% skipped meals, often regularly, to make loan repayments.[1] At the same time, CAP acknowledges that the current situation is not ideal for certain groups, such as first home buyers, and supports the investigation into whether lenders are applying the rules correctly.

We also support the December 2021 change that requires directors and senior managers to exercise due diligence as has resulted in directors proactively ensuring all staff act within the law.[2] We disagree that this personal responsibility is overly punitive but do acknowledge that the implementation timeframe may have caused unnecessary stress and pressure, particularly for large organisations like banks.

On balance, CAP believes that the benefits of the reform far outweigh the costs. We are anticipating less hardship as a result of adequate affordability assessments, fewer clients going through insolvency procedures, and less unreasonable fees and advertising to vulnerable customers who cannot afford loans. Whilst still in the early stages, we are pleased to see that more dialogue around financial capability and budgeting is taking place due to recent legislative changes. Considering New Zealand’s relatively poor financial capability score, these conversations are important to have at a national level.[3] CAP has also heard that financial mentors are seeing greater compliance with the CCCFA resulting in safer and more responsible lending. For example, one mentor used the new legislation to sort out a complaint quickly and efficiently. CAP expects to see further positive impacts of the recent CCCFA changes in terms of affordability assessments and responsible lending in approximately six to ten months.


Why the CCCFA reform was needed

 1. The reform will reduce unmanageable debt and poverty in Aotearoa
Unmanageable debt is a significant contributor to hardship and poverty in Aotearoa. The impact of experiencing unmanageable debt is far-reaching and devastating – from clients not feeling like they are good enough parents to missing out on daily essentials or feeling anxious and depressed. More robust guidance, as the new legislation offers, will mitigate financial hardship from unaffordable loan repayments.

2. The legislative changes bring much needed clarity around affordability assessments
While we are aware that the new affordability assessment regulations present a challenge for first home buyers in an already difficult market, we believe it is important for affordability assessments to consider all incomes and all expenditure. The new regulation outlines the correct way to conduct an affordability assessment because previously lenders did not understand the borrower’s actual financial situation and gave out unaffordable loans. The CCCFA verification changes also address behavioural biases that lead borrowers to overestimate income and underestimate expenses, resulting in poor affordability assessments.[4]

In addition, the new regulations allow lenders to identify if a whānau is having to ration essentials like food to service a loan by providing benchmarks around acceptable living standards. Defaults are a poor indicator of a borrower’s ability to pay because whānau will often prioritise loan repayments, particularly for a repayments mortgage or car, to the detriment of healthy food or a warm home. We believe that the additional costs and time for lenders to verify and adequately assess a customer’s situation is worthwhile for the protection and rights of consumers, particularly for those prone to vulnerable circumstances. With this clarity, the CCCFA changes provide more clear-cut ways to complain about exploitative lending and enable just outcomes.

3. Debunking the vulnerable person myth
The COVID-19 pandemic has shown us more than ever that anyone can become vulnerable and face financial hardship. Te Ara Ahunga Ora research shows that 26% of New Zealanders are secure financially, 40% are at-risk of financial hardship, and 34% are experiencing difficulties.[5] Financial mentors are seeing more New Zealanders move from the secure to the at-risk group, and these tend to be those with home loans. We can see this in the current COVID climate where recent borrowers have high debt-to-income ratios and inflation and interest rates are rising – meaning people who could previously live off their incomes are now at-risk. No one chooses to get into unmanageable debt, and there are many reasons, sometimes beyond someone’s control, that put them in a vulnerable place. For example, relationship breakdown, health challenges, unemployment, and bereavement are some common reasons why clients contact CAP for help with unmanageable debt. Therefore, it is crucial to have effective lending laws to mitigate the risks of unsafe and harmful lending for all New Zealanders.

Next steps:

For Government:

1. Maintain the scope of the CCCFA changes
CAP supports the investigation that aims to address whether lenders are applying the rules correctly; however, we believe that the scope of the rules and what lenders they apply to should not be changed. CAP would be concerned if the legislation was altered during the early implementation stages without being afforded appropriate timeframes and impact assessments.

In addition, CAP calls for Buy-Now, Pay-Later, and mobile phone contracts to be covered under the CCCFA to promote responsible lending and consumer rights across all lending products.

2. Maintain the expectation that lenders adhere to thorough affordability assessments
All affordability assessments must necessarily consider all income and all expenses. It is precisely the cavalier generalisations that have led to poor lending decisions in the past. At the same time, it is important to ensure lenders are not applying over-reaching barriers to borrowers.

For Regulators:

3. Provide lenders with clearer guidance around the specific circumstances of director liability and how a surplus or buffer can be interpreted
CAP calls for the Council of Financial Regulators, particularly the Commerce Commission, to address guidance gaps and misinformation surrounding the new legislation by providing educational resources and interactive platforms to ensure lenders implement the changes correctly and fairly. We encourage this to happen immediately as we are still in the initial phase of the rollout, and this is the most effective time to ensure changes are implemented smoothly.

4. Hold a wider consultation across the sector
CAP supports the current actions of the Ministry of Business, Innovation and Employment who are reaching out to stakeholders in the sector and seeking to understand what is happening on the ground. Engaging with consumer and debt solution organisations is particularly essential to have a balanced investigation of the CCCFA reform impact. Financial mentors work closely with whānau who the reform was intended to protect.

5. Provide mortgage lenders a period of grace to adjust behaviours while more specific guidance is developed
We acknowledge that the timeframe of the CCCFA changes may have caused pressure for lenders and borrowers, particularly for large organisations like banks. A period of grace could help to ensure new policies and processes are not rushed.

1 Christians Against Poverty New Zealand. (2020). Below Zero: Living in unmanageable debt in Aotearoa.
2 Commerce Commission. (2021). Changes to credit laws.
3 Te Ara Ahunga Ora. (2021). New Zealand Financial Capability Survey 2021.
4 Consumer Action Law Centre, (2021). Submission: National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020.
5 Te Ara Ahunga Ora. (2020). COVID-19 exposing New Zealanders’ financial vulnerability.