Banking and Finance: Updates to the CCCFA, Business Debt Hibernation Regime and Business Finance Guarantee Scheme
‘Fit and Proper’ Certification
All providers of consumer credit (except certain exempt providers, for example a registered bank) and mobile traders must generally hold a ‘Fit and Proper Person’ certification issued by the Commerce Commission and be registered on the Financial Service Provider Register (FSPR) in order to continue providing their services as from 1 October 2021. If a provider is currently registered on the FSPR, certification is not required until completion of the provider’s next annual FSP confirmation after 1 October 2021. For more information on the ‘Fit and Proper Person’ certification, please see the Commerce Commissions’ guidance here.
Suitability and Affordability Assessments
The Credits Contracts and Consumer Finance (Lender Inquiries into Suitability and Affordability) Amendment Regulations 2020 (Amendment Regulations) was introduced on 30 November 2020 as part of the latest 2019/2020 CCCFA reforms.
Under the CCCFA, consumer credit lenders (including mobile trader consumer credit sellers and providers of high-cost consumer credit contract) and transferees under buy-back transactions of land (relevant lender) must make reasonable enquiries into:
- whether the relevant credit or finance provided will meet the borrower’s requirements and objectives (“suitability”); and
- whether the borrower will be able to make the payments under the credit agreement without suffering substantial hardship (“affordability”).
The Amendment Regulations set out prescriptive minimum inquiries and assessments that a relevant lender must make as from 1 October 2021 before making a new, or making material changes to an existing, credit agreement. The Amendment Regulations also prescribe the processes, practices and procedures that a relevant lender must follow when making reasonable inquiries.
To view a full version of the Amendment Regulations, please click here.
Consultation on draft Responsible Lending Code
The Government released a consultation draft of the updated Responsible Lending Code in December 2020, which has now been finalised and is due to come into force on 1 October 2021, along with the Amendment Regulations referred to above.
The key changes reflect the introduction of the Amendment Regulations, providing guidance on the processes for assessing suitability and affordability of consumer credit loans and how to keep records of reasonable enquiries that relevant lenders have made.
There is also proposed new guidance around dealing with unforeseen hardship by borrowers and foreign language advertising procedures in order to assist the relevant lenders to comply with the latest CCCFA reforms introduced in 2019/2020.
To view the finalised version of the Responsible Lending Code, please click here.
Business Debt Hibernation Regime – extension
The BDH regime, which was originally made available to certain entities until 24 December 2020 affected by COVID-19 to manage their existing debts, has been extended to 31 October 2021. For more information about the BDH regime itself, please see our previous article here.
Business Finance Guarantee Scheme
The Government has also extended its Business Finance Guarantee Scheme until 30 June 2021 to help with business cash flow needs, including response or recovery projects resulting from COVID-19. For more information about this regime, please see our previous article here.
Please note that this article provides a high level overview on the various topics covered only and should you require any further information, advice or assistance relating to any of the above, the team at Lane Neave would be happy to assist.