CCCFA Reforms Spark Debate; Accountability and Licensing in Focus

Highlights:

• FinCap Concern: Removal of personal liability for directors and senior managers in lending breaches disappoints FinCap, as it could weaken accountability in responsible lending practices.
• New Licensing Requirements: The CCCFA reforms introduce mandatory licensing for lenders through the Financial Markets Authority (FMA), enhancing regulatory oversight of lending and debt collection practices.
• Support from Specialist Lenders: The Financial Services Federation (FSF) supports the reforms, seeing the removal of personal liability as a way to encourage competition, particularly among smaller finance companies.

The recent changes to the Credit Contracts and Consumer Finance Act (CCCFA) have ignited a range of opinions across the financial sector, with industry players agreeing that "the devil will be in the detail."

FinCap's Concerns on Accountability

FinCap expressed disappointment at the proposed changes, particularly the removal of personal liability for directors and senior managers in cases of irresponsible lending. Currently, these individuals face fines of up to $200,000 if their institutions fail to implement responsible lending practices. FinCap Senior Policy Advisor Jake Lilley believes this accountability has encouraged lenders to be more mindful of community concerns, leading to fewer incidents of irresponsible lending.

Licensing Lenders and Debt Collection

One positive change welcomed by FinCap is the requirement for lenders to obtain licenses from the Financial Markets Authority (FMA). FinCap supports this move as it will enhance the regulation of lending practices and improve the visibility of debt collection activities, preventing harassment or coercion.

Specialist Lenders Support Reforms

The Financial Services Federation (FSF) praised the removal of personal liability for directors, seeing it as a way to boost competition by encouraging more people to enter senior roles in smaller finance companies. FSF Executive Director Lyn McMorran highlighted that the changes would still maintain strong responsible lending obligations while alleviating the burden on smaller firms.

As the sector awaits the release of draft legislation, all eyes are on the details of the reforms to ensure a balanced approach that fosters both consumer protection and financial competition.

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