David Clark rejects National’s offer to fix loan crisis, saying it would cause delays


The legislation has been accused of making it difficult for homebuyers to access credit. Photo/NZ Herald.

Commerce Secretary David Clark rejected National’s offer of legislation to address concerns that tighter credit rules will prevent people from getting mortgages.

He wrote to Nicola Willis and Andrew Bayly, the national MPs who first went to him to ask the government to take a national bill designed to solve the problem of the credit crunch, saying he believed that adopting their solution would lead to “unnecessary delays”.

Regulations under the Consumer Credit Agreements and Finance Act (CCCFA) have been blamed for people turning down mortgages for trivial matters like gym memberships and Netflix subscriptions.

The government has commissioned a review of the situation, seeking to understand whether regulations are really to blame for the credit crunch, or whether people are being turned away due to other economic factors, such as banks becoming more risk averse in as house prices rise, and borrowers failing to meet loan-to-value ratio requirements.

The CCCFA regulations were originally designed to combat irresponsible loan sharking. National’s solution would have allowed the government to have different sets of regulations: a strict set for loan sharks and another more permissive set for banks that would use existing rules to determine risk.

In his letter, Clark noted that National actually supported the amendment that led to the creation of the new regulations (although National was not involved in the regulations themselves).

Clark’s review of the CCCFA will require MBIE to report in February on possible issues, after which Clark will present a possible response.

In light of this, Clark told Willis and Bayly that National’s bill would likely slow down the process.

“I note that if the government were to pass your bill, it would cause unnecessary delays in dealing with this case.

“Your draft law does not detail the regulations you are proposing which would risk creating uncertainty for the sector.

“Based on my meetings with banks last week. I detect little enthusiasm for an entirely new set of regulations for banks and regulated entities,” Clark wrote.

He wrote that the banks had suggested “small changes” that could be made to the legislation to ensure its “goal” was achieved.

Willis pushed back on Clark’s criticism, saying it was actually an admission that the regulations, which National hadn’t supported, were the problem — not the legislation itself, which was the part supported by National.

“The Minister now appears to accept that it is his poorly drafted regulations that are causing havoc for New Zealanders trying to get loans,” Willis said.

“We continue to believe that a bipartisan effort is warranted,” she said.

Clark doubled down on his suspicion that structural factors could be behind the credit crunch.

He wrote of a “number of factors at play” in mortgages, “including the Reserve Bank’s moves on LVR restrictions and changes in the official cash rate, which impacted bank lending”.

Clark also said “a number” of media reports about people being turned down for loans were “incorrect”, and noted Reserve Bank mortgage data showed first-time home buyers were on the rise. their share of lending since the regulations came into effect.

The same data shows fewer loans overall, but that could be because the volume of homes sold has fallen.

Willis said it’s hard to trust the review that will form the basis of Clark’s recommendations, given that it’s being undertaken by many of the same officials who drafted the regulations in the first place.

“Until we see his solutions, it’s hard to give him a tick and a passing grade, the officials he put in charge of the regulatory review are the same officials who were in charge of the review in first place,” he said. .

Janet E. Fishburn