Tips over lending shake-up

The Commerce Commission has provided advice to companies about the upcoming transfer of responsibility for regulation of consumer credit to the Financial Markets Authority (FMA).

From July 1, the FMA will become the regulator responsible for the Credit Contracts and Consumer Finance Act (CCCFA). 

The aim of the shift, with the relevant legislation passing its third reading on May 30, is to bring the oversight of such credit into a single conduct regulator alongside broader financial markets regulation.

Lenders currently certified or exempt from certification because they are licensed by the FMA or the Reserve Bank will be automatically deemed to hold a market-services licence from the FMA for the service of being a creditor under a consumer credit contract from July 1.

Existing exemptions from certification relating to covered bond or securitisation arrangements, and non-financial business interim creditors, are intended to be replicated in the Financial Markets Conduct Regulations. These will be in force for July 1. 

“This ensures you can continue operating without interruption and no immediate action is required to maintain your ability to provide consumer credit,” says a spokesman for the commission.

“Licences issued by the FMA do not expire and continue unless suspended or cancelled, meaning no relicensing or renewal process is required.”

The commission has now stopped assessing new certification applications because it’s unlikely to be able to process them in time. New lenders proposing to offer consumer credit may apply for licensing through the FMA from July.

Existing lenders’ core CCCFA obligations will continue to apply from July 1, such as responsible lending, fees, disclosure duties and hardship processes.

Their current certifications – or exemptions from certification if licensed by the FMA or Reserve Bank – will end. They will transition automatically to a market-services licence for the consumer credit service from the FMA. There is no need to apply for a FMA licence.

To ensure a smooth transition, lenders should ensure their organisation’s contact details up to date so they receive updates from the commission and FMA, and they must continue compliance practices under the CCCFA.

They also need to look out for further information and guidance on what to expect from the FMA’s approach to consumer credit licensing and supervision.

“This transition has been designed to minimise disruption for lenders,” says the commission. “We’ll continue to provide updates as more information becomes available and will ensure you have clear and timely information throughout the change.”

A FAQ page has been set up or email CreditFunctionTransfer@comcom.govt.nz with queries.