After criticising a regulatory and legislative framework which has “led to the architecture governing the financial services sector losing some of its coherence and … to a lack of clarity for many market participants”, new Minister of Commerce and Consumer Affairs, the Hon. Andrew Bayly, has announced that the Government will make regulatory changes aimed at easing the availability of credit and at reducing regulatory burden for those financial institutions that are currently required to hold multiple licences and report to multiple regulators.  This will include a targeted reform of conduct licensing requirements (including those under the recent Financial Markets (Conduct of Institutions) Amendment Act 2022, commonly known as “CoFI”). 

Samantha Barrass, Chief Executive of the Financial Markets Authority (FMA), has called this an “opportunity to streamline and bring New Zealand up to best of class, learning from what has, and has not worked overseas” and has said that the FMA is up for the task. 

In this FYI, we set out what to expect of the heralded reforms, and a timeline.

CCCFA Reforms and improving availability of credit while protecting vulnerable consumers

The Credit Contracts and Consumer Finance Act 2003 (CCCFA) requires lenders to check that lending for consumer credit contracts is suitable and affordable. 

The Minister proposes to reform the current requirements to address issues with processing times and with loans being unnecessarily declined. The aim is to ensure that the CCCFA protects “vulnerable consumers without unnecessarily limiting access to credit”.

The Commerce Commission will be removed as the conduct regulator for the CCCFA, to be replaced by the FMA, as discussed further below.

The Minister also promises to undertake a more “substantive review” of the CCCFA. This is to include reviewing its penalty and disclosure regime, and its relationship with CoFI. Specific changes are to be announced in the coming months.  This announcement is consistent with the Act / National coalition agreement which had the parties agree to ‘rewrite’ the CCCFA. With the Act Party advocating a ‘back to first principles’ approach.

Rationalising regulation and regulators

CoFI requires banks, insurers, and non-bank deposit takers with retail/consumer products (each a captured institution) to be licensed in respect of fair conduct and have a Fair Conduct Programme, by 31 March 2025.  CoFI is also the umbrella for regulations relating to prohibited sales incentives.

In the lead up to the election, there had been talk by the National Party of repealing CoFI, and this was incorporated into coalition agreements.  This created uncertainty about whether captured institutions should continue to work on their CoFI licence applications and fair conduct programmes.

The Minister has now made it clear that captured institutions must continue to prepare fair conduct programmes and should apply for their CoFI licence.  However, the Minister is initiating a review, with a view to ensuring “that good conduct obligations are proportionate and fit-for-purpose, acknowledging the positive general framework.”

In particular, the reform will look at duplication in licensing requirements between conduct and prudential regimes.  We will move to two rather than three regulators. 

The Minister is proposing that the FMA would be the sole conduct regulator.  Explicitly, this means that the Commerce Commission’s current role under the CCCFA moves to the FMA. 

Separate prudential regulation and licensing will continue under the RBNZ.  Implicit in the Minister’s comments is that the RBNZ is to be reined in on regulating conduct.    

Financial service providers will eventually only have to have one conduct licence from the FMA (in addition to any prudential licence they require), covering the range of their market services, rather than the multiple licences currently required under the Financial Markets Conduct Act 2013 for those providing more than one market service. 

The devil will be in the detail in this review, as prudential regulation must necessarily cover some aspects of conduct, such as good governance.

The FMA’s view

In a speech following the Minister’s announcements, Ms Barrass has emphasised the FMA’s ongoing view that using the core principles at the heart of CoFI “can result in a simple and streamlined approach for conduct regulation in New Zealand across the piece”, and that this should be the approach to the conduct of all financial services. 

Perhaps seeking to allay any concerns about how the FMA might define fair conduct programmes, she says the FMA will not be subjecting these to significant scrutiny and will not be “signing them off”. To captured institutions she says, “It is for you to right-size your fair conduct programme or your CoFI application for your business, especially for smaller firms.”  

Many readers will be aware of the FMA’s current consultation about an outcomes-focussed regulatory approach. Ms Barrass pointed out the benefits of the alignment of credit regulation and fair conduct rules with this approach. It is certainly the case that most of the outcomes the FMA is consulting on are aligned with CoFI obligations. Clearly though, even financial service providers that are not CoFI captured institutions would be well-advised to have a good understanding of the FMA’s outcomes-based approach, given that poor outcomes can often result in fair dealing contraventions, an aspect of regulation that applies across all financial services.

Other reforms

The Minister has indicated that he also wishes to reform the Companies Act 1993 to “simplify, modernise, and digitise” it, and is interested in the following as future workstreams:

  • changing capital markets settings “to help New Zealand businesses and investors thrive”;
  • changing KiwiSaver settings “to help New Zealanders save more for their retirement”;
  • looking at the work on insurance contract law “so that insurers and policyholders have better certainty about the deals they’re striking”.

Details are yet to be provided.

The timeline of reforms may play out as follows:

  • Next few months:  Removal of “prescriptive affordability requirements for lower-risk lending” in the CCCFA.
  • FMA to issue clear guidance for smaller institutions to meet minimum requirements of conduct in the CoFI context.
  • Substantive review of the CCCFA and CoFI.
  • Changes to legislation to change regulator structure and remit (and remove duplication), allow for providers to have a single conduct licence covering all activities (a prudential licence will still also be required, where applicable), and ensure that good conduct obligations are proportionate and fit-for-purpose.
  • Reform Companies Act 1993 to simplify, modernise, and digitise it.
  • Capital markets, KiwiSaver and insurance contracts reforms.

Next steps

Large CoFI captured institutions are already well on their way to meet CoFI requirements.  Any institutions that have paused during this period of uncertainty should certainly pick up the pen again. 

All financial service providers would be well-advised to be across the FMA’s proposed fair outcomes that will underpin its outcomes-focussed approach to its functions, and think about how and the extent to which these need to shape their practices.

All lenders should be braced for yet further CCCFA reforms, although we expect that these will be aimed at rolling back some of the more recent changes that have come into force recently.

Please get in touch with your usual Simpson Grierson contact, or one of our experts below, if you wish to get a further understanding of how these matters may affect you.


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