NZ lending code kicks in June 6

New Zealand Commerce and Consumer Affairs Minister Paul Goldsmith released a new Responsible Lending Code, which is the culmination of a two-year process of amending the 2003 Credit Contracts and Consumer Finance Act to crack down on loan sharks and payday lenders.  

The Code comes into force on June 6 and is not binding, but will be viewed as compliance with the binding lender responsibility principles set out in the Act, which was passed last year. The June 6 start is before banks said they would be ready.

The amendments to the Act were developed after a 2011 summit convened by then Consumer Affairs Minister Simon Power to respond to cases of loan sharks and payday lenders operating irresponsibly in poorer communities.

The changes to require lenders to be responsible with their advertising and lending practices followed the introduction of similar codes in Australia and Britain. Power is now the general manager of Business Banking and Wealth at Westpac NZ.

The code and its principles would "allow borrowers to have better access to information, and better protection from those lenders who engage in predatory practices," Goldsmith said.

"At the same time, they will keep down compliance costs for those lenders who already have good, responsible systems in place," he said.

The New Zealand Bankers Association welcomed the release of the code, saying it had worked with the Government to ensure responsible lenders did not incur extra compliance costs.

NZBA chief executive Kirk Hope said the Code would have to be properly enforced.

"Regulators will need to be vigilant to ensure the Code, and the law behind it, meets its stated aims of cracking down on loan sharks and other unscrupulous lenders," Hope said.

Banks had made submissions earlier this year that the June 6 introduction would leave too little time to change and test IT systems and processes. They also warned it would cost more than a million dollars each to comply with the Code.