Pānui December 2020

ContentsEnd of year message from Moana - Acting Chief Executive2Condolences3Goodbye for now from Soraiya4FinCap opening hours5MoneyTalks opening hours5Nga Tangata Microfinance closing dates5CCCFA regulations on suitability and affordability6Consultation on draft updated Responsible Lending Code6Debt collection – our next campaign6Commerce Commission moves to address rising telecommunications sector complaints7Commerce Commission seeks view of pain points for consumers7Submission on the Electricity Authority Consumer Care Guidelines8Vero and charity Good Shepherd NZ to trial affordable insurance product9Debt Solutions now available for clients11Evaluating BFC services and next steps for the sector12Measuring client outcomes12Regular reporting via a dashboard12Nga Tangata Microfinance Impact Report12ComVoices State of the Sector Survey 202013Purpose of New Zealand Superannuation14Commerce Commission market study into grocery sector16Recent enforcement action by the Commerce Commission18BNZ warned over responsible lending and disclosure failures18Former high-cost lender warned over failure to adhere to responsible lending requirements20Your chance to be a part of designing the new National Strategy for Financial Capability22Pink and blue collar households hit hardest by COVID-19 – survey by CFFC23

End of year message from Moana - Acting Chief Executive

Kia hiwa rā, kia hiwa rā. Meri Kirihimete! me ngā mihi mō te tau hou ki a koe me to whānau.

We wish you all the most joyous Christmas and a prosperous New Year.

As we approach the holiday season, we reflect on the generous contributions of those that supported the FinCap journey in 2020. What a year it has been. It has been a year of exponential growth and milestones. Thank you all for journeying with us.

   

We have had an enjoyable year in 2020 working on some interesting projects, to support real change and improve how we work.  It has been a privilege to contribute to people, communities and whānau living free of hardship and support the inspiring work being done by all our services to improve the lives of all New Zealanders.

We finish the year with many highlights. Our FinCap team, have worked hard to continually improve on what we do and how we do it.  We believe the communities we work with deserve the best and their wellbeing is at the forefront of our hearts and minds as much as is humanly possible. We are not perfect, but we are committed to continual reflection, refinement and improvement as a team. As a result of this, we have been privileged to grow into new areas which in turn means we have become more responsive to the real needs on the ground to support our services, sector and families.

While there have been highlights, there have also been challenges. The Covid-19 impact which affected all our communities here and abroad really stand out. The Covid-19 impact gave us cause to pause and reflect with gratitude on all that we have. A heartfelt thank you to you all for your unwavering effort and resilience to support families during this time and continue to do so. The inherent goodness of humanity tends to come out at times like these and it is wonderful to have that re-affirmed. 

Thank you also to everyone who has played a role in supporting the FinCap team. Whether that has been, a phone call to say ‘hi’ or ‘thank you’, or just a smile. “Ahakoa he iti, he pounamu” Every contribution, big or small has an impact and your generosity and support is truly valued. 

Finally, on behalf of our FinCap board and our team I would like to wish you and your families are very Merry Christmas and a Happy New Year. It has been an incredible year and we feel privileged to work with you all and helping in any way to improve. Please take care over the holidays and we look forward to working with you in 2021.  We wish you all the best for a wonderful break and lots of sunshine over the holiday period

We look forward to new opportunities to collaborate and work together in the New Year.

Heartfelt greetings and bountiful blessings from our FinCap family to yours. 

“Aroha atu, Aroha mai, tātou i a tātou”  (Be safe, and be kind to each other)

Acting Chief Executive - Moana Andrew

Condolences

FinCap gives its condolences for the passing of two long serving members of our sector. Lindsay Chisholm from the Salvation Army and Adrienne Hutchings from Anglican Care Centre in Whangarei.

Lindsay had recently retired from The Salvation Army after playing an important role supporting budget advisers/financial mentors at a national level. He was also on the board of the Federation of Family Budgeting Services. We are sad to have received this news, knowing that Lindsay was looking forward to a well-deserved retirement. Our condolences go out to The Salvation Army and to Lindsay’s wife and family.

Adrienne Hutchings worked at Anglican Care Centre in Whangarei as a volunteer adviser for 11 years. She provided care and support to everyone who crossed her path in this role. She will be missed by her colleagues and the community that she served. Our condolences go out to Anglican Care Centre and Adrienne’s family.

Goodbye for now from Soraiya

As some of you know I am going on maternity leave on Friday 18 December with my baby due on 13 January. This is my first child and there is a very real sense of excitement and anticipation for her arrival. I thought I would take the opportunity of the last pānui for 2020 to reflect on my time at FinCap.

I started working at FinCap at the beginning of December 2017. It is crazy to think that I have been in the role for three years. Officially my job title has been Communications Adviser, but it was much more than that. I think that was a bit of sneaky plan by Tim when he hired me. While it has been very busy it has also been a very rewarding role.

Very soon after I started in the role Minister Kris Faafoi decided that he would undertake a review of the Credit Contracts and Consumer Finance Act with a focus on interest rate caps. FinCap had only been around for 6 months and was still finding its feet. We had no policy positions on anything. We did not have any established ways that we could find out what Financial Mentors thought about issues. Tim’s instinct was that Financial Mentors would be supportive of interest rate caps, but he wanted to see what you had to say, and so early in the 2018 we embarked on a consultation process with survey’s and engagement at regional hui to decide what we would advocate on.

There is a lot to say about what we achieved over that time. With the support of FinCap you were instrumental in getting an interest rate cap introduced in New Zealand. You bought up issues around affordability assessments that have resulted in much tighter rules on how affordability assessments will be done. You also raised issues around debt collection practices, a priority area for FinCap to address going forward.

I am glad to have played a part in ensuring that your voices were heard by people in power. Along the way there have many opportunities to represent your perspective with stakeholders across government and the private sector, helping to ensure that realities of people in financial hardship were told.

In between all of that I supported the FinCap team with its communications work, helped in many ways by Rocky with his kind ear to bounce off ideas. I will certainly miss our team in the year that I am away.

Quite early on I realised that you could not do justice to the role with both communications and policy work and so I am pleased to see FinCap hire Jake Lilley as our Consumer Issues Adviser. Jake will be taking on much of the policy work that I was involved in, advancing issues around responsible lending and debt collection, and taking on work from Merv in the electricity sector and from Tim in the banking sector. My maternity leave replacement will be focused on communications and you are likely to see lots of improvements in this area of our work over the next year, with more time dedicated to this important function.

I want to thank every Financial Mentor and every manager that I met along the way. It has been a pleasure to get to know you and work with you to reduce financial hardship in New Zealand. We have made a difference and will continue to make a difference.

FinCap and the financial capability sector has been good to me and my family and I hope that for everyone working in this sector, the satisfaction that we get from our jobs can support our lives outside of work. I look forward to working with you again!

FinCap opening hours

FinCap will be officially closing for the holiday season on Thursday 24 December. We will be reopening on 11 January 2019.

The training team will be going on leave earlier, from Wednesday 17 December 2020.

We look forward to seeing you again in the new year!

MoneyTalks opening hours

MoneyTalks will be open 8am to 6pm weekdays over the Christmas and New Year period, and closed the stat days and weekends in between. This allows our team to enjoy a well deserved break.

Many financial capability and budgeting services will be closed between 23 December and 11 January. With this in mind, we are most happy to receive your customer referrals throughout the holiday period however note there may be a delay in your customer meeting with a Financial Mentor.

Thank you to you and your team for your support, we look forward to continuing helping those in need together in the New Year.

Best wishes and Merry Christmas!

Clare

MoneyTalks coordinator

Nga Tangata Microfinance closing dates

Greetings budgeting services.  We wish you all the best over the Christmas period and hope it is restful, peaceful, and safe for everyone. 

We would like to offer our thanks to all services for what you do and we are certain that there will be families a bit better off over this Christmas period through our mahi together.

NTM Christmas break dates are 18th Dec to 11th Jan for support staff, however you are welcome to submit applications and they will be processed up to 23rd Dec and from 4th Jan.

Thanks to those services who have given us their dates too.  We are sending our end of year newsletter shortly with a few highlights we'd like to share with you.

From the crew at Nga Tangata Microfinance

CCCFA regulations on suitability and affordability

The Credit Contracts and Consumer Finance (Lender Inquiries into Suitability and Affordability) Amendment Regulations 2020 were made on Monday 30 November 2020.

 

These regulations prescribe the minimum steps that lenders must undertake to assess whether a loan is likely to be affordable and suitable for a borrower. These regulations are a big victory for Financial Mentors, and something that we worked together to advocate for.

The new regulations will come into force on 1 October 2021.

The new regulations can be found on the legislation.govt.nz site: https://bit.ly/37lnM3z

MBIE is working on further regulations to enable the Commerce Commission to carry out fit and proper person assessments, including regulations that will set the Commerce Commission’s fees for fit and proper certification. They will be in a position to share more details on these further regulations early next year.

The MBIE website summarises all the reforms that have happened so far as part of this process https://www.mbie.govt.nz/business-and-employment/consumer-protection/review-of-consumer-credit-law/changes-to-consumer-credit-law-2020/

Consultation on draft updated Responsible Lending Code

In light of the changes made in the Credit Contracts Legislation Amendment Act and the new regulations, the current Responsible Lending Code needs to be updated. A draft of the updated Responsible Lending Code is now available for public consultation.

You can find a copy of the updated code on the MBIE website - https://bit.ly/3oK31V0

Chapter 12 of the Code has undergone a detailed review, in light of issues identified by officials and lenders during Alert level 4 early this year.

You can provide feedback to FinCap to consider in our submission to MBIE or you can put in your own submission.

Please contact Jake on jake@fincap.org.nz if you would like to contribute to the FinCap submission on updated Responsible Lending Code.

Debt collection – our next campaign

In 2021 FinCap will be focusing our attention on improving laws and regulations on debt collection. Please let Jake Lilly know on jake@fincap.org.nz about any issues your clients face with debt collection including practices and fees to help us tell the story about why debt collection needs reform.

Commerce Commission moves to address rising telecommunications sector complaints

The Commerce Commission is asking for views on what telecommunications providers could be doing better to address increasing complaints about the sector.

The number of consumer complaints is an indicator of consumer experience and, over the past year, consumer complaints and enquiries to the industry dispute resolution scheme, the Telecommunications Disputes Resolution Scheme (TDRS), and the Commerce Commission have increased.  

“The increase in complaints indicates that telecommunications providers need to lift their game to improve outcomes for consumers,” said Telecommunications Commissioner, Tristan Gilbertson.

Commerce Commission seeks view of pain points for consumers

The Commerce Commission is asking for views on:

1. The key pain points being experienced by consumers across all dimensions of customer experience

2. What needs to be done to address them.

This includes selecting and buying telecommunications services, the day-to-day performance of the service and provider, changing to another provider, and the complaints process.

“We’re asking for specific examples of the problems consumers are running into and views on how things could be done better. This will help us to understand what needs to change to make a meaningful difference for New Zealand consumers,” said Mr Gilbertson.

Contact Jake Lilley, our Consumer Issues Adviser on jake@fincap.org.nz if you have any views and he will feed them back to the Commerce Commission.

Submission on the Electricity Authority Consumer Care Guidelines

The Electricity Authority recently consulted on its Consumer Care Guidelines. FinCap submitted along with other consumer advocates.

We must all work towards a future where no whānau is disconnected or goes without the electricity needed for a healthy home due to an inability to pay. The proposals in the consultation paper are a step towards this but should be the first of many. Financial Mentors and the people, whānau and communities they work with need strong protections through rights to appropriate and consistent assistance for overcoming or avoiding hardship from all electricity providers.

We have strongly supported the Electricity Authority efforts to guide electricity retailers to consistently offer support to all their customers who are having trouble to pay. We have also strongly supported guidelines that suggest all retailers make a Consumer Care Policy publicly available so the Financial Mentors can see what should be available to clients. Otherwise, we want to see the Electricity Authority gathering much more information to give the public oversight of where more protections are needed.

You can read our submission on Te Papa Hou - https://bit.ly/37fwf8i

Vero and charity Good Shepherd NZ to trial affordable insurance product

A new car insurance product being trialled by charitable organisation Good Shepherd NZ and insurance company Vero aims to improve financial security for Kiwis who may be excluded from the car insurance market.

People accessing a Good Shepherd NZ Good Loan to finance a car will now have the opportunity to purchase Vero’s Drive Car Insurance, a low-cost, comprehensive car insurance product.

Good Shepherd NZ works with people on limited incomes, and Chief Executive Fleur Howard says they were concerned about how many of their clients were borrowing money to buy cars but weren’t insuring them.

“A car accident can be a double blow for our clients. Not only do they not have the money to repair or replace the car, but their ability to get to work is affected because they often work irregular hours outside of accessible public transport schedules.”

She says that insurance can be an important element of financial resilience, but for those who can’t afford to pay the premiums or excesses the financial fallout can be enormous.

“Imagine having to continue making repayments on a vehicle you can’t afford to repair or that has been stolen, when you have no way to get to work?”

“One person we spoke to when researching this product was left with a $50,000 repair bill for the other vehicle involved in an accident - more than she earned in a year,” she says.

“The opportunity to provide more people with an affordable insurance option and prevent these situations from happening, learning as we go, is really exciting for us - its great progress towards helping people manage a significant financial risk.”

Vero undertook in-depth research to understand why some of Good Shepherd NZ’s clients did not take out car insurance. CEO Jimmy Higgins says cost was only part of the reason people opted to go without insurance.

“Our research showed that people’s values and background informed their view of risk, and many of the Good Shepherd NZ clients we spoke to felt that protecting a material possession like a car was less important than taking care of their family and community.

“But for some families a car is more than a possession, it’s a connection – to work, family, wellbeing, church, community. Our challenge is to find ways to ensure that those differences are not a barrier to New Zealanders accessing the help and support we are here to offer them if something goes wrong.”

Drive Car Insurance was carefully designed to meet the needs identified by the research.

Premiums will be fixed at just $8 per week and customers won’t pay any excess on their first claim, to ensure that customers can have a conversation about excesses before one needs to be paid. The policies will allow for any driver as long as they are complying with their licence conditions and will have some more relaxed application criteria than standard policies.

Higgins says Drive Car Insurance fits with Vero’s financial inclusion action plan and its vision to build futures and protect what matters for New Zealanders.

“Our vision means providing products and services that match how different people view value and accessibility.”

Drive Car Insurance will be trialled for an initial 12-month period, which Higgins says will help ensure it provides genuine value to policyholders.

Both Higgins and Howard said they hope the findings from the research that went into developing Drive Car Insurance would also yield broader insights on how easier access to appropriate and affordable insurance might help New Zealanders develop greater financial resilience.

Debt Solutions now available for clients

From the MSD BFC newsletter

Financial Mentors and providers who support people with severe debt problems now have some new tools in their kete.

Four Debt Solution providers are ready to help clients with complex debt problems that may need specialist financial, debt counselling or lending support to solve. This will add an extra layer of specialist support for BFC providers who don’t have the time or the staff to work at this level themselves.

In July 2020, Ministers Sepuloni and Faafoi announced the services as part of COVID Response and Recovery funding of $4.3 million over two years.

The following four Debt Solution providers are operating interim services till 30 June 2022:

Debtfix provides specialist financial consultations on debt matters. Financial Mentors and clients can use these to access the range of debt repayment agreements and insolvency support options available.

Christians Against Poverty (CAP) has received funding to provide specialist debt and money management support to families in desperate circumstances.

Good Shepherd New Zealand provides debt consolidation loans and debt counselling (low interest and interest free loans) using their new Good Loans brand. BNZ is now assisting with marketing support using the theme “Why do we support Good Loans?”

Nga Tangata Microfinance is funded by MSD to provide interest-free loans in conjunction with Building Financial Capability (BFC) financial mentors.

Alongside this support, a service design will be run to develop a longer term national Debt Solutions approach. This will include input from clients, BFC providers, FinCap, CFFC, the finance sector, and government agencies (through SCAFI – the Safer Credit and Financial Inclusion strategy) and is expected to start in February 2021.

Evaluating BFC services and next steps for the sector

From the MSD BFC newsletter

Following the sector’s significant Budget 2020 funding increases, MSD has been engaging with our partners: FinCap, BFC providers, and other stakeholders, to help inform the future direction for the sector. Engagement will continue as they firm this-up throughout 2021.

As part of this future focus, it became clear that it was time to move beyond the current BFC evaluation programme delivered by Malatest International. MSD are now working with Malatest to end their relationship and carefully transition all their work in preparation for our next evaluation steps.

Measuring client outcomes

From the MSD BFC newsletter

MSD have started a review of the Client Outcomes Measurement Tool (COMT).

Since 2016 the tool has been used to track client progress and provide information on ways BFC providers can improve services. Feedback from the sector and evaluation reports have identified that the current COMT should be re-thought so that that MSD can better measure the impact of BFC services. From early 2021, MSD will work with providers and clients on this redevelopment. MSD will let services know how they can be involved through the BFC Sector Updates.

Regular reporting via a dashboard

From the MSD BFC newsletter

With the recent upgrade to Client Voices, the previous dashboard reports were unable to be produced until data entry was stabilised, and without significant additional investment in funding.

This delay in production has given MSD and FinCap an opportunity to investigate how we can best and efficiently produce the dashboard reporting and include the information most meaningful for you and other stakeholders. This means that 2020 full-year reporting will not be available. We apologise for any inconvenience this may cause. We will update you on progress in early 2021.

Nga Tangata Microfinance Impact Report

Nga Tangata Microfinance have released a social impact report by Impact Lab.

The report shows the impact that their loans have on the lives on their clients. There are lots of great references to Financial Mentors. It’s worth a read to see the impact of your referrals to Nga Tangata Microfinance and also look at a way that impact can be measured.

https://www.ngatangatamicrofinance.org.nz/ntm-research/

ComVoices State of the Sector Survey 2020

This 2020 State of the Sector Survey is the fourth biennial snapshot of the community and voluntary sector undertaken by ComVoices. Its findings reinforce those of previous surveys and other recent reports on the community and voluntary sector.

While still fragile, the community and voluntary sector is generally more stable and viable than it was two years ago. The survey of 129 community and voluntary organisations shows that the sector continues to deal with increased demands, increasing costs and has been significantly impacted by COVID-19.

Download the summary report here:

https://bit.ly/3mj65FS

Download the full report here:

https://bit.ly/381FAQc

 

Purpose of New Zealand Superannuation

The first statement defining the purpose of New Zealand’s retirement income system was released by Retirement Commissioner Jane Wrightson on 21 October 2020.

New Zealand Superannuation and retirement savings plans such as KiwiSaver together form the retirement income system, but until now there has been no definition of what that system should achieve. There is no definition of the role of NZ Super in the Superannuation and Retirement Income Act.

“During the Review of Retirement Income Policies last year it was clear New Zealanders had deeply held views on the role of NZ Super, but they differed,” says Wrightson. “Some considered it was there to prevent poverty and ensure people retained dignity in old age, others saw it as providing a basic standard of living, as a gesture of care for the elderly or as a reward for working hard and paying taxes.

“My role as Retirement Commissioner requires me to monitor and advise Government on retirement income issues, but to do that I need to start from a base of what our retirement income system is for. This purpose statement will also enable me to test proposals that may affect people’s retirement income in the future.”

Wrightson formed an Expert Advisory Group of academics and policy specialists with expertise in various areas to assist her to test and debate issues. Together they have settled on the following purpose statement for New Zealand’s retirement income system that will be used by Wrightson’s office, the Commission for Financial Capability (CFFC):

A stable retirement income framework enables trust and confidence that older New Zealand residents can live with dignity and mana, participate in and contribute to society, and enjoy a high level of belonging and connection to their whānau, community and country. 

 

To help current and future retirees to achieve this, a sustainable retirement income framework’s purpose is twofold: 

1. To provide NZ Superannuation to ensure an adequate standard of living for New Zealanders of eligible age. NZ Super is the Government’s primary contribution to financial security for the remainder of a person’s life. 

 

1. To actively support New Zealanders to build and manage independent savings that contribute to their ability to maintain their own relative standard of living.

 

The retirement income system sits within the broader government provision of infrastructure also needed to enable older New Zealanders to live well, such as health care, housing, and transport.

“This statement acknowledges the dual role of Government and the individual in preparing for their retirement,” says Wrightson. “The Review recommended that NZ Super be retained at its current settings in the medium term, and made a number of recommendations to strengthen KiwiSaver. Whether people use KiwiSaver or another vehicle to build independent savings, they must be supported in putting money away for retirement because for many, NZ Super alone will not be enough.”

Wrightson considered policy in areas such as health care and housing should also be viewed through a retirement lens, as they had significant bearing on standards of living in retirement.

“This is particularly true for many Māori, whose disparity in living standards throughout their lives affect their quality of life as they age,” says Wrightson. “I hope to influence progress in addressing these disparities before people reach retirement.”

She thanked the Expert Advisory Group for their help in formulating the statement.

“It will help me serve New Zealanders and keep their retirement income needs front of mind when mooting or assessing any policy that might affect their standard of living in their later years. My aim is to ensure a stable income system to enable people, now and in the future, to retire with confidence.”

Members of the Retirement Commissioner’s Expert Advisory Group:

Alison O’Connell, Independent Director and longevity policy analyst

Associate Professor Claire Matthews of Massey University and author of its Retirement Expenditure Guidelines

Dr Kay Saville-Smith of the Centre for Research, Evaluation and Social Assessment

Malcolm Menzies, senior research analyst

Ngahiwi Tomoana, Chair of Ngāti Kahungunu Iwi and a specialist in hapū and iwi development

Simon Chapple, Director of the Institute for Governance and Policy Studies at Victoria University Associate Professor Susan St John, Director of Auckland University’s Retirement Policy and Research Centre

Vui Mark Gosche, Chair of Counties Manukau District Health Board, Chair of Kāinga Ora - Homes and Communities.

Commerce Commission market study into grocery sector

Media release

Issued 19 November 2020Release no. 55

Commission opens market study into grocery sector and publishes process paperThe Commerce Commission has commenced a market study into factors that may affect competition in the grocery sector following publication of terms of reference for the study by the Minister of Commerce and Consumer Affairs. 

“The price and quality of groceries have an impact on all of us. Groceries are a major expense for households, with more than $22 billion spent at New Zealand supermarkets and grocery stores in the past year”,  Commission Chair Anna Rawlings said.

“New Zealand has one of the most concentrated retail grocery sectors in the world. If retail competition is working, our study would expect to see grocery retailers competing to win customers based on factors such as price, quality, choice, and service. Our study provides an opportunity to consider whether competition in the sector is working for the benefit of New Zealand consumers, and if not, how it could be improved.” 

The Commission will release a preliminary issues paper and engage with, and send information requests to, a range of stakeholders, before Christmas. It will undertake further information gathering and engagement with stakeholders, including with consumers, commencing early next year. 

The Commission expects to release its draft report for consultation around July 2021 and final report in November 2021.  

A process paper and updated guidelines that describe the purpose of a market study and the Commission’s approach to market studies are available on the study’s dedicated webpage (www.comcom.govt.nz/groceries) 

Background

This is the Commission’s second market study after completing one into the retail fuel market in December 2019. 

The Commission or the Minister of Commerce and Consumer Affairs may initiate a market study where they consider it is in the public interest to do so. The party that initiates the study must publish terms of reference that identify the goods or services to be studied.

The Minister of Commerce and Consumer Affairs announced the initiation of a market study into the grocery sector on 17 November and a notice was published in the Gazette, formally directing the Commission to carry out the study. The Commission has now opened the study. 

What is a market study?

A market study, referred to as a ‘competition study’ in Part 3A of the Commerce Act, is a study into the factors affecting competition for particular goods or services, to find out how well competition is working and whether it could be improved.

By gathering and analysing information on a market, we can identify whether there are features preventing it from working well, as well as considering how they might be improved. 

Outcomes of our work may range from a ‘clean bill of health’ for the sector to recommendations for changes to enhance market performance. The Commission’s recommendations are non-binding, but the Government must respond to any recommendations within a reasonable period.

Why is competition important?

When markets work well, businesses compete by providing consumers with products and services at prices and quality levels they hope will be more attractive than their rivals. In a competitive market, businesses are incentivised to innovate, and new competitors may be attracted to enter the market, putting pressure on incumbents. 

Recent enforcement action by the Commerce Commission

BNZ warned over responsible lending and disclosure failures

Media ReleaseIssued 2 December 2020

The Bank of New Zealand (BNZ) has been warned by the Commerce Commission over likely responsible lending breaches and failures to provide timely and accurate information to borrowers. 

In the Commission’s view, BNZ likely breached responsible lending and disclosure obligations under the Credit Contracts and Consumer Finance Act 2003 (CCCF Act).

In late 2018 BNZ reported 15 potential breaches of the CCCF Act to the Commission. The matters reported to the Commission related to certain home loans, personal loans, credit cards and overdrafts entered into or varied between 6 June 2015 and 24 February 2017. There were 11,956 affected customers.

Following its investigation, the Commission has warned BNZ that it is likely to have breached its obligations under the CCCF Act.

“In the Commission’s view, BNZ failed to meet the requirements of the CCCF Act including by making errors when delivering information required by the Act. For example, in some cases BNZ provided incomplete or inaccurate disclosure, and in other cases disclosure was provided a day, a few days, or as many as seven months after the information should have been provided to borrowers. We expect lenders to regularly audit their systems to make sure that they can comply with consumer credit law, or quickly identify problems if they arise, fix them and provide appropriate remediation to borrowers,” said Commerce Commission Chair Anna Rawlings.

In late 2018 BNZ refunded approximately $3.8 million in interest and fees to borrowers affected by these issues.

BNZ has co-operated with the Commission throughout the investigation, and in September 2020 it refunded $350 to each borrower affected by its likely failure to meet responsible lending obligations.  This amounted to a total refund of more than $1 million to more than 2,300 affected borrowers.

“BNZ has identified these matters itself and reported them to the Commission, made remediation payments to its customers and made system changes to reduce the risk of issues like this arising in the future.  Taking into account those steps, and consistent with our Enforcement Response Guidelines we have decided that it is appropriate to issue a warning to BNZ for this conduct,” said Ms Rawlings.

Background

Initial disclosure

Lenders must disclose to the borrower all the information listed in Schedule 1 of the CCCF Act which applies to the contract before the contract is entered into.

Variation disclosure

Where a loan contract is changed, the lender must provide full particulars of the changes to the borrower.

Warning letters

A warning explains the Commerce Commission's opinion that the conduct at issue is likely to have breached the law. Only the Courts can decide whether a breach of the law has in fact occurred.

The purpose of a warning letter is to inform the recipient of the Commission’s view that there has been a likely breach of the law, to suggest a change in the recipient’s behaviour, and to encourage future compliance with the law.

Former high-cost lender warned over failure to adhere to responsible lending requirements

Issued 3 December 2020

Release no. 62

The Commerce Commission has issued a warning to Superloans Napier Limited and Superloans Porirua Limited that they are likely to have failed to comply with the lender responsibility principles set out in the Credit Contracts and Consumer Finance Act 2003 (CCCF Act).

An investigation into the Superloans Group, including Superloans Napier and Superloans Porirua, was opened following a number of complaints, including complaints from financial mentors, which raised concerns about the Superloans Group’s compliance with the responsible lending provisions of the CCCF Act.

Commission Chair, Anna Rawlings said, “Our investigation identified several borrowers who were provided with high-cost Express loans on a regular and ongoing basis. In one case a borrower had 19 loans in a 12-month period.”

The CCCF Act requires lenders, before entering into an agreement, to make reasonable inquiries with a borrower so as to be satisfied that the agreement meets the borrower’s requirements and objectives, and to exercise the care, diligence and skill of a responsible lender. 

“Our investigation found Superloans promoted and allowed its loans to be used on a regular and long-term basis and encouraged longer term and regular borrowing through the use of text and email messaging to borrowers. These text messages did not contain a risk warning.”

“There was also limited evidence to indicate a borrowers’ previous borrowing or stated purpose for the loan was discussed or taken into account when assessing the suitability of the loan, and Superloans Groups’ guidelines did not contain any guidance on how staff should comply with their responsibilities in this area.” 

“Responsible lending is an area of focus for the Commission. We urge lenders to make sure that they understand their responsible lending obligations and they have internal processes in place to ensure they meet those obligations,” said Ms Rawlings.

Background

Lender Responsibility Principles

Lenders entering into consumer credit contracts after 6 June 2015 are required to comply with the lender responsibility principles, as set out in the CCCF Act.

Lenders must make reasonable inquiries, before entering the agreement, to be satisfied it is likely the borrower will make repayments without suffering substantial hardship, and to exercise the care, skill and diligence of a responsible lender.

From June 1 high-cost lending to consumers is now subject to specific restrictions that do not apply to other forms of lending.

The key restrictions on high-cost lending are:

· interest and fees charged on a high-cost loan are capped at 100% of the amount first advanced

· the rate of charge (excluding default fees) on a high-cost loan is capped at 0.8% per day

· lenders are restricted from making high-cost loans to some repeat borrowers

· lenders have extra disclosure obligations.

The Commission has developed guidance which explains these key restrictions. The specific rules are set out in the CCCF Act and the Credit Contracts and Consumer Finance Regulations 2004. These rules are complex, and lenders are encouraged to take legal advice to ensure that they operate within the restrictions.

Responsible Lending Code

The Code provides guidance as to how lenders can comply with the Principles. It includes the type of inquiries a lender should make into a borrower’s income and expenses, and it specifies that more extensive inquiries should be made if the loan is high-cost. 

The Code is not legally binding, but if lenders comply with it that will be treated as evidence they complied with the principles.

Warning letters

A warning explains the Commerce Commission’s opinion that the conduct at issue is likely to have breached the law. Only the Courts can decide whether a breach of the law has in fact occurred.

A warning letter is to inform the recipient of the Commission’s view that there has been a likely breach of the law, to suggest a change in the recipient’s behaviour, and to encourage future compliance with the law.

Your chance to be a part of designing the new National Strategy for Financial Capability

The National Strategy for Financial Capability was released in 2015, it lays out five work streams that contribute to a vision of ‘everyone getting ahead financially’: getting New Zealanders to talk and learn about money, to plan for the future, to be debt-smart and to save and/or invest. The Strategy provides a reference point for organisations working in the Financial Capability space, a structure to tie their initiatives back to, and supports cohesion across the sector.

 

Unfortunately, the current strategy has not been a living document and nor has it been widely embraced or supported. 

 

The Commission for Financial Capability is now reinvigorating a new National Strategy to set the direction for the next five years. The Commission believes the focus of the strategy should be to support stakeholders and partners, to better unite the sector, and to foster collaboration. The Commission wants to be sure that the strategy reflects the work and priorities of the sector, and they involve our stakeholders in its development as much as we can.

 

Their original intent was to hold a national hui to workshop the new strategy outcomes and opportunities, bring stakeholders and partners together, and build relationships across the sector.  Since COVID-19 makes this impractical, the Commission is are currently running a series of fortnightly online workshops to discuss aspects of the strategy development, to share research data and information, and to facilitate connection and discussion with participants. You are welcome to attend any of these sessions. They will be sending out email invitations beforehand to people on their email list, but here are the details so you can save the dates (the topics may change but we’ll give you plenty of notice).

11 February 2021

10am-12pm

Collective Impact – a model for effective community action

25 February 2021

10am-12pm

Funding Structures – funding models for the hardship space

11 March 2021

10am-12pm

Funding Models – funding across the sector

25 March 2021

10am-12pm

Government, Policy and Financial Capability – advocating to Government

Email brenda@cffc.govt.nz to join the mailing list for the National Strategy and receive an invitation to the above meetings.

Pink and blue collar households hit hardest by COVID-19 – survey by CFFC 

A survey on New Zealanders’ financial wellbeing undertaken six months after the first lockdown has revealed the types of households most impacted by COVID-19.

 

Many working families in blue collar and “pink collar” occupations were hit hard: couples aged 18-54 with children, renting, often with one parent at home and the other in occupations such as construction, retail, food and accommodation services were likely to still have reduced incomes compared to February 2020.

 

Knowledge workers and those working in the public sector have, by contrast, fared better than most.

 

The survey of more than 3600 households during two weeks in October was conducted by the Commission for Financial Capability (CFFC) as a follow-up to a similar survey conducted in April. It found that while many households had recovered lost income, overall the recovery was slow and uneven.

 

Key findings were:

 

· One in three households had not recovered their income to the February 2020 level, including 11% of households still on severely reduced income of more than 30%.

· The percentage of those still on reduced incomes compared to February 2020 was highest among households where the main respondent was aged 55 to 64 (37%), indicating this age group was having more trouble finding new jobs or extra work than younger workers.

· Māori and Pacific households were more likely to still have reduced incomes. Māori households had the highest proportion of those whose income was reduced by more than a third (14%) and Pacific households had the highest proportion of those whose income was reduced by up to a third (31%).

· While arrears had decreased since April, one in four households (23%) had some sort of arrangement with at least one creditor, such as a mortgage suspension or reduced repayments on other loans. This causes concern regarding the effect on households when those arrangements expire.

 

Head of the CFFC, Retirement Commissioner Jane Wrightson, said it was encouraging that income reduction was slowly improving overall, and many people who lost jobs in the first half of the year had found new ones. However, financial resilience was still a concern, with 41% of households still exposed due to high debt and low savings.

 

“Households in the exposed segment have increased their saving levels, which suggests some of them realised the precarity of their financial situation,” says Wrightson. “We need to encourage them to keep going so they are better prepared for the next financial shock.”

 

While there had been some increase in the use of  free financial guidance such as Sorted and MoneyTalks among households in some difficulty, more could be gaining help from these independent services

 

“We understand that households who have never been in financial difficulty before might not  be used to accessing face to face help, but they should feel reassured that there is confidential guidance available for free through FinCap budgeting services,” says Wrightson. “Sorted also provides trusted online information and tools to help families in strife move forward.”

 

Wrightson said it was a relief to see in the survey that the high rate of enquiry about withdrawing KiwiSaver funds under hardship criteria had not, to date, transpired into retirement savings being drained.

 

“Your KiwiSaver is a long term investment for your future that should only be accessed as a last resort. There is a lot of other help available, listed on the covid19.govt.nz website, that households can turn to first.”

 

Home ownership was a key factor among those doing better than other groups, reinforcing the importance of helping New Zealanders attain this goal.

https://cffc.govt.nz/news-and-media/news/pink-and-blue-collar-households-hit-hardest-by-covid-19-survey/

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