Removal of CCCFA excesses welcome

14 February 2024

Chapman Tripp welcomes the rebalancing of the Credit Contracts and Consumer Finance Act 2003 (the CCCFA), announced by Commerce and Consumer Affairs Minister Andrew Bayly on 31 January.

The intention is to rewrite the CCCFA to protect vulnerable consumers without unnecessarily limiting access to credit. And the Financial Markets Authority (FMA) will become the single conduct regulator, picking up the CCCFA regulator role from the Commerce Commission.

The reforms will occur in a two-step process which we expect will involve removing the prescriptive affordability requirements for lower risk lending preparatory to a more substantive review of the CCCFA, including looking at its penalty and disclosure regime and its relationship with the Conduct of Financial Institutions (CoFI) regime.

We outline the main areas where reform is needed with our recommendations. We also set out how we expect the FMA will approach its new role as CCCFA regulator.


Changes made by the Labour Government in December 2021 to strengthen consumer protections against predatory lenders were found by the Ministry of Business, Innovation and Employment (MBIE) in 2022 to have had unintended impacts, the effect of which was to squeeze access to credit.


  • Borrowers across all lending types, who should pass the affordability tests, were being subject to outright declines or reduced credit limits; and
  • Borrowers were being subjected to unnecessary or disproportionate inquires which were perceived by them as unjustifiably intrusive.

A series of tweaks were made to remedy these issues but the appropriate balance between responsible lending obligations and overly restrictive lending practices was never achieved.  More broadly, the CCCFA’s liability settings need to be reconsidered to achieve a better balance - both in respect of lender liability, and personal liability for directors and senior managers of lenders. 

Our suggested areas for reform

Disclosure rationalisation and simplification

The extensive disclosure and informed decision-making requirements in the CCCFA and the Responsible Lending Code have resulted in ‘information overload’ for consumers, which undermines the purpose of the disclosure. The focus should be on ensuring that borrowers are provided with necessary and useful information, but without requiring excessive and highly prescriptive information to be disclosed.

We recommend:

  • Reviewing the requirements relating to initial disclosure, variation disclosure and debt collection disclosure in particular. Some mandatory disclosure items are of little value to consumers.
  • Considering whether there are better options to address concerns about the behaviour of debt collectors than requiring debt collection disclosure. For example:
    • In relation to consumer credit, misrepresentation of the amount and recoverability of consumer lending debts would be a breach of the responsible lending obligations, which govern all aspects of consumer credit contracts, including debt collection whether done in-house or by a third party debt collection agency;
    • Existing laws, such as the Fair Trading Act 1986’s (FTA) prohibitions on misleading and deceptive conduct, provide protection for the collection of a broader range of debts. Potentially this could be coupled with licencing of third party debt collectors of consumer debt; and
    • We query whether distinguishing between lending debt[1] (arising from including the debt collection disclosure regime in the CCCFA) when addressing concerns about debt collectors’ behaviour, compared to the collection of other debt, makes sense.
  • Removing the, in our view, out of date restrictions on the use of electronic methods to provide information.
    • In particular, the CCCFA should allow disclosure information to be provided electronically without obtaining prior borrower consent, if the borrower has provided an email address (or equivalent). This reflects the reality of modern-day commerce; and
    • Electronic disclosure by default would allow borrowers to receive disclosure information in a timely manner. The current CCCFA default methods are ‘post’, despite the inherent time delay this creates, and ‘in person’, which is increasingly irrelevant to how borrowers interact with lenders.

Penalties regime

The penalties regime should be reviewed to ensure it is fit for purpose and provides a better balance between access to credit and liability.
We recommend:
• Reconsidering the appropriateness of the penalties regime, particularly for disclosure breaches. The lack of a materiality threshold means that errors in non-core disclosure obligations can attract the same penalties as errors in important information. The review should also consider whether section 99(1A), providing that lenders cannot recover certain costs of borrowing after an initial disclosure or agreed variation disclosure breach, is fit for purpose.
• Lifting the restrictions on indemnities and insurance for pecuniary penalties for senior managers and directors, if such penalties are to remain. These restrictions are inconsistent with the personal liability regime in the Deposit Takers Act 2023 (DTA), which generally allows indemnities and insurance, and also includes a formal requirement for regulator guidance on its director due diligence requirements and defences (aligned with the Companies Act).

Overlap and inconsistencies between legislative regimes

The overlap and inconsistency between aspects of the CCCFA and the FTA, the Financial Markets Conduct Act 2013, CoFI and the DTA should be reviewed. An example is the level of overlap between the FTA and the CCCFA responsible lending obligations to ensure that information provided by the lender to the borrower is not presented in a manner that is, or is likely to be, misleading, deceptive or confusing.

What might the FMA being in charge of the CCCFA look like?

Taking on the role as regulator responsible for enforcing the CCCFA will be a material expansion in the FMA’s current scope of work.  The FMA has already indicated that it would look to apply an outcomes-based approach with a view to promoting:

  • proportionate engagement
  • regulatory certainty, and
  • adaptation to new technologies and products.

These priorities indicate an increased focus on outcomes for customers, with less focus on technical breaches.  We expect, however, that high-cost credit providers will remain a key area of regulatory scrutiny given the potential for their customers to experience poor outcomes.

Next steps

There will be an opportunity to submit on the reforms at later stages of the process.  We will keep you informed of developments.

1. Debt collection disclosure applies to credit contracts under which (i) the debtor is a natural person, and (ii) when the contract was entered into, the credit was to be used, or intended to be used, wholly or predominantly for personal, domestic or household purposes.

Related insights

See all insights