The FMA takes the lead on consumer lending

The Financial Markets Authority (FMA) becomes the consumer lending regulator today, as the main consumer lending elements of the “fit for purpose” financial services reforms come into force.

However, the Commerce Commission retains jurisdiction over Fair Trading Act (FTA) breaches by lenders, maintaining an element of duplication which we had hoped might be avoided.

The “fit for purpose” review raised expectations for a variety of improvements to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) and a reduction in duplication. The reforms make a number of welcome (and long-awaited) changes, although the end result has been less than we hoped for. We look at what this package of changes means for lenders.

Principal changes effective today

Credit contracts are no longer excluded from the Financial Markets Conduct Act (FMCA), and various CCCFA services are also brought into the FMCA. As part of this, the FMA’s powers apply to the CCCFA.
- The FMA’s tool kit, including stop orders and direction orders, now applies to a broad range of “relevant CCCFA services”, such as being a creditor under a non-consumer credit contract, a debt collector, a lessor under a consumer lease and a mobile trader, even though these providers are not required to hold a market services licence. You can find our previous commentary on the FMA’s powers here.
- Unlike the Commerce Commission, the FMA has the power to accept an undertaking to pay an amount in lieu of a pecuniary penalty - an ability it has been using increasingly of late.
Relevant CCCFA services are now subject to the fair dealing rules in the FMCA (which generally duplicate obligations already owed under the FTA). They are also effectively subject to a new prohibition on being confusing, as the FMA can issue a stop order where it is satisfied that a communication in regard to the supply of a service is likely to confuse in a material particular. These rules will apply to providers who historically have had little to no regulation under the CCCFA.
Buy-back transactions and consumer leases (both regulated under the CCCFA) become “finance advice products” under the FMCA and subject to the financial advice regime.
Consumer lenders who were certified under the CCCFA (or exempt from certification on the basis that they were licensed by the FMA or registered by the Reserve Bank) automatically receive a licence for consumer creditors under the FMCA.
- The conditions for these licences will be limited initially, pending consultation.
- Licensees are subject to the standard FMCA requirements, such as the requirement to report contraventions (including likely contraventions) and material changes of circumstances to the FMA. This is a material change, as hitherto self-reports were voluntary (although expected by the Commerce Commission).
- As licensees, consumer creditors will need to monitor compliance with their market services licensee obligations and identify material changes in circumstances. For those licensees that have not previously held a market services licence, this may require an uplift in policies, procedures and controls.
The exemptions from consumer credit licensing for securitisation vehicles and for non-financial service businesses that provide credit on an interim basis were released last week. These generally replicate previous exemptions from the certification regime for these lenders, but it is worth noting that existing grandfathering for certain pre-December 2021 securitisation arrangements has not been expressly carried forward. Creditors intending to rely on these licensing exemptions should review to ensure they meet the requirements.
The due diligence duty of directors and senior managers has been repealed. It should be noted that the potential for personal liability remains for persons “involved in a contravention” by the lender (accessory liability), reflecting existing personal liability. However, such liability generally requires knowing or deliberate involvement in such a contravention.

Role of the Commerce Commission for FTA breaches

One area that has yet to be resolved is how involved lenders will need to be with the Commerce Commission going forward. The Commerce Commission retains jurisdiction under the FTA for behaviour such as false and misleading conduct, duplicating the role held by the FMA in respect of the fair dealing regime in the FMCA.

We hope that reporting processes can be streamlined so that lenders need to report to and engage with the FMA only where a breach is predominantly a CCCFA and/or FMCA fair dealing breach, even if a breach of the FTA has also occurred.

Given the intended shift of responsibility to the FMA, the common-sense approach would be for only one report to be prepared (at the time and with sufficient content for the FMA’s purposes).

It would be helpful if the Commerce Commission’s position on self-reporting by leaders could be clarified. The FMA has thus far only expressed its views in this area informally, but has indicated that it is considering options in relation to self-reporting guidance. We anticipate that this will be an area of attention now that responsibility has shifted.

In the meantime, one point of note is that the FMA has indicated that where a lender discovers issues, they should be escalated to the lender’s board and the FMA as soon as possible.

Improvements to the CCCFA

Although hoped-for improvements to ensure borrowers and lenders are provided with the right information at the right time failed to eventuate, several other useful changes have been made to provide a more workable and proportionate CCCFA, including:

repealing section 99(1A) of the CCCFA for new loan contracts - the provision that was recently found¹ to mean that a creditor’s failure to make required initial or variation disclosure meant that the debtor is not liable for the costs of borrowing;
adding an ability for the Courts to reduce the effect of a failure to make initial or variation disclosure correctly by permitting some or all of the costs of borrowing to be charged by lenders for contracts entered into before section 99(1A) was repealed. Chapman Tripp supported the retrospective application of these provisions in our submission to the Select Committee;
ensuring consistent treatment in the CCCFA by providing that the consumer credit protections do not apply to guarantors if they are acting as the trustee of an express trust or a partner in a partnership;
exempting lenders from affordability or suitability testing in relation to certain payments under a mortgage or for unpaid rates where these are added to the loan balance, and updating model disclosure statements, including to cover high-cost credit and lay-by sales.

Consumer protection changes

Several consumer protection changes will only come into force on 5 December 2026, as they require time to be implemented by lenders.

These are:

extending the repayment waiver obligations to a product where, for a fee, the lender waives the loan shortfall caused by an insurance payout for total loss of the secured asset being less than the loan balance at the time;
providing cancellation rights for repayment waivers and extended warranties, either as part of the statutory cancellation right for the contract or exercisable in respect of the repayment waiver or extended warranty only, and;
additional initial disclosure requirements around specifically identifying consumer goods and reflecting the cancellation rights changes.

New model disclosure statements have been released to cover these changes.

Other reforms still to come

The “fit for purpose” reforms were also spread across two other Bills. The first of these - the Financial Service Providers (Registration and Dispute Resolution) Amendment Act 2026 - came into effect in June. The third - the Financial Markets Conduct Amendment Bill - is still winding its way through Parliament. This Bill contains important extensions to the FMA’s powers, including “without notice” on-site inspection powers.