Contents
The Credit Contracts and Consumer Finance Bill (CCCF Amendment Bill) and the Financial Markets Conduct Amendment Bill (FMC Amendment Bill) are now open for submissions.
Together they overhaul New Zealand’s consumer credit regulation and make other changes relevant to Financial Markets Authority (FMA) licensees.
The submission deadline is 23 June. We run through some of the key issues that lenders and other market participants may wish to focus on.
“Significant influence” transactions
It is proposed that any transaction resulting in a person obtaining “significant influence” over a New Zealand-incorporated licensee requires prior FMA consent. Under the new regime, this will also generally apply to consumer lenders. The “significant influence” threshold is triggered when a person (or persons acting together) obtains control of 25% of voting rights or the power to appoint 50% of directors, whether directly or indirectly. An overseas incorporated licensee, however, only needs to provide a notification to the FMA after the change occurs.
So, what should happen where a transaction occurs in an overseas incorporated holding entity, but it results in a person obtaining significant influence over a locally incorporated licensee? Will the locally incorporated licensee be able to influence (or even be aware of) plans for the transaction? Is there any substantive difference between this scenario and one where a significant influence transaction occurs in respect of an offshore incorporated licensee, where the practical difficulties of obtaining advance consent have led to a notice-only approach?
This requirement is expected to come into force within three years of enactment, to allow time for regulations to be developed.
Proposed concession for debt collection disclosure
A new concession is proposed in respect of debt collection disclosure, to accommodate “credit limit notices”. Given the context, the interaction of this proposed concession and the existing concession for “payment reminders” needs attention. For example, should the regime contemplate that an amount can be both overdue and overlimit (particularly where it has been overlimit for longer than the one-month concession for credit limit notices)? And should it be possible for both overdue and overlimit amounts to be chased in the same notice?
Scope of CCCFA services under fair dealing regime
Should the “relevant CCCFA services” that become subject to the fair dealing regime under the Financial Markets Conduct Act 2013 (FMCA) be limited to services that are actually regulated by the Credit Contracts and Consumer Finance Act 2003 (CCCFA)?
The current definitions have been pulled from the CCCFA without their original context e.g. the definition of “debt collector” covers the collection of all lending debt, even though only the collection of certain lending debt owed by natural persons triggers debt collection disclosure obligations under the CCCFA.
Duplication of obligations
Given previous announcements, it was expected that the CCCF Amendment Bill would provide that the Fair Trading Act 1986 ceases to apply to “relevant CCCFA services” covered by the fair dealing regime under the FMCA. It is unclear why this approach has not been taken, given that it would avoid unnecessary duplication of obligations.
We also note that the CCCF Amendment Bill does not address other known issues with the CCCFA. In the disclosure context, for example, lenders remain unable to provide disclosures electronically without obtaining prior consent, even where borrowers and guarantors have provided email addresses.
Next steps
Please contact any of the lawyers named below if you would like assistance with making a submission on the Bills, or for help preparing for the new licensing regime.
