Removal of CCCFA excesses welcome

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• Removing the, in our view, out of date restrictions on the use of electronic methods to provide information.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.