Following on from changes to the Credit Contracts and Consumer Finance Act 2003 (CCCFA), there has been a 44 percent year on year decline in new retail credit account openings in January 2022 compared to January 2021.
The law around lending money to consumers in New Zealand changed on December 1, 2021. The implications of this tightening up on handing credit out mean increased processing time, and more stringent checks involved.
ANZ says that the changes mean customers should plan ahead and be patient, as the process will take longer. “Customers will be asked more in-depth questions about their finances and some customers may find it more difficult to get credit than they have in the past,” the bank says in a statement.
These effect are certainly being felt by consumers if the latest insights by Equifax on consumer account openings for unsecured credit are to go by.
The insights from the global data, analytics, and technology company reveal that in this period:
- Home loan account openings declined by 35%
- Unsecured credit accounts openings declined by 52%
- Credit card account openings declined by 71%
- Personal loans new account openings declined by 33%
Equifax Managing Director, Angus Luffman says January 2022 had the biggest decline in new account openings since the initial Covid-19 dip in March 2020.
“January was the first full month of account opening data since the new affordability assessment criteria was introduced through the CCCFA changes in December 2021. A drop of this magnitude represents a significant decline in credit activity be it for: new credit, refinancing or consumers just trying to get a better deal on their finance.”
“The impacts are widespread across all retail credit portfolios, with the biggest declines in the unsecured credit products – credit cards and personal loans. Unsecured credit helps Kiwi consumers purchase everyday items like furniture and electronics, to make their lives better. In January we saw that borrowing activity decline significantly.”
ANZ says that previously, lenders had some ability to use careful discretion when assessing a customer’s situation and whether the loan was likely to be repaid without issue, including considering the customer’s previous history, assets, and other factors.
But since the introduction of the new regulations, lenders will need to collect more information, and the money an applicant has left over each week may need to be higher than previously to secure lending.
The banks says that customers can do a few simple pre-checks to speed the process up, such as: Check they have 90 days’ worth of bank statements; secure evidence of income/ employment and have a good understanding of your current expenses.