Professional Bank Account Cleaning Services Required
- mentor24
- Mar 28, 2022
- 3 min read
We have all been hearing a lot lately about CCCFA 2021 (Credit Contracts and Consumer Finance Act 2021) Legislation which has been making it harder to get any type of lending.
What has been hit hardest in particular is home lending, and even more so first home buyers, who are just trying to break into the market.
Essentially, the CCCFA sets out rules that lenders must follow when lending you money. A range of new rules have kicked in over the past two years following a government review of the legislation in 2018.
These changes range from tougher penalties for irresponsible lending to interest-rate caps on high-cost loans or payday loans.
The legislation is aimed at protecting consumers from bad debt and preventing them from taking on too much debt.
On 1 December last year, more changes came into effect including:
New prescriptive requirements for lenders to follow when assessing the affordability and suitability of loans.
Duties on bank directors and senior managers to exercise due diligence and penalties (of up to $200,000) for failing to comply.
New minimum advertising standards.
Additional disclosure requirements before debt collection begins. (www.consumer.org.nz, March 2022)
What do the new rules mean for consumers?
The new rules mean consumers are having to jump through more hoops to get credit and lenders are having to do more digging.
There are exceptions in the rules that allow lenders to avoid a deep dive into your finances, such as where preliminary inquiries suggest the borrower will be able to make repayments without suffering hardship. But we’re yet to hear of any bank using this exception.
The CCCFA requires lenders to assess whether a loan is suitable for the borrower and ensure the borrower can make repayments without suffering financial hardship.
Lenders must make “reasonable inquiries” into your financial information to make this assessment but are no longer able to rely solely on information you provide.
So, if you’re applying for a loan you’ll likely be asked to provide three months’ worth of bank statements plus other financial information. Your spending habits may be scrutinized, as well as your income, credit score and any debts including buy now, pay later payments.
There have also been reports in the media of borrowers being denied credit unexpectedly.
Consumers have come to us with similar stories – it has affected a range of people from those applying for a home loan via a mortgage broker to those applying for a credit card.
However, it’s unclear whether it’s the new rules that are causing this or the banks’ interpretation and application of these rules, or elements of both. (www.consumer.org.nz, March 2022)
What can I do to get lending?
After speaking with a couple of mortgage brokers, the key point that is being repeated is tidying up your bank account a minimise the transactions that are going through it, if only for 3-4 months. ,
Stop using Buy now, Pay later lenders.
Try and clear as much short term debt as possible and reduce limits on credit cards
Limit takeaways and brought lunches, and if required use cash. Set a budget for these, of say $40 a week, but get the cash out at the beginning of the week, or when you buy your groceries.
Set your household a budget and stick to it.
It will be a lot of compromise required, but it is short term pain for long term gain!
In the last couple of weeks, though there has been word of the restrictions easing slightly, however, do not rely on this, as bank especially, can take a while to change policy to suit.
What tools can I use to help?
There are a few great tools to get you started with and I have linked below:
These are all free apps/tools that you can use.
However, if you want some support putting a budget together, and/or cleaning up your bank accounts, you can get in touch for an appointment and we would be happy to help you out.
This post highlights a crucial shift in lending practices that many consumers are still trying to navigate. The CCCFA’s tighter regulations are a step toward protecting borrowers, especially first-time home buyers, from falling into cycles of high-cost debt. The crackdown on payday loans and interest-rate caps is especially timely, given how many people rely on short-term credit without fully understanding the long-term impact. For those in the UK exploring safer borrowing options, this guide to the top 10 payday loans UK direct lender offers insights into more transparent and responsible lending choices. Financial literacy and regulatory clarity go hand in hand.