UP FRONT • REGULATION
Advisers not looking forward to CCCFA Matthew Martin talks to mortgage advisers to about their concerns of the changes to the Credit Contracts and Consumer Finance Act (CCCFA). BY MATTHEW MARTIN
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tsunami of new legislation and regulation has charged across the financial advice landscape recently but mortgage and lending advisers say the biggest waves are being caused by changes to the Credit Contracts and Consumer Finance Act (CCCFA). The full force of the CCCFA changes came into effect on December 1 and see lenders being required to place more scrutiny than ever on borrower affordability and to adopt stricter affordability criteria. This legislation requires lenders to be certain the borrower fully understands what they are signing up to and they must estimate borrowers' income and expenses, and verify those expenses, to ensure borrowers can afford repayments. However, mortgage brokers spoken to by TMM say the changes are virtually
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unworkable, that all the banks have interpreted the legislation differently and consumers will be forced into taking out higher interest non-bank loans. MinterEllisonRuddWatts partner Kate Lane said the CCCFA changes will "set a baseline as to what analysis lenders must do in relation to suitability and affordability". "As the regulations basically take a one-size-fits-all approach, potential borrowers who are non-standard might find that they fall in the too-hard basket for some lenders given the detailed verification work required on income and expense information." Lane said the regulation will prescribe that expense information is verified against reliable evidence, a process likely to be "very time consuming". And, according to Squirrel managing director John Bolton, she was right
with Bolton saying it's even worse than predicted. "The problem is that the CCCFA is a very good piece of legislation for managing at-risk borrowers and protecting them from these loan trucks rolling around and backhand finance from dodgy loan operations, but it's not good at all for the sale of property." He says the legislation is like hitting a nail with a sledgehammer and is pushing a ton of bureaucracy onto banks and therefore onto brokers. "We now have a whole heap of compliance bureaucracy and the added costs that will wash through to the mortgage market and produce a lot of unintended consequences." Bolton says government consultation and the resulting feedback on legislation like the CCCFA often falls on deaf ears.
