New regulator sets single expectation standard

The Financial Markets Authority (FMA) has taken over as the regulator of the Credit Contracts and Consumer Finance Act (CCCFA) in New Zealand, replacing the Commerce Commission.

This change aims to avoid duplication between regulators and reduce compliance costs for lenders.

Lenders that were already certified by the Commerce Commission or exempt from certification are automatically deemed to hold an FMA licence, with no application or fee required.

Streamlined Regulation

They also no longer need to submit an annual return, as this requirement has been repealed, making the process more efficient.

The FMA’s approach to the CCCFA is proactive, risk-based, and focused on fair conduct, using various supervision tools.

These tools include roundtables, guidance, webinars, thematic reviews, and on-site or desk-based monitoring to ensure lenders comply with regulations.

Regulatory Responses

The FMA’s regulatory responses will range from feedback letters to investigations and litigation, depending on the severity of the misconduct.

Litigation options include enforceable undertakings, civil proceedings, and criminal proceedings for intentional or reckless breaches, with the goal of protecting New Zealanders.

The regulator may also issue warnings, direction orders, stop orders, action plans, licence conditions, and in serious cases, licence suspension or cancellation to ensure fair treatment.

Clare Bolingford, FMA executive director of licensing and conduct supervision, says the shift is seamless for existing lenders.

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She notes that aligning credit regulation with broader financial services creates a framework that better supports responsible lending and consumer protection, providing a single, more consistent set of expectations.

The FMA will initially focus on lending practices, particularly suitability and affordability assessments, commission-based structures, and complaints handling processes.

David Cunningham, chief executive of Squirrel Mortgages, says most advisory firms and individual mortgage advisers are using aggregators’ software and processes for their FAP licenses, which has made compliance easier for them.

Industry Feedback

Cunningham says compliance has also been made easier through the use of AI tools, which can build exceptionally good checks and balances into a business, making the process more efficient.

He notes that the FMA has been respectful in its approach to thematic reviews and does not want to destroy the industry with overly restrictive regulations, allowing for growth.

Cunningham also comments on the idea of clients paying fees to advisers for arranging their mortgages, saying it would be a disaster and destroy the advisory industry, as the current system is more effective.

The current system, where banks pay commission to advisers, allows for a more competitive market, and changing it could have negative consequences.

As the FMA begins its new role as regulator of the CCCFA, it will be important to monitor its approach and ensure that it strikes a balance between protecting consumers and allowing the industry to operate effectively, using technologies like AI tools to shape the future.

The FMA’s focus on lending practices and consumer protection is a step in the right direction, and the industry will be watching closely to see how the regulator’s approach evolves over time, adapting to speed and flexibility in modern lending.

The FMA’s ability to adapt to changing circumstances and respond to emerging issues will be important in maintaining a fair and competitive market, supporting responsible lending and consumer protection.