My understanding is that one select committee member has subsequently stated that they thought the proposed changes to the responsible lending rules only applied to 'loan sharks' and not to banks вЂ“ notwithstanding the written and oral submissions made to the select committee by the New Zealand Bankers' Association and at least two banks.ДЇinancial services regulation is complex and while it can have significant impacts on society, it is often not politically interesting. Numerous written and oral submissions were made to the Finance and Expenditure Select Committee warning it about the potential overreach of the responsible lending changes and its consequences for people seeking loans from mainstream lenders. These problems also raise the question of whether the select committee process is really fulfilling its function of enabling genuine, as opposed to token, consultation.

Mainstream lenders simply have no incentive to lend to people who canвЂ™t pay them back. It is hard to believe that the main problem was ever with mainstream lenders, who were operating with very low levels of bad debts at the time and largely addressed any conduct issues that could have led to irresponsible lending. This has negatively impacted thousands of New Zealanders wanting to borrow from mainstream lenders. Instead, broad-brushed and overly prescriptive regulation was adopted. focussing on enforcement of misconduct in the car lending industry which had been identified as a significant part of the problem and on whether additional resources or enforcement tools were needed to do this.

allocating resources towards supporting the people at risk, perhaps by providing more financial assistance to budgeting agencies and social lenders like the Salvation Army, and.In this case, the aim of protecting vulnerable borrowers from predatory lending would have been better achieved by: The issues with the responsible lending rules start with the combination of a weak problem identification and a desire to solve problems by imposing prescriptive compliance requirements that focus on prohibiting conduct and ultimately substituting the judgment of regulators for the judgment of lenders. Poor problem definition and alternatives evaluation This article looks at three key issues in the legislative process of: problem identification and preference for a particular вЂњcommand and controlвЂќ solution, the select committee process which didnвЂ™t provide the checks and balances it should have, and a concerning trend to delegate too much of what is properly a legislative function to regulation and to regulators. how do we stop it from happening again?ДЄs with many failures, a confluence of factors were in play.However, the problems which have emerged with the implementation of the new responsible lending rules raise wider issues about how financial regulation is developed and implemented in New Zealand. There has been much written in the past few weeks about the unintended (or perhaps ignored) consequences of changes to New Zealand's responsible lending rules under the Credit Contracts Legislative Amendment Act 2019.

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