From Wednesday 1 December, banks, finance companies and their customers will face new obligations and paperwork as changes to the Credit Contracts and Consumer Finance Act come into effect.
Among other requirements, before lending money, lenders will need to:
This will hopefully lead to greater protection for consumers, but it also means applications for personal loans and mortgages are likely to take longer, and require more work from both lenders and borrowers. The effect is that customers will have to supply much more information when applying for a loan and lenders will have to check it out much more carefully, leading to a much longer process.
As a borrower, the key point is that you can’t expect loans to move as easily as they might have in the past. Set aside more time, and be expected to provide more details of your financial situation.
While banks, financial service business and mortgage brokers seem to back the intent of the changes, the policies are expected to have a number of unintended consequences and make some business harder than it needs to be. As Mortgage Lab CEO Rupert Gough puts it, “The 1% of the market that are targeting vulnerable people (with predatory lending) have caused the other 99% to have to do all this extra work.”
Good Returns also notes that lenders are concerned the changes have been rushed through Parliament.