Summary of Position
I submit this formal opposition to the Credit Contracts and Consumer Finance Amendment Bill (Government Bill 137–1), introduced by Scott Simpson. While the bill claims to modernise regulation and streamline enforcement across the credit sector, it in fact weakens consumer safeguards, centralises discretionary power, deregulates key protections, and removes vital remedies for borrowers.
This bill represents a coordinated shift favouring institutional convenience over public protection, undermining legal certainty, accountability, and equitable access to justice.
1. Transfers Oversight to a Market-Focused Regulator
This bill transfers all regulatory responsibility from the Commerce Commission to the Financial Markets Authority (FMA) — an agency focused primarily on capital markets, not consumer welfare.
- The Commission’s mandate is to protect fair trading and public interest; the FMA does not.
- This shift repositions credit oversight as a matter of market stability, not consumer protection.
- It invites regulatory capture, reducing independence and eroding the original social purpose of credit regulation.
2. Repeals Section 99(1A): Removing Borrower Relief
Section 99(1A), which protected borrowers from being charged costs when lenders failed to make required disclosures, is repealed.
- Borrowers may now be held liable for interest and fees even if lenders breach the law.
- This removes a crucial deterrent against lender non-compliance and places the burden of redress entirely on consumers.
- Replacement provisions are vague, court-dependent, and unlikely to be practically accessible to vulnerable debtors.
3. Expands Discretionary Exemptions and Declarations
The bill grants the FMA new powers to:
- Declare entire classes of contracts exempt from the Act,
- Reclassify contracts as non-credit agreements,
- Issue broad exemptions from responsibilities under any provision.
These secondary legislation powers lack public consultation and oversight, creating legal grey zones, undermining the Act’s authority, and enabling arbitrary deregulation at the administrative level.
4. Shifts from Certification to Licensing — Blocking Small Providers
The bill replaces the current certification model with full FMA licensing, subject to market services obligations.
- Smaller or community-based lenders may be forced out by compliance complexity and cost.
- Credit supply will be centralised among larger providers, reducing diversity and access.
- While innovation is claimed as a goal, equity and affordability are sacrificed.
5. Weakens Director and Senior Manager Accountability
The bill repeals the due diligence duty of directors and senior managers — a crucial governance safeguard.
- No equivalent accountability framework is proposed.
- This signals that organisational compliance is optional and leadership is immune from personal responsibility.
- It invites systemic misconduct by creating a legal vacuum at the top.
6. Imposes Retrospective Changes and Reduces Legal Certainty
The bill applies new court powers (sections 95A and 95B) retrospectively to contracts dating back to 2015.
- This undermines rule-of-law principles by changing the legal landscape for past agreements.
- Borrowers with enforceable rights may now find those rights narrowed, delayed, or procedurally obstructed.
7. Removes Key Disclosure Obligations and Access Channels
Key disclosure obligations are watered down:
- Trustee and partnership guarantors are excluded from required disclosures.
- Continuous disclosure can be met through website access only — inappropriate for many consumers.
- This disproportionately affects the digitally excluded, the elderly, and those unfamiliar with financial systems.
8. Introduces Broad Enforcement Powers Without Checks
The bill allows the FMA to issue stop and direction orders without a prior hearing.
- Orders may be issued based on the likelihood of a breach — not actual harm.
- They can target associated persons, including future, unnamed entities.
- There is limited opportunity to challenge these orders, increasing the risk of abuse or selective enforcement.
9. Monetises Fines — Prioritising FMA Over Consumers
Court-imposed pecuniary penalties are first allocated to the FMA’s litigation costs.
- This creates a perverse incentive for cost-driven enforcement.
- It diverts focus from restitution and justice to regulatory revenue generation.
10. Reinforces a Market-Over-People Policy Shift
This bill is part of a broader legislative pattern that:
- Erodes public protections in the name of “efficiency,”
- Embeds corporate interests in public law,
- Reduces transparency and democratic oversight.
This is not neutral modernisation. It is deregulation by stealth — abandoning the vulnerable for the benefit of the powerful.
Conclusion and Recommendations
I strongly oppose this bill. It erodes legal protections, centralises discretion without oversight, and undermines trust in credit regulation. I urge the Finance and Expenditure Committee to:
- Retain Section 99(1A) or replace it with equivalent automatic borrower protection,
- Restrict FMA powers to exempt or reclassify contracts,
- Reintroduce director due diligence duties or equivalent oversight obligations,
- Limit retrospective application of new remedies,
- Preserve Commerce Commission involvement in consumer lending oversight.
Consumer finance should be fair, safe, and transparent — not quietly restructured to serve markets over people.
Respectfully submitted,
Ukes Baha
Public Health Advocate | Counsellor | Policy Analyst
ukesbaha.com