Commerce and Consumer Affairs Minister Andrew Bayly said financial institutions would need to continue to work towards a license under CoFI, regulation which aims to prevent banks, insurers and non-bank deposit takers from mistreating their customers.
Before the election, the National Party opposed CoFI amid fears the regulation would burden the sector with red tape.
The coalition u-turn is set to provide certainty for the industry, with many brokers in favour of the regulation designed to safeguard consumers’ interests.
According to newspaper reports, Bayly changed his mind on the regulation after considering the work already done by financial institutions to comply with the regime.
Speaking at a Financial Services Council event, Bayly told media he was keen to simplify the CoFI process for smaller financial institutions such as non-banks.
Bayly said he wanted to remove duplication from the licensing process.
“Many financial institutions find themselves holding multiple licenses from both the FMA and the RBNZ, adding to operational burden,” Bayly said.
“We want to simplify this by moving to one conduct licence overseen by the FMA, and one prudential licence by the RBNZ.”
“Let me be very clear – these changes are not about lessening requirements for appropriate conduct,” Bayly added.
“It’s about ensuring that financial institutions have clear guidance from the FMA, and take responsibility to meet their obligations more effectively.”
Bayly also outlined plans to transfer responsibility of the Credit Contracts and Consumer Finance Act (CCCFA) from the Commerce Commission to the FMA.
Bayly said he was concerned that the CCCFA allowed vulnerable borrowers to access credit while not giving enough leeway to stronger borrowers.
The minister said his top priority was to “remove prescriptive affordability requirements for lower-risk lending.”
Bayly also promised a broader review of CCCFA, including looking at the Act’s penalty and disclosure regime and relationship with CoFI.
IBANZ responds
IBANZ chief executive Mel Gorham welcomed the the focus on easing red tape, and called on the government to reduce duplication.
“It is reassuring to hear that the minister is concerned about the operational burden CoFI (in its current form) creates for the industry, the costs of which ultimately rest with policyholders.
“Changes that reduce duplication, whether it be in CoFI licensing or for FAP intermediaries, insurers and other financial institutions replicating aspects of oversight that already rest with the FMA as regulator of the financial advice regime are welcome.
“Achieving this while still preserving the focus on fair conduct programmes under CoFI should deliver a more affordable and targeted regime that will benefit consumers and the industry as a whole.
“Minimising the potential of duplication should be a key consideration with any legislative reform and needs to strike a balance with the tangible improvements the reform will deliver. This is only heightened by the country’s inflation challenges and pressure created by the rising cost of capacity impacting access to and affordability of insurance, particularly in the fire and general sector,” Gorham added.
