Amendments To Support The Next Phase Of Financial Services Reform Introduced To Parliament

On 31 March 2025 the Minister of Commerce and Consumer Affairs (the Minister) introduced three amendment bills to Parliament to facilitate the next phase of the wide-sweeping financial services reforms previously announced.  For further details on these reforms please see our previous article: Government announces decisions on financial services reforms. 

The amendment bills introduced by the Minister seek to primarily amend the following Acts (but would additionally include consequential amendments across further legislation):

These changes will be relevant to all financial service and markets participants in New Zealand but will especially be of interest to consumer lenders.  

CCCFA amendments

The proposed amendments to the CCCFA predominantly relate to the Financial Markets Authority (FMA) taking over from the Commerce Commission as regulator.  As a result, there are a number of technical amendments proposed to facilitate this change by the insertion of various FMA enforcement powers, including stop orders and direction orders.  

There have also been a number of consequential changes to the FMCA, including requiring creditors under consumer credit contracts to be licensed as market service providers (instead of the current certification process under the CCCFA).  Importantly, consumer creditors will be not "FMC reporting entities" for the purposes of Part 7 of the FMCA.  As expected, those entities which are already certified (or are exempt from certification because they are already licensed by the FMA or registered by the Reserve Bank of New Zealand) as consumer creditors under the CCCFA will be deemed to be holding a market service licence rather than be required to reapply.  There are no details yet as to the standard licence conditions for consumer lenders including what, if any, obligations there will be in relation to regulatory returns (noting that the current requirement to file an annual return under the CCCFA is being repealed).   

Consumer credit lenders, as holders of a market services licence, will be subject to a range of new monitoring and enforcement requirements, including being required to have effective methods in place for monitoring compliance with the conditions of their licence, identifying and reporting material changes in circumstances, and reporting contraventions and likely contraventions of their licence conditions.  As such, the conditions of the licence will play an important role in determining how consumer credit lenders interact with the regulator moving forward.

Further proposed changes to the CCCFA include changes to two sections which have been historically problematic for consumer lenders.  Firstly, it is proposed that section 59B, which imposes a due diligence duty on directors and senior managers of consumer credit lenders, will be revoked.  In its place, the existing regime in the FMCA for a person "involved in the contravention" will apply.  Secondly, it is proposed that section 99(1A), which automatically disentitled creditors to the costs of borrowing for any period where the creditor failed to comply with certain disclosure obligations, will be revoked.  A court order may still be made, in connection to a breach of those disclosure obligations, that a debtor is not liable for any or all costs of borrowing during the non-compliant period, but the court must be satisfied that it is "just and equitable" to make the order (as well as consider additional factors such as whether the creditor had an appropriate compliance programme and the extent to which the debtor was prejudiced by the breach). 

The transitional provisions make it clear that the proposed amendments will not apply retroactively and will only apply to agreements entered into following the commencement of the repeal provision.  In particular, directors and senior managers will still have a due diligence duty in respect of consumer credit contracts entered into before that duty is repealed.  

Notably, sections 95A and 95B (which were originally inserted in December 2019, and provide the court with discretion to reduce the amounts payable in connection to section 99(1A)) are proposed to now apply retrospectively to any consumer credit contract entered into on or after 6 June 2015 – and this incudes in relation to existing proceedings (which is expressly defined to include Simons & Ors v ANZ Bank New Zealand Limited and ASB Bank Limited CIV 2021-404-1190).  This would be a rare case of retrospective legislation in New Zealand, and this significant step represents (alongside the relevant wording in the explanatory note) that Parliament is strongly of the view that section 99(1A) has not been operating as designed and was not intended to apply in such a punitive manner to all disclosure breaches.  

FMCA amendments 

The proposed amendments to the FMCA (further to the proposed changes to the FMCA noted above) are primarily various technical and tidy-up amendments.  

There are however changes to the market service licence regime, including in relation to extended FMA approval requirements and the consolidation of market service licences.  The consolidation of market service licences will be beneficial for entities who provide more than one market service, and this will ideally reduce some of the regulatory burden given that only one licence will need to be maintained moving forwards.  It is proposed that the FMA's approval will be required for the following additional activities to be undertaken by licensed entities:

  • If a person is to obtain significant influence over a licensee;
  • If a licensee proposes to enter into a significant transaction (which largely means a transfer of the licensee's business to another person); or
  • If a licensee proposes to amalgamate with another person.  

The purpose of these requirements is to capture additional change of control scenarios.  

The FMCA amendments also propose a change to the Financial Markets Authority Act 2011 in order to grant the FMA wide ranging on-site inspection powers.  The FMA will be authorised to carry out warrantless on-site inspections at the place of business of financial markets participants (which is a broad term, that extends to anyone registered on the financial service providers register).  Employees, directors and agents of the financial markets participant will also be required to answer questions relating to records and documents and supply information to the FMA that it reasonably requires.  

FSPA amendments 

The proposed amendments to the FSPA include both consequential changes to the FMA becoming the regulator of the CCCFA and in relation to the governance and operation of the dispute resolution schemes.  These changes primarily impact managers and operators of dispute resolution schemes and are unlikely to directly impact financial service providers.   

Our thoughts

The proposed amendments are largely in line with the reforms signalled by the Minister throughout 2024, however there have been less changes to the disclosure provisions of the CCCFA than consumer lenders may have been hoping for.  It remains to be seen whether additional substantive changes will be proposed to the CCCFA, but in the meantime the Government's view appears to be that the penalty regime was the main aspect of the CCCFA which was driving undesirable outcomes.  While the changes are certainly welcome, it ushers in yet another period of flux as lenders turn their minds to what this means for their CCCFA compliance frameworks, including reporting and the handling of suspected breaches and remediation.

Further to our previous article: A new landscape on the horizon for financial services regulations, our view is that consumer lenders can expect a change in enforcement approach under the FMA.  The FMA has continued to be clear that its intent is to be an outcomes-focused regulator, including ensuring that consumers are accessing fair and quality services.  We anticipate that the FMA will place more responsibility on consumer lenders to proactively understand, assess and address what outcomes it is delivering to consumers.  

Next steps 

The three bills have been introduced to Parliament and are currently awaiting their first reading.  It is not yet clear what the proposed timeline for when these bills will become law, or whether Parliament intends to pass these bills under urgency.  

If you are a financial service provider or you are considering providing consumer credit we recommend you familiarise yourself with the proposed amendments and consider their impact on your business.  If you wish to discuss any of the proposed amendments, or any aspect of the New Zealand financial services landscape, please get in touch with our financial services regulation team.