Some lenders maintain strict practices despite easing rules
Government moves to ease lending rules blamed for causing a credit crunch in early 2022 could be thwarted by financial institutions.
Centrix credit bureau director Keith McLaughlin said there were no signs yet that July 2022 changes to the Consumer Credit Agreements and Finance Act (CCCFA) had made it easier getting a loan.
The rules have been relaxed to limit the scope and detail of the information lenders are required to collect when making credit decisions, after complaints that previously creditworthy people were being refused loans.
But some lenders didn’t change their application of the CCCFA because it worked to their advantage, McLaughlin said.
“Some of the anecdotal feedback we’ve received indicates that some lenders won’t make any changes because they find their portfolio’s risk weighting is much better than it was before, and even though loans may be lower than they were was, the quality is much greater.
“So some of our customers will maintain the CCCFA standards that were put in place in December.”
Meanwhile, July’s Centrix report showed that demand for credit fell and the level of arrears rose in the face of a slowing economy, rising interest rates and inflation.
Credit demand was down 6% from a year ago, with mortgage applications down 29%, new buy it now and pay later applications down 30%, but against -currently, the demand for personal and auto loans has increased.
The number of overdue accounts fell slightly from the previous month, but was 14% higher than a year ago.
Real estate delinquencies continued to fall but a rise in delinquencies on car loans was to be watched.
“Products like mortgages and auto loans — secured lending products — are typically the last credit repayments people let slip, indicating we might be starting to see signs of financial stress,” McLaughlin said. .