New law aims to stop consumers being ripped off
The government has introduced a new regulatory regime to govern conduct in the financial sector.
The Financial Markets (Conduct of Institutions) Amendment Bill requires banks, non-bank lenders and insurers to have the right systems in place to treat their customers fairly.
The reform follows reviews by the Reserve Bank of New Zealand and Financial Markets Authority, which identified that banks and insurers lack focus on good customer outcomes, and have insufficient systems and controls to identify, manage and remedy conduct issues.
"Issues have included products not being designed with good customer outcomes in mind, customers being pressured into buying unsuitable products due to sales pressures, and inadequate systems for handling complaints and claims," according to the Ministry of Business, Innovation and Employment.
Under the new regime – which is expected to come fully into force in early 2025 – the authorities will be able to ban or regulate certain sales incentives.
Also, lenders and insurers will have to maintain effective policies, processes, systems and controls to ensure they treat consumers fairly.
Government aims to create level playing field
Minister of Commerce and Consumer Affairs David Clark said the new regime will tilt the balance back towards consumers by protecting them from bad behavior.
The government took action after earlier reviews found "a major imbalance in power" between financial institutions and consumers.
“There was also a lack of accountability when it came to ensuring good conduct is maintained by financial institutions," he said.
“Further, New Zealand has been an outlier internationally in not having conduct regulation of banking and insurance services. This important regime will fill that gap."
Mr Clark said the new regime would also help prevent lenders "saddling borrowers with debt they cannot afford".
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