CCCFA stymies home upgrade scheme

Waikato Regional Council’s sustainable homes scheme, Eco Retrofit, has hit a roadblock with the Credit Contracts and Consumer Finance Act (CCCFA).

The scheme – confirmed last June through the council’s 10-year plan – was due to launch this year, providing ratepayers with support for the capital and installation costs of insulation, heating, double glazing, solar power and other improvements. Costs would be recovered through a voluntary targeted rate (VTR), with no impact on general ratepayers.

But due to challenges in complying with the CCCFA at this point, and the requirement for the council to set the voluntary targeted rate through the annual plan process, councillors reluctantly voted on Wednesday to defer implementation of the rate for 12 months.

Councillors also agreed that a delegation should meet with ministers as a priority to lobby for an exemption.

“It’s bitterly disappointing that a scheme developed to help our communities enjoy healthier homes has been unintentionally hamstrung by this legislation,” said Waikato Regional Council chair Russ Rimmington.

“We want to provide another way for homeowners to make sustainable improvements without having to pay the full cost upfront. In doing so, it supports sustainable forms of energy generation and heating, promotes healthy communities and reduces air pollution from ineffective forms of heating.

“It’s clear from reports that, under the CCCFA, applicants are finding the process of applying for a loan to be arduous and invasive. It goes against the intent of our scheme,” Cr Rimmington said.

While CCCFA changes had been made to restrict predatory loan shark lending activities, there are increasing concerns nationwide about the unintended consequences of the CCCFA.

A report to council said staff had been working with other councils to secure exemption of local government voluntary targeted rate schemes from the CCCFA. But no resolution in favour of the councils was likely in time to implement Eco Retrofit at the start of the 2022/23 financial year, it said. There was also no guarantee an exemption would be granted.

The report said it had become clear that “complying with the administrative requirements of the CCCFA – particularly recent amendments that came into force on 1 December 2021 – would be unduly onerous and costly”.

Failure to comply with new obligations relating to due diligence, responsible lending, record keeping and certification could incur penalties of up to $600,000 for an organisation.

Reports from financial institutions and consultancy firms point to the new regulations driving higher costs into the lending process, loans increasingly being declined and approval times being extended.

In response to these concerns, Commerce Minister David Clark announced last month that the Council of Financial Regulators will bring forward an investigation into the CCCFA.

Background

Eco Retrofit’s purpose is to support ratepayers with the capital and installation costs of sustainable home improvements. Customers would obtain a quote for approved work from a list of approved local suppliers and enter into a contract with the supplier to carry out the work up to the value of $15,000.

For those participating in the scheme, a voluntary targeted rate (VTR) would be placed on the property, calculated on the loan being repaid over 10 years.

The Eco Retrofit scheme leverages the council’s access to lower interest rates available through the Local Government Funding Agency. The proposal consulted upon through the 2021-2031 Long Term Plan allowed for borrowings of up to $35 million over 10 years, but with no impact on ratepayers.