ALDEN WILLIAMS / Stuff
An ECan loan was intended to help homeowners install insulation, heating and other home improvements.
Canterbury Regional Council has quietly suspended a loan scheme after a similar scheme in Auckland resulted in a $10million payout to ratepayers.
Until the end of 2021, Environment Canterbury, or ECan, offered taxpayers a loan of up to $6,000 for healthy home improvements, such as installing insulation and heating, but some aspects of the loan may breach the law.
About $4 million has been distributed among 1,400 landlords in Canterbury since the program launched in 2018, according to Katherine Trought, director of strategy and planning at ECan.
The plan had an interest rate of 5.9% payable over nine years. All reimbursements were made through residents’ invoices.
* New lending rules threaten to scuttle ‘flagship’ sustainable homes scheme
* One in four Covid deferred mortgages are unable to start full repayments
* Covid-19 mortgage ‘holiday’ scheme ends, with 3,700 mortgages still on repayment deferral
Auckland Council was warned in February last year that their scheme potentially breaches the Credit Contracts and Consumer Credit Act. ECan suspended its program in December to make sure it wouldn’t break the same rules.
Trought said the law was complex legislation, “especially here where it also relates to our powers to levy rates”.
Independent economist Tony Alexander says mortgage lenders’ willingness to lend has declined.
An update to ECan’s website on Dec. 14 said the board’s review of the program was “well underway, with much of the initial work done,” but was still ongoing Friday.
Part of the law that Auckland potentially broke related to credit checks and other obligations. It was the responsibility of lenders to ensure that people who got into debt were in a financially secure enough position to meet repayments.
“It went unchecked for a number of years,” commission chair Anna Rawlings said at the time.
Ecan tested applicants for repayment ability based on their rate payment history, but Trought said there were other tests.
“The program also aimed to keep repayments low, and participants in the Healthier Homes program are able to space out their repayments over time – up to nine years – to minimize financial pressure,” he said. she declared.
The Commerce Commission can only issue warnings – sanctions have been handed down by the courts. Either way, after being warned, Auckland paid $10 million to taxpayers who had paid interest or incurred penalties for missed payments.
Trought told Canterbury that “very few” people failed to honor their refunds. She did not give an exact figure, but said it was a “fraction of a percentage” of the roughly 1,400 people who borrowed money.
The late penalty is 10% of the overdue amount, she said.
In 2021, there was an 11% increase in housing debt, economist Cameron Bagrie said in February.
He said the growth was abnormal, but increased lending restrictions imposed by the CCCFA in December were preventing people from buying homes.
Fear of breaking the new rules may cause banks and lenders to become ‘ultra conservative’ about who can and cannot be lent money, prompting an investigation by the Minister for Trade and Consumption, David Clark, a month later.