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Retirement village watchdog to investigate loans

The government’s watchdog of the retirement village industry is investigating the extent of loans made to residents and intending residents by village operators.

Some operators may offer financial assistance to cover shortfalls in entry payments to those wishing to buy into a village, or to existing residents to cover accrued weekly fees.

Troy Churton, the National Manager of Retirement Villages at the Commission for Financial Capability, is looking into the practice for his annual Monitoring Report for the Minister who oversees the sector, Hon. Kris Faafoi.

Churton says the Retirement Village General Regulations 2006 require operators to set out the nature of any financial assistance they offer and the terms on which residents may receive it. However, operators offering credit to consumers become financial service providers and also need to meet obligations under the Credit Contracts and Consumer Finance Act 2003.

“CFFC is aware the Commerce Commission reminded retirement village operators in 2016 that they must follow lending requirements when offering credit to residents and that residents get all the information they need.”

CFFC understands some operators reiterate the availability of loans at residents’ meetings for those experiencing financial difficulty.

“The issue is particularly relevant in the current environment of falling interest rates and potential pressures on retirees’ income from savings,” says Churton.

The areas being monitored include:

• The types of financial assistance offered, credit terms, interest rates and how loans are charged and recouped.
• How operators advertise, represent or inform intending residents and residents about the availability of financial assistance.
• The approximate number of intending residents and residents receiving forms of financial assistance, and – for loan situations - the range of loan sizes.
• The processes operators follow in assessing, offering and administering financial assistance to intending residents or residents, including compliance with the Credit Contracts and Consumer Finance Act.
• Dispute resolution schemes operators belong to for the purposes of complying with the Financial Service Providers Act.
• How statutory supervisors oversee the lawfulness of operator processes when providing financial assistance; and the protection of residents’ financial interests.

Churton says CFFC also wishes to understand operator compliance costs, and how well residents understand the arrangements of the financial assistance they have signed up for.

His report will be delivered to Minister Faafoi next June.

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