Call to rein in loan sharks

NZ Herald Oct 30, 2008

Both major parties are signalling a possible tougher line on loan sharks offering so-called “payday loans” in the wake of the world financial crisis. A Labour list MP who chairs Parliament’s finance and expenditure committee, Charles Chauvel, has drawn up a private member’s bill to stop lenders recovering any interest if a borrower defaults, unless the lender can show that before granting the loan it investigated the borrower’s ability to repay. Consumer Affairs Minister Judith Tizard said the proposal was “useful” because the consumer credit law was being reviewed. An officials’ report is due in December.

National Party commerce spokesman Simon Power said he had not seen the proposal but consumer loans now needed to be seen in the context of the wider financial crisis. “With the collapse of so many finance companies we will see some recourse to loan sharks,” he said. “That means some type of oversight or regulation would need to be looked at carefully.” The Labour Government has previously ruled out regulating interest rates as in three Australian states and the Australian Capital Territory, which have all capped effective annual interest rates at 48 per cent.