New law seeks to bring loan sharks into line

NZ Herald 3 April 2012
The Government is taking power to ban “loan sharks” who breach a new responsible lending code, but has resisted calls to outlaw high interest rates directly. Draft legislation issued yesterday was welcomed by Consumer NZ chief executive Sue Chetwin and Family Budgeting Services Federation head Raewyn Fox as providing “all the stuff we’ve been asking for”. It would give the Commerce Commission power to ban people from lending if they breach any provision of the new law, including a proposed “responsible lending code”, more than once.

But the Labour Party, unions and Mangere budgeter Darryl Evans, who leads an Auckland-based breakaway group of budgeters, are still calling for a legal ban on high interest rates similar to an Australian bill outlawing interest rates above 48 per cent. Research last year found some payday lenders and pawnbrokers were charging interest rates for one-week loans equivalent to 550 per cent a year. “We think interest charges should be looked at,” Mr Evans said. “Other than that, it’s everything we were asking for.” Outgoing Consumer Affairs Minister Chris Tremain, who lost the portfolio to Tauranga MP Simon Bridges yesterday, said ministers were still open to submissions on the issue but felt a strict interest limit would have unintended consequences. “Say we arbitrarily said 50 per cent. If someone wants a $1000 loan for a week, that’s 1 per cent a week. Who would lend someone $1000 for a week to get $1010 back? Given the risk profile, not many people,” he said.