Bill could put heat on money lenders

Kapi-Mana News - - FRONT PAGE - By KRIS DANDO

Payday lenders may be forced to en­sure their cus­tomers can re­pay loans un­der a bill be­fore Par­lia­ment, but one ‘‘ loan sharks’’ cam­paigner says the bill does not go far enough.

National’s Credit Con­tracts and Fi­nan­cial Ser­vices Law Re­form Bill is on the or­der pa­per at Par­lia­ment, but is yet to have its first read­ing.

Lin­den res­i­dent Andy Shann is ea­gerly eye­ing an­other op­por­tu­nity to sup­port leg­is­la­tion that will pro­tect ‘‘those poor peo­ple’’ who have no other av­enues to get cash to pay bills.

He has been a vo­cal op­po­nent of payday lenders and the in­ter­est rates they charge since he did a re­search pa­per on the sub­ject as part of his mas­ter of laws at Vic­to­ria Univer­sity four years ago.

Kapi- Mana News sought comment about the bill from some of the loan com­pa­nies that have branches in Porirua.

In­stant Fi­nance has 850 cus­tomers in Porirua. Chief ex­ec­u­tive Richard de Lau­tour said it would prob­a­bly make a sub­mis­sion as part of the Fi­nan­cial Ser­vices Fed­er­a­tion’s sub­mis­sion.

He said ex­ten­sive bud­gets were done with bor­row­ers to en­sure they could pay and he would wel­come a re­spon­si­ble lend­ing code and tougher penal­ties on lenders who mis­led cus­tomers.

He said there had never been any short­com­ings in credit leg­is­la­tion ‘‘but it does not ap­pear to ever have been prop­erly en­forced’’.

In 2010, Mr Shann helped Labour MPs draft the Credit Re­form ( Re­spon­si­ble Lend­ing) Bill, which pro­posed caps on in­ter­est rates and re­quire­ments on lenders to make sure bor­row­ers could re­pay.

The Bill was de­feated by 63 votes to 59.

He said at the time he was hugely dis­ap­pointed.

Some payday lender rates were up to 10 per cent a week and the loans of­ten com­pounded into four fig­ures very quickly, he said.

‘‘It [the im­mi­nent law re­form bill] does not pro­vide for caps on ex­ces­sive rates of in­ter­est.

‘‘The govern­ment is not con­vinced that this is the best way of ad­dress­ing poor lend­ing prac­tices and in­debt­ed­ness. The sit­u­a­tion is so im­por­tant in a place like Porirua, where you’re con­fronted by loan sharks of­fer­ing money every­where you turn.’’

Mr Shann showed Kapi-Mana News a let­ter he re­ceived from Prime Min­is­ter John Key in 2010.

It said the Min­istry of Con­sumer Af­fairs was mon­i­tor­ing in­ter­est rate caps in Bri­tain, Aus­tralia and South Africa.

Mr Shann said the right moves were be­ing made over­seas.

‘‘Last year the Bri­tish Govern­ment passed leg­is­la­tion to curb ex­or­bi­tant rates and in June Aus­tralia capped rates at 48 per cent.

‘‘South Africa has re­stric­tions in place now, as do Ja­pan, Sin­ga­pore, France, Ger­many, Canada, Mex­ico, two-thirds of Amer­i­can states and al­most all of South Amer­ica.

‘‘I was told [by Mr Key] that if the caps are too high they may be seen as a tar­get and if they are too low, lenders will exit the mar­ket and ex­clude credit for some bor­row­ers.

‘‘Those con­cerns are out­ra­geous – is Mr Key say­ing he knows bet­ter than prac­ti­cally ev­ery other govern­ment in the world?’’

Mr Shann said he in­tended to ‘‘ jab the is­sue’’ dur­ing the com­mit­tee stage of the law re­form bill.

Mr Shann’s boss, Mana MP Kris Faafoi, sup­ports Mr Shann’s ef­forts.

He vis­ited Porirua Bud­get Ser­vice and Porirua branch of Cit­i­zens Ad­vice Bureau in May, gaug­ing the ef­fect that high in­ter­est rates, fees and penalty pay­ments were hav­ing on hun­dreds of fam­i­lies in the city. Ninety-five per cent of Bud­get Ser­vice clients had got into trou­ble pay­ing back high-in­ter­est loans, ac­cord­ing to the ser­vice’s man­ager Robert An­to­nio.

Labour wants to in­tro­duce so­cial lend­ing – low-cost loans in con­junc­tion with com­mu­nity or­gan­i­sa­tions and the pri­vate sec­tor – that have so­cial ben­e­fits as the out­come.

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