Bill could put heat on money lenders
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.