Grasp­ing High St lenders charge 806% pa

Sunday Star-Times - - NEWS - Jonathan Milne

In One­hunga where I live, we’ve seen queues stretch­ing round the cor­ner from lo­cal cheque­cash­ing and pay­day-lend­ing com­pa­nies on the day of the en­ergy div­i­dend pay­out. It’s a hand-to­mouth money-go-round. No doubt, it was sights like th­ese that im­pas­sioned for­mer Min­is­ter Sam Lotu-Iiga, whose elec­torate of­fice was just 200 me­tres up the road, as he tight­ened reg­u­la­tions on high-risk, high-in­ter­est lenders. Short-term pay­day loans can some­times at­tract in­ter­est at a rate of 1.5 per cent a day, though there is no le­gal max­i­mum. Lotu-Iiga sought greater pow­ers to crack down on cow­boys last year. This year, the new gov­ern­ment’s con­sumer af­fairs and com­merce min­is­ter Kris Faafoi has stepped up to build on the pre­vi­ous min­is­ter’s work with vul­ner­a­ble bor­row­ers. ‘‘I’ve seen too much of it,’’ the Mana MP tells me this week­end. ‘‘Just like south Auck­land, Porirua has got a lot of places to go to get pay­day loans.’’ Mort­gaged home-own­ers may cel­e­brate low in­ter­est rates, but it’s not true for all. The Com­merce Com­mis­sion tells of one lender charg­ing 806 per cent in­ter­est a year, to those who can least af­ford it. ‘‘They have been prey­ing on vul­ner­a­ble con­sumers for some time and tak­ing this be­hav­iour right up to the edge,’’ Faafoi says. ‘‘We’ve seen loan ap­proval forms that make your eyes wa­ter – rent, power and food not be­ing in­cluded in an as­sess­ment of peo­ple’s weekly ex­penses.’’ This week, Par­lia­ment will hear pleas for new con­trols on con­sumer fi­nance. Even some lenders ac­cept the need to tighten up: the Fi­nan­cial Ser­vices Fed­er­a­tion ac­knowl­edges an ar­gu­ment for re­stric­tions on re­peated ex­ten­sions to loans. That will help peo­ple like coun­try singer Margy Orr, whose story we re­port to­day, trapped in that vi­cious cy­cle of new debt on old debt. ‘‘It’s easy money to get,’’ she says, ‘‘but very ex­pen­sive to pay back.’’ The Gov­ern­ment is over­haul­ing lend­ing laws: it should look favourably on a pro­posal to stop grasp­ing high street lenders tak­ing more in in­ter­est than the value of the ini­tial loan. And it should set con­trols around lenders is­su­ing mul­ti­ple loans si­mul­ta­ne­ously, or rolling over one loan af­ter another. And crit­i­cally, it must de­mand trans­par­ent ex­pla­na­tions of how much des­per­ate bor­row­ers will be li­able to pay. For Faafoi, this is close to home. ‘‘I’ve cer­tainly had close fam­ily who’ve been in this sit­u­a­tion and it’s not pretty,’’ he says. ‘‘See­ing the things they can’t do for their chil­dren be­cause they have to pay back huge amounts of debt.’’ It is that pow­er­ful per­sonal mes­sage that he must take to his col­leagues in Cab­i­net.

A queue out­side cheque-cash­ing and pay­day-lend­ing com­pa­nies in One­hunga.

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