Grasping High St lenders charge 806% pa
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.