Predatory lenders in the crosshairs

They sell $35 packs of noodles to poor families, but they finally face tighter restrictions as new consumer law reforms kick in.

Mobile truck shops and loan sharks are now in the crosshairs as the Government’s consumer law reforms take effect.

Prime Minister Jacinda Ardern is adamant the changes are enough to tread the fine line between a debt spiral and a legitimate loan for the nation’s poor.

Consumer Affairs Minister Kris Faafoi and Ardern visited a Porirua kindergarten yesterday , to publicise the Government’s efforts to curb predatory money lenders.

Ardern said she had a ‘‘shocking realisation’’ when she discovered lenders – whom she saw as predators – were often seen as saviours by those most in need.

The Government aimed to reduce need and to regulate predatory behaviour, she said.

As previously reported by Stuff, the mobile traders targetted lowincome communities with weekly repayments on overpriced goods.

Consumer NZ had found instances of mobile traders charging $35 for noodles, and $4500 for a pair of cellphones.

Changes to the Credit Contracts and Consumer Finance Act came into effect this week. Mobile traders and truck shops will now have to meet already established ‘‘responsible lending protections’’, there will be a cap on interest rates for loans, and there will be a limit on how often lenders can provide credit to people already in debt.

Faafoi said debt spirals in lowincome families – that saw $150 debt turned into ‘‘$1500, $2000’’ – needed to stop.

Some lenders who offered people high-cost loans were charging more than 600 per cent interest a year, Faafoi said. An interest cap would now limit this to 0.8 per cent per day.

‘‘We also made sure lenders can’t enter into a third loan with someone who has taken out two loans already in the last 90 days.’’

Speaking after the announcement, Ardern was adamant the changes would make a difference to low-income families.

‘‘When you look at the caps that are in place, we’re talking about the difference between a loan and a debt-spiral.’’

‘‘We’re talking about the difference between a loan and a debt-spiral.’’

Jacinda Ardern

Prime Minister