Lower-end lenders’ ads likely to change

Beneficiaries continue to be targeted by advertising for high interest rate loans on the eve of the responsible lending code coming into force.

The code was designed to force more responsible lending at the lower end of the market, though it does nothing to cap interest rates on loans to poorer New Zealanders, including beneficiaries.

While the code, which comes into force today, does require loan advertising not be be deceptive, there is no ban on targeting beneficiaries.

Consumer NZ chief executive Sure Chetwin said she had seen no decline in advertising for easy loans, or adverts targeting beneficiaries in the run-up to the code’s introduction.

‘‘We expect to see ads touting ‘no credit checks’ or ‘instant approval’ to be stamped out and companies prosecuted by the Commerce Commission if they continue to make these claims,’’ she said.

Lyn McMorran, executive director of the Financial Services Federation, said it would be discriminatory to have banned lending to beneficiaries.

But ‘‘it is worrying that there are people specifically targeting beneficiaries. They do tend to be some of the more vulnerable people in society,’’ McMorran said.

Raewyn Fox from the Federation of Family Budgeting said the code should have included a requirement for lenders to check at least one month of bank statements from prospective borrowers to assess their ability to service the loan, Fox said.

Time would tell if the code resulted in any changes to lending practices, she said.

That would depend on how active the Commerce Commission was, she said.

The commission has been training lenders in the finer points of the code in the past two months.

Linsa Finance in Tauranga is one of the lenders whose Google Ad for ‘‘Loans for Beneficiaries’’ comes up on a Google search for ‘‘Beneficiary Loans’’.

Its owner, Jim Smylie, said he expected little change in the availability of loans to beneficiaries despite the new lending code.

The code had passed into law in March, leaving lenders with an ‘‘impossibly short’’ time to change their systems and processes.

Chetwin applauded the code’s introduction, but said it would do nothing to fix one of the core issues in lending to beneficiaries and poorer families, whether by mobile shopping trucks selling goods on credit, or for high interest loans. ‘‘Even if they abide by all these rules, which some of them will, they are still selling products at outrageous prices to the vulnerable, and the same goes for those loans.’’

Fox said borrowers must also take some responsibility when they take out loans.

The Federation of Family Budgeting has launched a responsible borrowing code aimed at lifting borrowers’ awareness of the things they should think about before taking out a loan.