Govt circling loan sharks
Most of us borrow money at some point in our lives and if it’s done in a safe and affordable way there’s not an issue. But the problem is excessive interest rates, high fees and penalties from loan sharks are trapping many families into a lifetime of debt and misery.
Amendments to the Credit Contracts and Consumer Finance Act in 2015 were supposed to require responsible lending but they didn’t go far enough and there’s evidence people are still being given loans they simply can’t afford.
Social service agencies see many clients who have had a ‘top up’ or have been ‘refinanced’ by their high cost lender because they can’t afford the payments – some only a few weeks after the initial loan has been approved.
And on a daily basis they sadly see evidence of the problems high cost borrowing is causing.
Predatory practices and irresponsible lending has to stop and as a Government we are committed to tackling many of the issues that contribute to financial stress by lifting financial capability and building a strong and inclusive economy.
Submissions closed at the beginning of August on a review of the Credit Contracts and Consumer Finance Act and officials are now working through what you’ve told us needs to change.
My colleague Kris Faafoi is looking to introduce legislation by early next year.
One idea we’re looking at is a cap on interest rates and fees for all or some lenders.
We have to think very carefully how we do that so we don’t harm individuals and families with genuinely sort term cash flow problems but still stop borrowers accumulating unmanageable debt and getting into financial hardship.
We also have to stop predatory behaviour by mobile traders – perhaps we could limit how often trucks can be in each suburb?
Accessing credit can help New Zealanders achieve a long-term standard of living and meet the goals of individuals and families if done in a safe and affordable way.
But the impact of people getting into unsustainable debt has a ripple effect on families and communities because the money goes towards loans and credit contracts instead of the essential items.
But it tends to be vulnerable members of our society who are most affected and often find themselves in even deeper hardship as a result.
I’ll be arguing for and supporting whatever helps vulnerable people when this new legislation comes to the House.
Clare Curran is the MP for Dunedin South