Loan sharks attack by Labour’s Kris Faafoi
Real sharks are apex predators. Loan sharks are bottom-feeders. But they can dismember individuals, families, communities. Remember the famed shock scene in Jaws when Roy Scheider suddenly realised the scale of the challenge? That giant toothy head reared into plain sight, he staggered backwards and warned his companions: ‘‘You’re gonna need a bigger boat.’’
That’s been our problem. For too long New Zealand’s loan shark problem has been every bit as visible and shocking as that scene’s. The giant head’s been in view since at least 2007 when fringe lenders where shown to have been aggressively targeting vulnerable borrowers with ruinous deals. The problem has been one of governmental failure. They haven’t gone after it with a big enough boat.
What Commerce and Consumer
Affairs Minister Kris Faafoi has come up with is a new range of measures that do represent significant improvement. The question is whether even these are under-reaching.
The measures are, in themselves, significant. Faafoi is dead right that the 2015 amendments to the Credit Contracts and Consumer Finance Act didn’t go far enough, so he’s introducing legislation to cap the interest rate at 100 per cent of the original amount – so borrow $500 you cannot be required to pay back more than $1000 in total. Penalties for rule-breaking stiffen to up to $600,000 for a company and $200,000 for an individual, and a ‘‘fit and proper person’’ test will apply for lenders, including door-to-door sales people and those debtpeddling truck shops dispensing finance deals like Mr Whippy.
And there would be a burden of proof on lenders to prove, if the Commerce Commission arches an eyebrow, that their fees are reasonable.
Consumers would have clearer powers to give uninvited salespeople on their doorstep their marching orders, and even add legal status to ‘‘do not knock’’ stickers.
And this on top of laws that already require lenders to make ‘‘reasonable’’ inquiries into a borrower’s income and expenses, sufficient to be plausibly satisfied that the borrower could afford the payments without suffering substantial hardship.
So what’s not to like? For starters the sluggishness of the rescue – the timetable is to have the new rules in place by 2020 and even this is subject to parliamentary timeframes. So there’s still plenty of time for the rogues to make out like bandits.
And yes, there is a path not taken. Looking at you, $5 billion surplus.
And you, Kiwibank. From the Left wing comes a revived call to beef up the bank’s ability to offer a more decent alternative for the micro-loan market. That won’t fly with everyone but is possibly an argument worth having.
And what of greater support for more ethical lending models; the likes of Sorted, offering valuable financial courses in communities and workplaces? Because the loan sharks are going after the vulnerable whereas significant better options for people consumed by the urgency of their situation tend to be, shall we say, polite to a fault.
Those offering empowering help tend to be batting their eyes from a discrete distance while the villains are shaking their moneymakers in people’s faces.
There’s still plenty of time for the rogues to make out like bandits.