Plea for tougher action to penalise high-interest lenders

New Zealand consumers need protection from these predatory companies. Tim Barnett

The Government needs to take a tougher line on high-interest lenders, says the country’s budgeting advice service. The call comes after its research found, on average, those who take out the loans can’t pay them back on time, resulting in more debt. A bill proposing changes to New Zealand’s consumer credit law is due to be introduced to Parliament next month. It plans to cap interest rates and fees to 100 per cent of a loan and introduce prescriptive requirements for lenders to test loan suitability. But Tim Barnett, chief executive of the charity FinCap — the umbrella body for the budgeting advice services, said the proposals did not go far enough. “New Zealand consumers need protection from these predatory companies. Our bottom line is New Zealanders should get the same level of protection as the Australian Government has given their citizens. They don’t,” he said. “Although pleased that our coalition Government is moving to strengthen consumer credit law, their proposals fall well short of what is needed.” Barnett said the law change needed to include a cap on the interest rates charged and limit the number of loans a person could get. He also urged a move to limit the percentage of a person’s income used to pay off debt. In Australia those on a benefit had it capped at 20 per cent. He said there also needs to be a faster way to penalise companies who broke the law. Currently it can be years before a company was taken to court over a breach. Barnett said New Zealand’s debt collection laws were also weaker than those in other countries, pointing to the United States where the lender stopped charging interest and fees once a debt was handed over to an agency.