Payday lenders face repayment battle

The next battle in the war against high-cost lenders is the fight for laws forcing debt collectors to agree to ‘‘affordable’’ repayment schedules for borrowers.

‘‘Debt collectors use tactics that amount to harassment as part of their collection practices,’’ law lecturer Victoria Stace, from Victoria University of Wellington, told a conference on financial capability in Auckland on Friday.

‘‘There is no law requiring them to enter into an affordable repayment schedule with the borrower.

‘‘The battle continues.’’ Speaking at Massey University’s Building Financially Capable Communities conference, Stace detailed the research she had done which helped national budgeting service Fincap persuade the Government to introduce interest rate and fee caps on high-interest lenders.

‘‘We have got interest rates down to around 300 per cent a year, and a ban on compounding interest, but that rate is still very high, there is likely to be scope for avoidance,’’ she said.

There was a dearth of research into the payday lending industry in New Zealand she said, which had been an obstacle to persuading politicians to act to protect vulnerable borrowers.

‘‘There’s been very little empirical research done in New Zealand on who uses payday lenders, why they use them, and whether the cases being seen by budget services are the exceptions as the lenders assert,’’ Stace said.

That had allowed payday lenders to maintain their loans were not a problem, and that all that was needed was for a crackdown on rogue lenders flouting existing laws.

‘‘Payday lenders are wellresourced, and they are persuasive,’’ she said.

Fincap hired Stace to research the industry, including looking overseas.

‘‘Problems with payday lending we have in New Zealand are mirrored all over the world,’’ she said.

‘‘Recently, Australia and the UK in particular have grappled with these issues. They have put tighter regulation in place.’’

‘‘That was very helpful because it showed that New Zealand is an outlier and that the norm is to have regulation, and in particular around interest rates.’’