Kris Faafoi
Stakeholder feedback has confirmed that predatory practices, irresponsible lending and unacceptable debt collection practices are still impacting on vulnerable New Zealanders.
Research, undertaken by the Ministry of Business, Innovation and Employment has confirmed my fears.
High Credit costs
While many lenders have improved disclosure and the information provided on their web sites, consumer advocates are expressing strong concerns about the high cost of credit, and inadequate assessments of the affordability of loans.
People are being provided loans they are not going to be able to pay back and are drawn into situations where the cost of the resulting debts is many times the original due to interest rates and penalty charges.
Clearly, the reforms of the CCCFA in 2015 did not go far enough and we need to act to protect people from the appalling burden these debts can create.
Legislation Review
The research is part of a review of consumer finance regulation and is likely to lead to new legislation.
I expect to release a discussion paper on the key issues and proposed solutions around the middle of this year. This will report the findings of the review.
It is likely to consult on a number of options for interest rate caps, as well as options for improving compliance with lender responsibilities.
The review is also looking at the debt collection methods employed by some debt collection agencies. Unrealistic repayment schedules, debtors being harassed, false and misleading claims and punitive interest and fees applied during debt collection are some of the unacceptable practices that have been described.
I will ensure that we address the concerns that I have been hearing about lending practices that impact on vulnerable people.
Kris Faafoi is Commerce and Consumer Affairs Minister of New Zealand.
