Predatory loan sharks are targeting struggling families throughout New Zealand.
This problem is particularly acute in these tough economic times in which ordinary people find it hard to make ends meet, with ever-rising prices and reduced or static incomes.
Poor financial literacy makes the problem more serious.
I launched a campaign called Stop Loan Sharks in March.
The stories I have heard are truly horrifying – excessive interest rates, loans being given to people who cannot afford repayments, or who do not fully understand the real cost or terms of the loan.
I have heard of people who are unable to keep up payments but are being pressurised to do so. Imagine borrowing $3200 to pay for car repairs and ending up with no car but a total debt of $9800!
My colleague Dr Rajen Prasad wrote in Indian Newslink (July 1) about the opportunity presented by “Members’ Bills” to try to make change as an Opposition MP. The Stop Loan Sharks campaign includes a Member’s Bill in my name (originally sponsored by another colleague, Charles Chauvel) that will be debated in Parliament on July 21. Primarily, the Bill provides for capping interest rates and requirements for responsible lending.
These are two mechanisms we can use to try to regulate loan sharks.
Treasury benches oppose
It seems likely that my Bill will be voted down by National and ACT.
All other parties support the intent of the Bill.
Consumer Affairs Minister (ACT MP) Heather Roy and National MPs have said that my Bill “does not go far enough and that some provisions are not effective.”
I understand that this Bill is not the whole solution to the problem of loan sharks.
I have acknowledged that some important responses to the problem are not legal matters, such as greater financial literacy, improved incomes and better quality credit sources within and outside of the mainstream banks.
There are also some good suggestions being made as a result of the long awaited review of the Credit Contracts and Consumer Finance Act (such as hardship provisions, sources of security and disclosure provisions).
However, I recently became aware that this review has been delayed.
Feedback from the community indicates there is a desire for Parliament to show leadership on this issue. I have sought support to get my Bill to the Commerce Select Committee for a proper scrutiny.
I am shocked that the Ms Roy and National are writing off rate caps based on limited investigations. The use of interest rate caps is common internationally.
Consumer Law expert Bill Bevan has commented on the responsible lending provisions in my Credit Reforms (Responsible Lending) Bill.
“The proposed statute provides for a clear improvement to the current law, effectively imposing an express duty on the creditor to have at least done some analysis of the debtor’s income, expenses and commitments, to form any ‘reasonable belief’ that the debtor can afford that lending,” he said.
I will continue to camping to stop loan sharks despite the outcome of the Bill in Parliament, since this issue concerns many people and there is widespread support.
Carol Beaumont is Member of Parliament on Labour List and the Party’s Spokesperson for Consumer Affairs. Further information on the above article, which is exclusive to Indian Newslink, can be found at www.stoploansharks.co.nz
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Keep your head above water Protect Yourself From Loan Sharks If you cannot afford, do not buy Plan a realistic budget and stick to it Have a savings plan Keep your credit rating high Be skeptical about quick fixes and easy money Never sign documents that are incomplete or illegible Do not get into a debt trap Beware of the temptingly low interest rates There is more at www.loansharks.com |
