Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


New Zealand’s responsible lending code not worth the paper

Westforce Credit Union

MEDIA RELEASE

21 July 2014

For immediate release:

New Zealand’s responsible lending code not worth the paper

While the UK last week became a slightly safer place for vulnerable consumers with a cap on payday lending, the New Zealand Government took steps to “ask" the loan sharks to participate in writing their own Responsible Lending Code.

The move this week by the UK’s Financial Conduct Authority to limit payday loan interest rates (to not more than a daily interest rate of 0.08 per cent of the amount borrowed) has real teeth, Operations Manager at Westforce Credit Union, Victor Martick, said today.

“By stark contrast, New Zealand’s Commerce and Consumer Affairs Minister Craig Foss’s announced they were receiving submissions for the ‘let’s all play nice’ Responsible Lending Code.

“This industry led and influenced Responsible Lending Code gives free rein to unscrupulous loan sharks who want to continue to prey on the less privileged with crippling interest rates – if people can’t lend fairly now, how is the Government asking them to ‘play nice’ going to change anything?”

“The Responsible Lending Code is like a verbal contract, not worth the paper it is written on,” Mr Martick said.

He pointed out that Government has likened the Responsible Lending Code to following both Britain and Australia’s lead, but fails to mention that those countries also cap interest rates, or have signalled their intention to do so.

“Mr Foss makes much of the assertion that adopting a Responsible Lending Code will increase protection for borrowers ‘without imposing unnecessary compliance costs on lenders who already have good systems in place’ – but what about all the ones who don’t?

“It would appear that the priority of Government is towards keeping compliance costs down, but shouldn’t their first obligation be to the most vulnerable in society? Rather than those who are making huge profits and are perfectly capable of taking care of themselves?

“Here at Westforce Credit Union we encounter people who are living in misery as a result of the activities of loan sharks and we can only conclude that Mr Foss is living in Lala Land if he thinks a loan shark is going to sit down with a ‘mark’ to ensure they can make the repayments without suffering hardship,” Mr Martick said.

The Responsible Lending Code provides only general guidance and there is a huge amount of leeway for how it may be applied in practise.

Mr Martick said the Credit Contracts and Consumer Finance Bill requires people, including those in the lower socio economic rungs of society (people who have poor education, no financial literacy and no money), to go to a disputes tribunal, and then only if they can prove the agreement is oppressive. Unfair doesn't even qualify.

“Interest caps will not hurt the profits of responsible lenders – of which Westforce Credit Union is one – and nor will they impose any burden on compliance. Interest caps are the only way we are going to be able to protect the vulnerable in society from loan sharks,” Mr Martick said.


© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Half Full: Dairy Payouts Steady, Cash Will Be Tight

Industry body DairyNZ is advising farmers to focus on strong cashflow management as they look ahead to the 2015-16 season following Fonterra's half-year results announcement today. More>>

ALSO:

First Union: Cotton On Plans To Use “Tea Break” Law

“The Prime Minister reassured New Zealanders that ‘post the passing of this law, will you all of a sudden find thousands of workers who are denied having a tea break? The answer is absolutely not’... Cotton On is proposing to remove tea and meal breaks for workers in its safety sensitive distribution centre. How long before other major chains try and follow suit?” More>>

ALSO:

Scoop Business: NZ-Korea FTA Signed Amid Spying, Lost Sovereignty Claims

A long-awaited free trade agreement between New Zealand and South Korea has been signed in Seoul by Prime Minister John Key and the Korean president, Park Geun-hye. More>>

ALSO:

PM Visit: NZ And Viet Nam Agree Ambitious Trade Target

New Zealand and Viet Nam have agreed an ambitious target of doubling two-way goods and service trade to around $2.2 billion by 2020, Prime Minister John Key has announced. More>>

ALSO:

Scoop Business: NZ Economy Grows 0.8% In Fourth Quarter

The New Zealand economy expanded in the fourth quarter as tourists drove growth in retailing and accommodation, and property sales increased demand for real estate services. More>>

ALSO:

Scoop Business: RBNZ’s Wheeler Keeps OCR On Hold, No Rate Hikes Ahead

The Reserve Bank has removed the prospect of future interest rate hikes from its forecast horizon as a strong kiwi dollar and cheap oil hold down inflation, and the central bank ponders whether to lower its assessment of where “neutral” interest rates should be. The kiwi dollar gained. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news