Power attracted by standard code of conduct for all lenders
By Paul McBeth
Aug. 11 (BusinessDesk) – Outgoing Consumer Affairs Minister Simon Power had his interest piqued by the suggestion that all lenders, regardless of size, should adhere to a standard code of conduct.
Power hosted a summit of financial market heavyweights in Auckland, chaired by former National Bank head John Anderson, to figure out ways to address usurious lending rates at the bottom end of the market. He said the idea to have all lenders adhere to the standard set by banks is a “really interesting notion” and is one he may pursue.
“A code of conduct which is mandatory across lenders is a really interesting concept – I don’t like the idea of having different standards for different tiers of lender,” Power told reporters. “The banks that come in at tier one, who have frankly done a good job in recent years, need to set the standard and pull the others up.”
In June, Power said he planned to crack down on so-called loan sharks amid claims they were targeting financially illiterate people with sub-standard disclosure.
“What came out of today is that voluntary arrangements, voluntary codes are not going to cut it - the government is going to need to have a view on this part of the sector,” he said.
Power plans to call officials into his office on Monday with a view to have policy proposals before Cabinet by the end of the year.
Another suggestion raised at the summit that intrigued him was the ability to void providers that didn’t adhere to registration rules. Between 35% and 40% of third-tier lenders were in breach of the law by not being registered on the Financial Service Providers Register.
Still, Power said he didn’t want to outright ban this type of lending, which has a natural demand.
“What’s not necessary is unscrupulous providers of credit who take advantage of people who don’t understand the terms, conditions and costs of credit contracts they’re entering into,” he said.
Labour Party MP Carol Beaumont had a private members bill voted down last year that would have imposed a cap on rates and would have blocked lenders from recovering more than they lent in the event of a default.