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MP’s Bill Would Reduce Loan Shark Harm

Peseta Sam Lotu-Iiga

MP for Maungakiekie

21 June 2011

Media Statement

MP’s Bill Would Reduce Loan Shark Harm

Maungakiekie MP, Peseta Sam Lotu-Iiga welcomes the announcement that the Government will target unscrupulous credit companies that prey on unwary consumers.

“The recent text-a-loan controversy that charges interest at 292% has highlighted the need for reform in this area. That is why I launched my Moneylenders (licensing and regulation) Bill 2011 last month. This bill provides for a comprehensive regime change to combat the problems associated with some moneylenders or loan sharks”, says Mr Lotu-Iiga.

“This bill takes a pragmatic approach to oppressive contracts setting up a frame work for determining oppression. Acknowledging the difficulty with capping interest rates, the bill sets a threshold level at 48%, above which there will be a presumption of oppression that must be rebutted by the lenders

“ I am appalled at the behaviour of some lenders who have seized passports, family photographs, food and drivers’ licences as security for loans. These forms of security will be strictly banned under the bill

To add further weight to Mr Lotu-Iiga’s efforts, the Minister of Commerce and Consumers Affairs, Hon Simon Power, is organising a financial summit in Auckland that will look at ways to tackle the problem.

“I support the Government’s decision to make changes in the area of consumer credit. We need to do something – and this is a step in the right direction”, says Mr Lotu-Iiga.

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The August summit is designed to achieve three things:

• An action plan that has initiatives that aim to help vulnerable people trapped in a debt spiral caused by lack of financial literacy, consumer choice and high, compounding interest rates.

• To send a clear message to all financial sector providers – from the bigger and more mainstream ones to the small, third-tier ones – that they all need to practice and commit to responsible lending and responsible consumer debt management.

• I also want the summit to decide on a clear direction about how the Government can best contribute to improving the financial literacy of New Zealanders

Mr Lotu-Iiga says the industry is known for unsavoury predatory practices of some payday lenders, cash lenders, car finance providers, clothing truck lenders and now text-a-loan companies. His bill addresses this behaviour by setting out clear guidelines for what is acceptable.

“Put simply harassment, bullying, threatening and abusive behaviour will be in contravention of the bill, says Mr Lotu-Iiga.

“ The bill has received the endorsement of the Citizens Advice Bureau, the Salvation Army, Christians Against Poverty, the Auckland Credit Union, the BNZ and Mercury Energy.

“I look forward to being a part of this summit and working alongside representatives of the financial sector and community groups as we target an issue that has plagued our communities for far too long.

ENDS

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