Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search


Worrying research highlights issues facing Financial Summit

Hon Simon Power
Minister of Consumer Affairs

9 August 2011 Media Statement

Worrying research highlights issues facing Financial Summit

Consumer Affairs Minister Simon Power today released research into third-tier lending ahead of the Government’s Financial Summit to be held in Auckland on Thursday.

The main piece of research, undertaken by the Ministry of Consumer Affairs, identified 218 third-tier lenders (lenders who provide personal, non-mortgage loans, excluding banks, building societies, and credit unions) operating in New Zealand, and examined the advertising methods they used.

Key findings include that:

• The total number of lenders has not changed significantly since 2006. In 2006 there were 185 third-tier lenders compared with 218 in 2011, an increase of 18 per cent.
• Although the total number of third-tier lenders has not changed significantly, there has been a 60 per cent growth rate in the number of outlets in the past 5 years, from 210 in 2006 to 336 this year.
• There has been significant turnover in third-tier lenders in the past 5 years, with about half (95) of the lenders who were in business in 2006 exiting the market, while 127 new lenders have entered the market.
• Advertising tends to target those without an adequate credit history (such as low income earners, beneficiaries, and young people), emphasises the ease, speed, flexibility, and normality of third-tier loans, often does not disclose borrowing costs, and sometimes includes incentives to refer friends and families to the lender
• Third-tier lenders tend to focus their business in lower income areas: for example, there are 47 outlets in South Auckland alone.
• Some 35% to 40% of third-tier lenders appear to have not registered as Financial Service Providers, as required by law. The Registrar of Financial Service Providers is investigating and will refer non-compliance to his enforcement unit as appropriate.

“I’m disturbed that so many third-tier lenders don’t appear to have fulfilled the most basic requirement to register as a Financial Service Provider,” Mr Power said.

“Given this, it’s also unlikely that they’ve joined an approved disputes resolution scheme, meaning consumers are being deprived of consumer protection and access to redress when things go wrong.

“The turnover in the third-tier lending market reflects the ease of market entry in an environment where just about anyone can become a credit provider because they don’t have to meet any competency or conduct standards.

“The growth in this industry, coupled with advertising targeting the most vulnerable members of our community, highlights the importance of the Financial Summit to tackle the issue of irresponsible lending.”

Around 250 people, representing community groups, budgeting services, banks and credit companies, are expected to attend the summit in Mt Wellington which will look at ways to help vulnerable people trapped in a debt spiral, promote responsible lending and debt management, and improve the financial literacy of New Zealanders.

Mr Power also released research by Colmar Brunton which looks at New Zealanders’ use of third-tier lenders, their experiences, and how the third-tier lenders operate, as well as background statistics for considering credit issues produced by the Ministry of Consumer Affairs.

The research reports can be found here.


© Scoop Media

Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On Populism’s Changing Of The Guard, Plus A Soul Music Playlist

The weekend’s Newshub/Reid Research poll results - Act up to 11.1%, National up 1% but still sitting at only 28.7%, Labour down to 43%, the Greens up to 8.5% - shows that the combined centre right vote is still languishing nearly 12 points behind the combined centre-left vote, 45 months after the last centre-right government was voted out... More>>


Finance: Finance Minister And RBNZ Governor Agree To Update MOU On Macro-prudential Policy

Finance Minister Grant Robertson and Reserve Bank Governor Adrian Orr have updated the Memorandum of Understanding (MoU) on macro-prudential policy to further protect the financial system and support the Government’s housing objectives... More>>

Government: Offers Formal Apology For Dawn Raids
Prime Minister Jacinda Ardern has today formally apologised to Pacific communities impacted by the Dawn Raids in the 1970s.

Between 1974 and 1976, a series of rigorous immigration policies were carried out that resulted in targeted raids on the homes of Pacific families... More>>

Government: Bill Introduced To Protect Against Conversion Practices

Legislation has been introduced to Parliament to protect against practices intended to change or suppress someone’s sexual orientation, gender identity, or gender expression... More>>


Human Rights Commission: Successive Governments Responsible For Massive Breaches Of The Right To A Decent Home

Te Kahu Tika Tangata / Human Rights Commission has today launched Framework Guidelines on the Right to a Decent Home in Aotearoa and announced that it will hold a national inquiry into housing... More>>

NZUS Council: Welcomes Nomination Of Senator Tom Udall As US Ambassador To NZ

The NZUS Council welcomes the nomination of Senator Tom Udall to the role of US Ambassador to New Zealand and Samoa, NZUS Council executive director Jordan Small said... More>>

BusinessNZ: Visa Extensions Welcomed
BusinessNZ has welcomed the extension of some critical skill visa durations and changes to immigration systems to speed processing. Chief Executive Kirk Hope says move acknowledges advocacy by the hospitality sector, the BusinessNZ Network and others, and comes not a moment too soon.... More>>




InfoPages News Channels