It is time to regulate loan sharks – Copeland

April 28, 2009

Kiwi Party finance spokesperson Gordon Copeland believes that the regulation of “loan shark” practices in New Zealand is overdue.

“Many of us have heard anecdotal evidence of people being unwittingly trapped into impossible debt situations, because they failed to understand the interest burden they were taking on when borrowing from their local 'fast loan approval' retailer,” said Mr Copeland. “Such people, who are often borrowing just small amounts to tide themselves over for short periods, can find themselves financially enslaved for years to come, or bankrupt!”

“New Zealand at present has no law governing the maximum interest rate which can be charged to a customer and that may prove impractical. What we must do though is legislate to ensure that all borrowers are given accurate information about the annual simple interest rate they will have to pay and a worked example of how the interest burden may compound over time.”

"This, in itself, would be a major step forward. It should, for example, be illegal to advertise the interest rate on a loan as “8% per week”. What does that mean? Does it mean that the rate per annum is a simple 416% (8x52) or does it mean that the 8% rate will be compounded, at the end of each week, to give a rate of 5,370.6% per annum!"

"Just imagine borrowing $1,000 and finding yourself either $5,160 or $54,706 in hock 12 months later and you can see why a law change is urgently required!”

ENDS

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