Support For Government Protections Against Loan Sharks
Fast-tracked legislation to protect vulnerable consumers against predatory loan sharks will help prevent families being saddled with unmanageable debt during an already difficult time, says Retirement Commissioner Jane Wrightson.
Wrightson heads the Commission for Financial Capability (CFFC), which runs financial education programmes in low-income communities where families are targetted by high-cost lenders.
She is supportive of the Government bringing forward some measures under the Credit Contracts Legislation Amendment Act by way of the COVID-19 Response (Taxation and other Regulatory Urgent Measures) Bill going through Parliament today. The protections were not due to come into effect until 1 June this year, but due to disruption and financial concerns caused by COVID-19, Commerce and Consumer Affairs Minister Kris Faafoi announced some measures would be fast-tracked.
The protections include:
- people borrowing from high-cost lenders will never have to pay back more than 100 per cent of the loan principal,
- compound interest on high-cost loans will be banned, and
- fees for defaulting payments will be limited to $30 (unless the lender can show that the higher amount reflects their costs).
“CFFC’s financial educators see first-hand the effects of unscrupulous high-cost lenders trapping families into cycles of debt from which they struggle to escape,” says Wrightson. “These families are particularly vulnerable due to the effects of COVID-19, so getting these protections in place quickly will not only force lenders to be more responsible, but also encourage borrowers to beware of taking on this kind of debt.”
CFFC has urged people facing financial stress to consider options through the Government’s financial support package before taking on more debt. Details of the financial support package can be found at covid19.govt.nz