Government crackdown on loan sharks
- Cap on total interest and fees charged
- Stiff penalties for loan sharks who break rules
- ‘Fit and proper person’ test for lenders, door-to-door salespeople and truck shops
The Government is introducing tough new measures to protect people from loan sharks and truck shops, Prime Minister Jacinda Ardern and Commerce and Consumer Affairs Minister Kris Faafoi announced today.
“This Government is committed to making New Zealand the best place to raise a child,” Jacinda Ardern said. “To do that we must stop families becoming trapped in the appalling debt spirals and poverty that result from onerous lending and payback terms.
“These new measures will halt the very worst of those preying on vulnerable and desperate people while enabling borrowing that meets their needs in an affordable way.
“They will protect families through capping the total interest and fees charged loans, introducing tougher penalties for irresponsible lending, and raising the bar for consumer lenders to register as a Financial Service Provider,” Jacinda Ardern said.
The announcement was made at the Vaiola Pl Budgeting Service in Mangere, where the Prime Minister and Minister Faafoi met with people affected by predatory lending as well as budget and financial advice providers.
“The 2015 amendments to the Credit Contracts and Consumer Finance Act (CCCFA) did not go far enough in protecting our most vulnerable consumers from loan sharks,” Kris Faafoi said.
“The introduction of an interest and fees cap on high-cost loans will prevent people from accumulating large debt from a single small loan. For example, if you borrow $500 you will never have to pay back more than $1,000 in total, including all fees and interest.
“The changes also lift the level of professionalism across the industry, by requiring directors and chief executives of lenders offering consumer credit contracts to pass a ‘fit and proper person’ test in order to register as a Financial Service Provider.
“Any lenders breaching the responsible lender principles will face stiff new penalties of fines up to $600,000 under the strengthened enforcement provisions in the CCCFA.
“We listened to consumer advocates and the finance sector’s feedback and will also be seeking increased resources for enforcement and monitoring to ensure lenders who break the law are detected and stopped,” Kris Faafoi said.
The Government is also tackling predatory behaviour by truck shops and others who sell door-to-door on credit or other deferred payment, by requiring all mobile traders to pass the ‘fit and proper person’ test.
The law will also be strengthened to give consumers clearer powers when asking uninvited salespeople to leave their premises, including by strengthening the legal status of ‘do not knock’ stickers, he said.
The new measures will come into effect from 2020, subject to Parliamentary timeframes.
More information on the Review of the CCCFA is available here.