Loan sharks and truck shops the target of new measures to protect vulnerable families
Commerce and Consumer Affairs Minister Kris Faafoi says a suite of new measures to stop families falling into hardship caused by predatory lending is a step closer, after the Credit Contracts Legislation Amendment Bill passed its first reading today.
“Predatory lending seriously affects the lives of many consumers and their families. They’re drawn into increasing spirals of debt until they are trapped into a cycle they can’t get out of. Their financial situation is dominated by debts which grow exponentially resulting in increasingly unaffordable repayments. The results are extreme hardship and, often, intergenerational poverty when whole families are affected.
“This simply isn’t acceptable and we are going to stamp this behaviour out.”
The Bill includes new provisions that ensure that for high-cost loans, people will never have to pay more than 100 per cent of the amount they originally borrowed. New, more specific affordability and suitability requirements will be introduced to prevent lenders granting loans to people who cannot afford to repay them. Stiffer penalties will be enforced for irresponsible lending, and requires lenders and truck shops to undergo “fit and proper person” tests before they are allowed to operate.
“These measures will make it much more difficult for lenders to prey on people in financial hardship, who are often amongst the most vulnerable in our community,” Mr Faafoi says. “We will also be working with the Commerce Commission to ensure these measures are enforced – because it is time for this predatory behaviour and the misery it causes to stop.”
Kris Faafoi said that he was also working to support broader availability of ethical and appropriate lending, and measures to help people manage their finances better.
“People do sometime need to borrow money so I want to strike a balance between tackling irresponsible lending while ensuring credit is still available to those who need and can afford it. I also plan to help people get to a situation where they are more able to make wise, informed financial decisions – and hopefully to avoid falling into financial distress and the misery it causes.”
The legislative changes, once passed, will be supported by amendments to the Responsible Lending Code. This will be updated to provide clearer guidance to debt collectors – and the lenders who employ them – about responsible debt collection.
The Bill is expected to pass this year, and come into effect in March 2020.