Banks should not be taking on the role of the regulator, Financial Services Federation

The Financial Services Federation is urging customers to take advantage of its Responsible Mobile Shop Code to help tell the difference between an ethical mobile trader and an unethical one.

This comes in response to Kiwibank’s decision to stop supplying banking services to ‘predatory lenders’ who use unscrupulous sales practices and inflated interest rates, leaving customers trapped in a cycle of debt.

Home Direct CEO Michael Wright says that whilst recent media reports have highlighted some genuine issues, it’s important to separate non-compliant traders from compliant ones. According to Wright, mobile traders can be a good option for those unable to access lending from banks so long as the customers know their rights, and the loans are managed well.

Executive director of the Financial Services Federation Lyn McMorran says that the Commerce Commission should be the one putting unethical traders out of business, and not the banks.

“If you start a blanket ban on all traders, then you also put the good ones out of business,” McMorran told NZ Adviser. “The best thing to do is to let the regulators do their job, weed out the bad traders and leave the good ones to do their job.”

“When mobile trading is provided responsibly, it actually provides a community service for people who have difficulty getting to the shops. We wouldn’t want to see the banks taking the role of the regulator.”

“It’s about selling quality goods at reasonable prices and being a responsible lender,” McMorran goes on. “Providing credit to someone who clearly can’t afford to pay it back is obviously not responsible, so what we’ve tried to do with the Responsible Mobile Shop Code is to give people an idea of what their rights are when dealing with a mobile trader, and what they should look out for.”

McMorran says that there are undoubtedly mobile traders out there doing harm, and that the Commerce Commission should be preventing them from operating.

“The industry doesn’t need more regulation, but it does need more enforcement of the regulation that already exists. You can write as much law as you like, but if nobody enforces it, it’s just a waste of paper. The Commerce Commission has done quite a bit of work in the mobile trader space and has put some of them out of business, but it needs to be more proactive as there is still clearly a lot of harm being caused to vulnerable people. But it’s not any bank’s job to be the regulator, and they’re not in a position to know whether the trader they’re dealing with is behaving responsibly or not. Wherever you put a blanket ban in place, that just means the good operators don’t get access to a banking arrangement when they need it.”