The Financial Services Federation (FSF) has welcomed the Commerce Commission’s recent crackdown on loan sharks, but has expressed concerns around the time that it currently takes to prosecute dodgy lenders.
According to FSF executive director Lyn McMorran, more resources should be spent on enforcement of the law rather than making legislative changes. She says the CCCFA overhaul “are not worth the paper it’s written on” if the only firms who comply are the ones who already practice responsible lending.
“The Commerce Commission has done some good enforcement work particularly towards rogue mobile traders and payday lenders but it hasn’t been sufficiently hard-hitting, swift or visible enough,” McMorran said.
“The key to stopping predatory lending behaviour lies in the regulator being adequately resourced to put these lenders out of business much more quickly, and permanently.”
McMorran noted that that earlier in October, a West Auckland finance company was sentenced and fined for breaching CCCFA legislation over two and a half years ago – not nearly fast enough to efficiently deter other lenders from doing the same. It is already against current law to offer borrowers unaffordable loans, and she says the key to protecting vulnerable customers and sending a strong message to loan sharks lies solely within enforcement.
“FSF’s members completely support the government in its commitment to stamp out irresponsible lending, but no matter how often you re-word legislation, it is not worth the paper it is written on if each time only the already-responsible lenders comply, and the same dodgy lenders aren’t deterred because the prosecutions are so few and far between,” McMorran stated.
Commenting on other changes to the CCCFA, the FSF stated that it has “some support” for the proposed 100% interest rate cap on high-cost loans, however does not support the introduction of mandatory minimum standards for the assessment of affordability of loans. It also supported the proposed rules around disclosure and advertising, along with greater transparency and access to redress during debt collection.