Debt relief lender says legislative reform is urgently needed to protect vulnerable consumers
9 out of 10 budgeting services believe ‘loan shark’ clients are almost always worse off after taking out a high-interest loan, according to new research released by FinCap. This is consistent with the experience of budgeting and loan support services, according to lender Ngā Tangata Microfinance (NTM) – an organisation providing financial advice and no-interest debt relief loans to help remediate the damage caused by predatory lenders.
The FinCap research has revealed that those on lower incomes are disproportionately affected by loan sharks and ‘harmful’ debt collection behaviour, with over 15,000 budget advice clients being trapped in high-cost loan debt. NTM Executive Officer Robert Choy says his clients have almost always taken out these loans in desperation, and that legislative action needs to be taken to tighten regulation around the consumer credit environment.
“Law reform is urgently needed and it’s pleasing to see work currently underway towards a safer consumer credit environment, led by the Minister of Commerce and Consumer Affairs Hon Kris Faafoi,” Choy stated. “Whilst a good start, the protective measures being planned need to go much further ensure a safe fair and ethical credit environment is established in Aotearoa.”
“The recommendations put forward by Ngā Tangata include a cap on interest rates; addressing the negative impact of fringe finance company practice; enfolding mobile traders’ within the legislation; and a comprehensive creditor licensing system.”
Minister Faafoi announced a number of measures following the CCCFA review in October of last year, which included loan cost caps, more rigorous assessments of affordability and loan suitability, and tougher enforcement measures for non-compliant lenders. The Financial Services Federation (FSF), New Zealand’s responsible lending organisation, has lobbied for tougher enforcement measures alongside a tightened regulatory environment, stating last year that the CCCFA review will “not be worth the paper it’s written on” if it isn’t enforced.
“In almost all cases, our clients have taken on high-interest debt out of desperation and because there are no other options available to them,” Choy stated. “That’s why we exist - to provide a service that’s safe, fair and affordable, and to show people that the debilitating stress of high-interest debt doesn’t have to be permanent."
