The government has announced extra measures to protect people against loan sharks.
Commerce and Consumer Affairs Minister Kris Faafoi. Photo: RNZ / DOM THOMAS
An interest rate cap will reduce how much it costs to borrow money.
Commerce and Consumer Affairs Minister Kris Faafoi announced that an interest rate cap of 0.8 percent day will be
included in the bill going through Parliament at the moment.
In April, the legislation was introduced to Parliament to protect people against loan sharks, but during the select
committee stage, the bill was criticised for not going far enough.
The bill already includes a cap on the total cost of borrowing, which means people taking out high-cost loans will never
have to pay back more than twice the amount they originally borrowed, including interest and fees.
In addition, all truck shops and other mobile traders will be required to check that credit is affordable and suitable
for each customer before providing anyone with goods that aren't paid for upfront and to provide information to help
borrowers make informed decisions about whether to sign up for credit.
The legislation is expected to pass this year and will come into effect in stages, starting in March.
Mr Faafoi said: "At the moment, high-cost credit is too easy for people in hardship to access. While this type of credit
can be an immediate solution to financial problems, we know that high-cost, easy credit leads to worse problems in the
long run...
"I know that some lenders are already referring customers who are struggling with repayments to financial mentoring
services and this is good to see because it ensures that those struggling with debt can access the advice they need to
get back on their feet. I encourage other lenders to follow this example. We are changing the law so that this can
become a requirement in future, if needed."