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20 June 2007

Loan sharks escape government net

It's business as usual for New Zealand's thriving school of loan sharks after the government's proposed net turned out to have huge holes.

Commerce Minister Lianne Dalziel and Consumer Affairs Minister Judith Tizard yesterday announced moves to regulate loan sharks. The most significant moves are to require these "fringe lenders" to register (which will require background checks for convictions etc) and require them to belong to a dispute resolution scheme.

However these moves lack substance and will be shrugged off by these cockroach capitalists which target families in low income communities.

Without effective regulations to cover things such as interest rates, set-up fees and penalty payments the dispute resolution service will be little more than a debt collecting agency for the loan sharks themselves.

Two years ago we wrote to the Prime Minister suggesting the following steps as a start to curb loan sharks -

(1) Loan Sharking
a. A "simple English" loan form - translated as necessary - would be required for all lending (cash loans, HP purchases, car purchasing, credit cards, mortgages etc) This loan form would feature the amount borrowed; the total amount to be paid back; the finance rate (which includes interest charges and fixed charges) and the number, frequency and amount of repayments.
b. Maximum finance rates would be set for all borrowing and related to the rate of inflation.
c. Penalty rates for non payment would be set at the finance rate applied to the amount overdue.
d. All commercial money lenders would be registered with all loan documents themselves registered (as occurs for bond payments in residency agreements)
e. Failure to register and use the "simple English" loan form would remove any legal redress for a lender.
f. A government funded education campaign for schools and the wider community with information on the dangers of debt and debt repayment.

The government steps announced yesterday are a hollow inadequacy of what is needed and the suffering of low-income families will continue unabated.

The tip of this misery is shown in the pages of Te Taimi o Tonga newspaper each week as photos and personal details of loan defaulters are held up to community ridicule in a "name and shame" operation.

It seems that the issue of loan sharks is beyond the interest of the Commerce Minister and beyond the ability of the Consumer Affairs minister.

ends

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