Promise of protection for the poorest in proposed Member's Bill

Despite years of public consultation and Ministerial tinkering, the Credit Contracts and Consumer Finance Act has failed to deliver protection to the poorest consumers. New Zealand law still allows lenders to charge some of the highest interest rates and charges in the world. This affects the most desperate and poorest members of society, exacerbating the burden of poverty they already carry. High interest rates and excessive charges on loans keep food off the family table and contradict the norms of social justice that we all hold dear.

An interest rate cap and other necessary controls on providers of credit are included in the Member's Bill proposed by Kris Faafoi, Member for Mana, Labour: Credit Reforms (Responsible Lending) Bill, out now for consultation. It will provide some desperately needed consumer protections.

Nga Tangata Microfinance Trust applauds this Member's Bill and the important step change it facilitates for the provision of a safer and fairer lending environment.

In recent years, there has been much talk about those most vulnerable in New Zealand. While the recently introduced Responsible Lending Code provides guidance on the sound principles of lending, this proposed Member's Bill directly addresses one of the key areas, the problem of unmanageable, enduring, high interest debt:

This bill would amend provisions in the Credit Contracts and Consumer Finance Act 2003 to require lenders to act responsibly when lending to unwary consumers and to prevent excessive rates of interest from being charged. It would also amend the Secondhand Dealers and Pawnbrokers Act 2004 to allow pawn brokers to charge administration fees, thereby removing any need for high interest rates in order to compensate for not being able to charge fees.

If passed in to law, this Bill will provide New Zealand with much needed consumer protection through the provision of safe and fair credit. It is time we did.

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