Angie Warren-Clark Labour MP

We have recently had officials review the Credit Contracts and Consumer Finance Act, the legislation that regulates lending and borrowing. Sadly, it confirmed what I have been hearing.

Predatory lending and unethical practices in debt collection and mobile shopping and truck shops is still happening routinely across New Zealand, as it is in Tauranga

I am pleased however that our Coalition Government has been clear that it will not tolerate this. The cycle of poverty it supports and the debt spirals that are created cannot continue if we want all New Zealanders to thrive.

This continued message my colleagues and I are hearing, and the findings from the review showed that clearly the reforms of the previous Government did not go far enough. The concerns about the high cost of credit, and inadequate assessments of the affordability of loans, need to be tackled.

The review found high-cost lender rates ranging from 100-400% and up to 800% percent interest for a short-term (under 6 week) loan.

People are being given loans they clearly cannot afford to repay – one example is a lender accepting a budgeted amount of $50 a week to feed a family with four children. Another is a mother receiving a Supported Living benefit for her child, who had previously undergone a No Asset Procedure. Three different lenders gave her credit, and none of them checked whether the client had the means to service her debts.

Simply, people are being provided loans they are not going to be able to pay back, and are drawn into situations where the cost of the resulting debts is many times the original due to interest rates and penalty charges.

Mobile traders also continue to be an issue –both in Merivale and many other areas where vulnerable consumers appear to be targeted. Many mobile traders have no or low explicit interest charges. Instead, it is common for them to generate profit by incorporating high costs of borrowing into the price of the goods, which are then paid in instalments – for example, a $15 tin of fruit salad (normally a few dollars), or a $4,440 iPhone (normally $1,399).

Finally, some lenders are charging fees for a range of activities which appear to be disproportionate to the cost of the activity and are inconsistent with what reasonable costs would be likely to include. Examples include charging $20 for each letter mailed out, or $10 to call or text a borrower who has missed a payment. These fees appear to be disproportionate to the cost incurred by lenders.

It is clear then that we must act to ensure this stops. Options we are considering include interest rate caps, stricter requirements for lenders, strengthening enforcement and penalties and tightening the rules around advertising, affordability and fees.

At the same time the responsible Minister, Kris Faafoi, is working hard to ensure there are alternatives for people who need to borrow. It is reasonable and appropriate to borrow at times. But we want to ensure our community can access safe and appropriate lending – reasonable interest rates, fees and charges, and borrowing that will not see them unable to manage their weekly commitments.

Our next step as a Government that intends to ensure a New Zealand where all people thrive is to make decisions on the steps needed, and to draft legislation with a view to it being enacted later this year. Before we do that, we are asking people to share their experiences as a borrower, lender or affected whanau/family, so that the changes we make will work for you.

You can let us know your views on borrowing (and lending) by making a submission via MBIE's website here.

As local list MP based in Bay of Plenty, I will keep you informed as we make progress, because I know that this is an issue for many of us in our community.