Interest rate caps needed to rein in loan sharks

Without interest rate caps imposed on them, loan sharks will still bite, FIRST Union says.

Parliament is this afternoon expected to consider the Credit Contracts and Financial Services Law Reform Bill, as it goes through committee stages.

FIRST Union organiser Jerome Mika said the proposed law included some positive steps, including a responsible lending code, increased disclosure requirements, harsher penalties and mandatory licencing of repossession agents.

“This is a really good start, but low income pacific workers and beneficiaries in areas like South Auckland, who have been poorly served by inadequate protections around dodgy lenders, will still be at considerable risk without controls on the interest rates loan sharks can charge.”

“There has been an explosion of loan sharks and pay day lenders since the financial crisis, especially online providers which people can access through their smart phones.”

“Loan sharks cannot be allowed to charge interest rates of in some cases several hundred percent.” 

“What is desperately needed is a cap on interest rates charged by fringe lenders, and we urge Parliament to support Carol Beaumont’s amendments to the bill which would provide for this. Other countries do this, and there is no reason why we can’t.”

“We support the changes in this Bill.  Ultimately though, we want to get rid of the demand for loan sharks and pay day lenders altogether.” 

“Low income workers need both better wages and should have a right to more regular pay, for example weekly rather than fortnightly wage payments, as well as access to credit on fair and reasonable rates,” Jerome Mika said.

—