CPAG submits on Consumer Credit legislation, calls for interest rate cap
Child Poverty Action Group (CPAG) fears new legislation won’t go far enough to protect vulnerable families from loan sharks.
CPAG joins with FinCap and Ngā Tangata Microfinance in calling for the Government to include an interest rate cap in the Credit Contracts Legislation Amendment Bill, to complement the Bill’s policy to limit to the total cost of borrowing.
"As it currently stands, the Bill will not provide adequate consumer protection against predatory lenders," says CPAG household debt spokesperson Dr Claire Dale.
"The weekly repayments on very short-term loans can be extremely high without the total repayable reaching the 100% repayment cap. When compared internationally, our lack of an interest rate cap is unusually lax and irresponsible.
"In the United Kingdom and Australia, the repayment cap is always accompanied by other measures," said Dr Dale.
"Daily rates of interest in New Zealand are often almost twice the rate allowed in the UK, and can currently, legally, be as high as 600% annually."
Dr Dale suggests that the maximum interest rate be set at 48% per annum as it is in Australia for loans over $2,000.
CPAG is also calling for a rule that lenders must advertise the MoneyTalks free budgeting advice service; a ban on retail truck shops; a ban on high-cost short-term loan advertising; a ban on high-cost lenders using direct debit payment authorities; and greater regulation of debt collection.
FinCap has created a public petition online calling on the Government, and the Minister in charge of the Consumer Credit legislation, Kris Faafoi to put an interest rate cap on the loan sharks that are hurting our families. Sign the petition at www.together.org.nz/loansharks.
For more information download CPAG’s submission on the Credit Contracts Legislation Amendment Bill here.