Hi all – we were planning to release on the Government’s new loan shark legislation – the Credit Contracts Legislation Amendment Bill which is having its first reading today and we thought we’d invite other organisations to join us.
The response has been overwhelming with eight national organisations joining FinCap including The Salvation Army, The Council of Trade Unions, Christians Against Poverty, and the NZ Council of Christian Social Services stepping up to push the Government to fix this broken legislation. We’ve included quotes from all organisations’ spokespeople further down.
The issue we have with the Bill is that is does not include an interest rate cap. This is a fundamental tool for managing predatory lending and is already in place in dozens of other countries around the world. Without it, tens of thousands of New Zealanders will have no reprieve from predatory lending.
In fact, an interest rate cap is so vital that up until recently it has been the policy of both Labour and the Greens as can be seen in their minority report on the issue in 2014.
This morning on Breakfast, the Prime Minister said she wants to curtail predatory lending. The current legislation won’t do that without an interest rate cap.
Clearly, FinCap and this coalition of support will be looking to Select Committee to introduce an interest rate cap as a matter of absolute priority.
Quotes on the issue:
Borrower Sarah Newham says her experience with predatory lending was awful. “my kids have their birthdays really close together and the budget was tight. I’d tried to save for it but there’d been some unexpected costs. I didn’t want to let them down, so I borrowed $400. I made the first couple of payments ok, but then I missed one and after that the debt got out of control.
“I managed to get it sorted in the end, but they still target me for sales. They sent me an email on my birthday suggesting I treat myself to a new loan as a present.”
FinCap Chief Executive, Tim Barnett says the Government needs to get this right. “The 200 budgeting services we work with are crying out for loan sharks to be reined in. A huge proportion of people who come to them have predatory loans repayments that are being put ahead of basic needs like food and rent. We can’t stop this without an interest rate cap. 76 countries have already taken this step, the research shows it works – and also shows that the much-needed alternatives only emerge once the high-cost short-term loans are off the market.”
Jodi Hoare, Community Ministries Programme Coordinator of The Salvation Army says that this Government has consistently focused on child poverty and holistic wellbeing which is admirable, but “Strong laws that protect people from predatory lenders are critical to fixing child poverty issues and building a healthy and well New Zealand. That includes putting an interest rate cap into law. We’re baffled that it’s not there.”
Christians Against Poverty CEO, Aimee Mai says the harm done by predatory lending needs to be stopped. “As a country we need compassionate legislation that protects the most vulnerable, and a limit on interest rates is essential to achieve this. Impossibly high interest rates leave parents to agonise over repayments. When you’re constantly choosing between paying bills and feeding children it can lead to feelings of inadequacy, anxiety and even depression. This link between unmanageable debt and depression cannot be overlooked when seven out of every ten clients say that their mental health was suffering as a result. Loan sharks have a history of sacrificing the wellbeing of our whānau for a quick buck, now is our chance to change that.”
CTU Komiti Pasifika co-convenor, Caroline Mareko says Pacific Island workers are disproportionately affected by predatory lending. “Pasifika peoples too often struggle to pay back money they borrow and the high interest rates that loan sharks charge stretch budgets and put families into terrible situations of choosing between paying these lenders or buying basics for their kids.”
Dr. Claire Dale, Spokesperson from Child Poverty Action Group (CPAG) says that the government’s cap on the total cost of credit isn’t enough. “It is a good start, but it’s flawed and without a cap on interest rates we won’t be providing the much-needed protection for low-income families.”
Good Shepherd Chief Executive, Fleur Howard says the debt trap created by predatory lending is currently stopping people from accessing fair lending. “We are finding, as responsible lenders, we are having to turn too many families away from accessing safe credit as their existing debt is so high we simply cannot lend to them without putting them into further hardship. These families want to get ahead but are caught in a debt spiral as predatory lenders constantly target them.”
Robert Choy, Executive Officer of Ngā Tangata Microfinance says “the credit environment in Aotearoa allows high interest lenders to legally prey on families in crisis, trapping them in a debt spiral from which there is often no escape. Unlike most of the rest of the world, New Zealand has no legal limit on interest rates. We believe that an interest rate cap is an essential part of providing morality, justice and protection for those most financially vulnerable”
New Zealand Council of Christian Social Services Policy Adviser, Paul Barber strongly supports the call to include a cap on interest rates in the new credit contracts and consumer finance legislation that is about to go before Parliament. “We and many other organisations working with people struggling with high cost debt have been calling for years for a limit on interest rates. The Government promised to take action on this and now is the time to do it.”
Family Works New Zealand Manager, Diane Garrett says an interest rate cap should be common sense. “As Financial Mentors we see many of our clients unable to pay for what we would regard as everyday living expenses. These people are forced to turn to quick payday lenders, loan sharks and high interest lenders to pay for their daily needs. The exorbitant interest rates and fees charged then trap our clients into a cycle of debt they find it hard to escape. We applaud the Government for the Amendment Bill, but it doesn’t go far enough to cap interest rates – if other countries can do it why can’t we?”