Parliament’s Finance and Expenditure Committee has made key amendments to the Credit Contracts Legislation Amendment Bill, giving borrowers more protection from harmful high cost consumer credit contracts. The changes indicate that the Select Committee listened to the voices of Financial Mentors representing consumers that have experienced predatory, high cost and irresponsible lending.
The Select Committee has introduced an interest rate cap of 0.8% a day, restrictions on repeat borrowing and tighter rules for mobile traders. They have also introduced an obligation on credit providers to alert consumers to the services of Financial Mentors through the MoneyTalks helpline, if the customers are in default, fall behind in their payments or are not approved for a high cost loan. Lenders will also be required to provide statistical information about their business on an annual basis to improve monitoring and enforcement.
FinCap together with a coalition of national NGOs and our local partners working in community led a campaign to introduce an interest rate cap.
Tim Barnett, Chief Executive of FinCap said, “Communities and social service providers have been asking for the introduction of an interest rate cap for almost two decades. Now instead of debating whether there should be an interest rate or not, we can work on ensuring that the cap is working and set at the appropriate level to protect consumers from predatory lenders.”
“It is pleasing to see that the evidence and stories brought to Parliament’s Committee by Financial Mentors has helped to change the legislation for the better. Financial Mentors witness the harm done to people, families and communities from harmful credit products and predatory lenders. The stories, they told about of control interest rates, the harmful practices of truck shops and persistent advertising of high cost loans had a noticeable impact on Committee members.”
The requirement for lenders to refer customers to Financial Mentors means that people in financial hardship will know where to find help when they need it. The MoneyTalks helpline is staffed by trained Financial Mentors and can refer people onto the 200 local financial capability and budgeting services across New Zealand. Last week, the MoneyTalks helpline received 200 calls for the first time, showing the growing awareness about the line and the willingness of New Zealanders to talk about their money issues with trained Financial Mentors.
The report by the Select Committee, shows the careful and considered deliberation of the Committee. The report makes important changes to how the system that protects consumers works and addresses issues with particularly harmful products and lenders. FinCap will be monitoring the changes over the next three years and look forward to further opportunities to work with Parliament to protect consumers and improve the financial wellbeing of New Zealanders, such as protecting consumers from harmful debt collection practices.