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Source: ONE News -
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MPs are being urged to send to a select committee a bill seeking to cap interest rates that loan sharks charge.
Labour MP Charles Chauvel's member's bill - the Credit Reform (Responsible Lending) Bill - was introduced to parliament last August. Labour's Carol Beaumont is taking over the bill and is urging MPs to vote for it when it gets its first reading, likely to happen in April.
Beaumont says the bill will be part of a bigger campaign to crack down on unscrupulous money lenders.
"The reality is we need to get some strong legislation in place so that pirahnas, those targetting the most vulnerable in New Zealand, can be more responsible," she says.
Manukau City Council agrees.
Mayor Len Brown says when the tsunami struck Samoa last year their thoughts were with the victims in both countries.
"I was also thinking 'Oh God there's going to be another tsunami that's not about the waves, it's about the money that has to go back home and fast,'" Brown says.
Loan sharks charge "obscene rates", Beaumont says.
"Increasing numbers of people are pawning items like bikes and children's toys to borrow funds to be able to pay the bills.
"In some cases people are borrowing to pay off interest and then incurring much higher interest as a result, leaving them in more trouble than they were in the first place."
Predatory lenders target vulnerable communities including Maori and Pacific people and students. Rates are known to have exceeded 1,000%.
In June last year a damning Consumer Affairs Ministry report outlined how "fringe lenders" generally target low income areas with high Pacific Island and Maori populations.
There are also mobile loan sharks who go door to door targetting state houses and pensioners.
Borrowers are generally not able to get mainstream loans, and as a last resort accept offers from lenders charging huge interest rates and fees, severe penalties, inflexible terms and conditions and little documentation.
Research identified over 180 fringe lender companies, including "pay day" lenders, who offer advances to cash-strapped borrowers waiting for their next pay cheque, but gouge huge fees in the process.
However the report cast doubt on the potential effectiveness of introducing legislation to cap interest rates.
Beaumont says the bill is not a complete fix but will make a difference. Education about budgeting and financial matters and a boosted minimum wage are also needed.
"We need to find a way for those people turned away by the mainstream banks to find credit when need it."
Beaumont has outlined the following case studies of families badly burnt by loan sharks.
- A loan for a $3,000 car saw a large Tongan family end up with no car and a $10,000 debt.
- A Samoan family declared themselves insolvent after being charged exorbitant interest on a loan to pay the rent when the father lost his job.
- A Tongan mum with four children lost all her furniture and
other possessions which were security on a $13,000 loan to go to
Tonga to bury her father. She now owes nearly $24,000.
