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Loan sharks "not going away"

Published: 11:02PM Wednesday July 21, 2010 Source: NZPA/Newstalk ZB

The Council of Trade Unions says the issue of loan sharks preying on the poor isn't going to  go away, despite the bill failing to get past its first reading in parliament last night.

Labour MP Carol Beaumont's bill was seeking to put a cap on interest charged by finance companies.

CTU spokesman Bill Rosenberg says loan sharks are exploiting people's desperation and options to address the issue should be looked at by a select committee.
 
There was erocious debate in parliament last night as National and Act MPs threw out the bill.

Despite voting against it, National MP Hekia Parata agreed with its sentiment, saying there was no doubt exploitation is a problem.

But she accused Labour of shameful behaviour for saying the government didn't care.

Holding back tears, Beaumont told the House she was sad the government's not taking responsibility on the issue, and mad the voice of the community was not being listened to.

"Stories abound of people hurt by irresponsible lending and excessive interest rates," she said.

"I know of a Tongan family who borrowed $3200 to repair their car...they ended up with no car and still owe almost $10,000."

Beaumont's bill does not specify a maximum interest rate. It would have allowed it to be set by regulation so it could be changed when necessary without amending the law.

Consumer Affairs Minister Heather Roy was barracked as she said the government was considering other measures to address the issue.

She said the government wasn't going to support the bill because credit law is under review and a public consultation document has been released.

"Capping interest rates could result in a decrease in available credit," she said.

"Australia is currently reviewing the effectiveness of its caps, and we will be watching the result of that review."

Beaumont's Labour colleague Charles Chauvel accused Roy of "claptrap".

"Loan sharks target the most vulnerable people with obscene interest rates," he said.

"They never expect to see their loans repaid in full...we have to take action now because there has never been a better time for loan sharks - 75% of people are earning less than $45,000 a year."

The Maori Party strongly supported the bill.

MP Te Ururoa Flavell said interest rates could exceed 400% a year and compound to 1000%.

Loan sharks used threats, blackmail and bullying to get their money.

National MPs said Beaumont's member's bill is flawed and didn't deliver the right solutions.

They said comprehensive "proper legislation" is needed which will result from the government's review.

Labour, the Greens, the Maori Party, United Future and the Progressive Party supported the bill.

The bill would also have imposed obligations on loan companies, and they would have had to "reasonably believe" a borrower could repay the loan they were taking out.

The bill was voted down  63 votes to 59.

Government moves include reviewing consumer laws and working to improve financial literacy.

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