October 17, 2018
Sharks will swim through loan law net
Ngā Tāngata Microfinance has welcomed a crack down on loan sharks, but says there are still big holes in the net.
The changes to be introduced in 2020 include a cost of credit cap of 100 percent of the principal borrowed from ‘high cost’ lenders and tougher penalties for irresponsible lending.
Executive officer Robert Choy says while that may catch some high cost payday lenders who often charge interest in excess of 300 percent a year, finance companies who lend larger amounts over longer periods at still-high interest rates will not be affected by the proposed cap.
He says Ngā Tāngata’s experience over many years making interest free or low interest loans to low income clients is it’s the larger amounts borrowed from second and third tier finance companies that ensnare borrowers in punitive debt spirals.
Ngā Tāngata wants to see a comprehensive creditor licensing system, along with improved monitoring and enforcement.
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