Bid to stop loan sharks

19:48, Mar 18 2010
STOP THE SHARKS: Launching a new campaign looking to crack down on loan sharks are, from left, Mangere Budgeting Services Trust chief executive Darryl Evans, Manukau mayor Len Brown, Labour’s consumer affairs spokeswoman Carol Beaumont, Labour MP Su’a William Sio and and law student Andrew Shann.

The most vulnerable Kiwis are at the heart of a campaign that aims to crack down on irresponsible money lenders and loan sharks.

The campaign being spearheaded by Labour's consumer affairs spokeswoman Carol Beaumont was launched at the Mangere Budgeting Services Trust last week.

It wants to get enough support for the Credit Reform (Responsible Lending) Bill so it can proceed to a select committee for review.

The bill was introduced to Parliament last August and had its first reading in April.

Attending the launch was Manukau mayor Len Brown, Labour MP Su'a William Sio, budgeting trust chief executive Darryl Evans and Victoria University law student Andrew Shann, whose master's thesis was the basis for the bill.

Ms Beaumont says the bill seeks to prevent lenders from charging excessive interest rates and ensure they are more responsible when lending money.


"This is a time when loan sharks are particularly flourishing.

"It's tough economic times, there's high unemployment and a lot of people are struggling with rising prices.

"Loan sharks will lend them money but at obscene rates, without checking to see whether the borrower is able to meet the repayment requirements.

"And as security, often people are using very valuable and personally significant items to secure those loans."

The bill will allow for maximum interest rates to be set, a power that does not exist in New Zealand law.

It will also require lenders to establish that borrowers are able to repay loans, and limits their ability to recover more than what was initially lent in the event of a default.

The bill would also allow registered pawnbrokers to charge administration fees, which removes the need for higher interest rates.

While the bill was a necessary step, it will not be a complete fix for the problem, Ms Beaumont says.

"To get to the root, we need to ensure the public is better educated, we need to address the inadequacy of incomes and we need to find a way for people turned away by mainstream banks to find credit when needed. It's clear loan sharks target communities where they can prey on strained circumstances and a lack of financial literacy," she says.

"This business of making money off our most vulnerable families needs to be stopped."

Manukau Courier