if credit companies who provide small loans are not allowed to pass on the cost of risk, they will stop lending to these people. Where do you propose that these families access credit?

providing a loan is not a public service, its a business, designed to make profit.

ps if they hadnt tithed to the church would they have had the money to pay for the basic household expences in the first place? I'm not sure but it is aquestion worth asking. Does that make me a bigot?

Normally I despise Minto and his heavily socialistic rantings but this blog is absolutely true. Already locked out by shady banks the poor and uneducated in this country should not be allowed to be destroyed by loan sharks. A serious limit on interest rates is necessary as most of those in NZ already don't have enough financial education to understand what interest rates really do to the loan amount. I wouldn't expect those who drop out at 16 or earlier without any goal of ever learning anything to do any better at understanding the reams of small print accompanying even the smallest loan. Loan sharks must go and limits must be placed.

Loan sharks are indeed a scourge on any society, and the poorer areas get hit worst...but in saying that, I'm also aware that Pacific Islanders are under pressure to take out loans, mostly small - but still crippling interest, by the very people they look to for help, the church! I know personally of 2 Porirua PI families that had to take out loans as a local elder had died and the church minister was going round the houses of his parishoners looking for, and getting, money for the funeral, family etc etc, they could not afford to 'pay' at that time and went for a loan....I understand culture is strong, but you are not in the Islands and the church should be ashamed.

Also alot of PI families send money back to the Islands, again another thing that has to stop if they cannot afford it...or they will always be prey to loan sharks, law or no law.

This is one of the few times I will ever have any agreement with John Minto.

Poor and uneducated people are targeted by "legitimate" loan sharks where the true cost of the loans are not explained to the borrower. Then, the borrower is burned by cruel and absurd extras that are thrown at them at whim of the lenders.

It is nearly impossible for victimised borrowers to fight back against loan sharks. The way that New Zealand's Courts deal with credit cases is akin to a conveyor-belt where the award of compensation (with arbitrarily exorbitant penalties) is absurdly routine.

To aggravate the injustices of this system, most borrowers cannot afford (or are not allowed, depending on where the case is heard) a lawyer to represent them while the credit companies routinely have professionals experienced in dealing with credit law working for their interests.

Further more, it is very VERY common for borrowers to have NO knowledge of where/when/if a hearing of their case is even taking place because they have not received a Notice of Hearing, (there are a few seriously dodgy people who deliver those Notices).

If the system of redress is broken (and it clearly is) then maybe we do need a new system.

Compounding Interest is unjustified, and so dangerous it should be illegal. But then the only safe form of banking is Public banking at low interest where there is intelligent control of the money supply and the Interest sucked out of the economy is properly redistributed ( eg via Infrastructure ). Private mutual societies and credit pools or community banks are possible, but after that, private lending - especially loan sharks - should be illegal. They flourish, of course, in desperate and lawless societies....which says a lot for ours. Sound like South Auckland ?

Possibly the biggest thing wrong with the way our western society has developed is that it's fine for anyone to charge Interest on money. Making money out of money is morally and economically unsound. As The Prophet warned, when he discovered the Money Changers had invaded the Temple. A sign of things to come.

And we've just elected a very smart money changer for prime minister.

Darth's description of the bad and cynical court processes doesn't surprise, considering how cynically the court system works in other areas. Why don't we stop pretending it's a Justice system and just admit it's a big employment scheme set up by lawyers ....for lawyers ? Defence lawyers might be best off. Some make over a million a year defending crooks on Legal Aid ( Tax ) money.

I too actually agree with John for once... there are Loan Sharks out there that are ripping the poor off left, right and centre. Unfortunately these poor people do need to be saved from their own stupidity.

However, there are just as many "poor" people ripping off legitimate finance companies taking out reasonable loans with no intention of paying them back and defaulting on the first payment. From all accounts trying to track down these people, mostly from the stereotypical part of auckland, is nearly impossible. People I know in the finance industry are convinced that there is a sizeable group of people who basically make a career out of ripping off companies like this. It wasn't just "corporate greed" that led to the first round of Finance Company collapses in NZ, a lot had huge bad debt ledgers full of people like this.

I have hardly ever agreed with John but in this case am 100% behind his sentiment. For once I doubt he will get too many comments in return. I have had first hand experience with an employee who bought a family vehicle through a second tier lender and got into terrible trouble. A $19,000 debt remaining on a vehicle not worth more than $5000 after two years of payments. Unravelling it for him and seeing the extent of fees, interest and other costs were horrific.It was a clear case of crooks preying on the financially vulnerable and a total disgrace. Corey #1, I'm afraid there's a difference between fair profit margins associated to risk and downright theft.

We don't need new rules, we need proper enforcement of the current rules. All financing costs are required to be properly disclosed and clearly explained or they are not enforcable, the loan is also supposed to be affordable. I have seen some of these cases and while there are definitely dodgy operators there are just as many clients who never intend to repay or who cannot even comprehend financial matters. They can't save and want everything instant. The reason for the high interest and fee costs is because of the high defaults. If you cap interest all it does is increase the interest costs for the lower risk borrowers.

Corey #1, I'm afraid there's a difference between fair profit margins associated to risk and downright theft.

I agree, but im pretty sure if you look close enough, there will be a piece of paper with all the fees and conditions on it, somewhere near the bottom of that will be a presons' signature agreeing to be bound by those terms and conditions. stupidity or culture should not absolve people from their legal responsibilities.

I would however, heartily support a bill that made the CLEAR reporting of ALL fees and true interest manditory. I would also support the ability of either party to cancel the terms of the loan within 72 hours provided all monies/assets were returned (less a minor and clearly visable handling fee)

. Random #6 is getting close to the mark. Also people have the opportunity to file for bunkrupcy (not an easy choice, but a valid one)

Well well, some of the JM haters even agree on this one. Could it be that John does have a point to make after all? Could it be that as a stand up citizen of NZ he ain't all bad with his opinions? You knockers harass this guy no end AND now he says something you like? Could it be you knockers have been on the receiving end of a few 'loan sharks'?