Loan interest appals minister

Law covering "misleading" advertising of interest rates on loans will be investigated after the Government's labelling of current practices as "appalling".

In response to yesterday's Dominion Post report about families borrowing money at interest rates of 8 per cent a week, the Commerce Commission revealed it had had two complaints alleging the Super Loans' signs were misleading under the Fair Trading Act.

It is assessing what action, if any, is appropriate. It has not yet launched an investigation.

Consumer Affairs Minister Judith Tizard said the situation clearly illustrated the need for better financial literacy. "We are looking at the current law and identifying areas where we might make legislative change," she said.

It was appalling that anyone should have to pay 8 per cent a week interest on a loan as there were "far lower rates available".

Super Loans, formerly XtraCash, charges that interest on money lent from its three Wellington stores.

The brightly coloured advertising signs, which can be seen from outside the Work and Income office across the road in Porirua, make the "per week" disclosure as "PW" in much smaller type than the "Interest only 8%".

Consumer NZ deputy chief executive David Naulls said the Super Loans advertisement was misleading, and did not tell the customer the annual rate of interest.

The advertisements were also targeted at people for whom English "may not be a first language" and at those "obviously in a desperate situation".

"Their advertising needs to be fair and reasonable," he said. "With the big emphasis on `Interest 8%' it is misleading."

Advertising Standards Authority executive director Hilary Souter said the authority expected that advertisers maintain a "high standard of social responsibility" that is clear to consumers.

People concerned that the advertising was misleading could complain to the authority directly.

The Code for Financial Advertising says financial advertisements should observe "the basic tenets of truth clarity" and should not mislead, deceive or confuse consumers with small print.

Economist Brian Easton said the "per week" disclosure was far too small, and therefore misleading.

- © Fairfax NZ News