Desperate families are increasingly taking out personal loans to boost their house deposits and cover Christmas bills.
Yet a proposed new law to protect people from cowboy lenders is unlikely to take full effect until at least 2016 - more than five years since it was first mooted by the Government.
The Credit Contracts and Consumer Finance Amendement Bill is aimed at cracking down on loan sharks, including making it illegal to lend to people who can't afford repayments.
However, even once made into law, the finance industry has another 18 months to develop a responsible lending code.
The delay has led to calls for the Government to act more quickly to stop loan sharks preying on first-home buyers and cash-strapped families.
"People have already been thinking about it," said Raewyn Fox from the NZ Federation of Family Budget Services.
"Developing it in six months is quite feasible. If lending is responsible, affordable and well thought out in the first place, it is not going to go wrong."
Last month Christchurch City Missioner Michael Gorman warned that at-risk residents were being targeted by dodgy lenders and mobile-truck shops, with some scouting for sales outside welfare agencies.
He calling for tougher laws on high-interest loan companies and a tightening of rules around mobile-truck shops.
The Sunday Star-Times reported on July 21 last year that the Reserve Bank's new loan-to-value ratio lending restrictions would force many first-home buyers into the arms of loan sharks.
Under the new law change, banks require more people to have a 20 per cent deposit as opposed to the heady days when a deposit of 5 per cent was enough to gain a mortgage.
Since being introduced, the number of people inquiring about personal loans had jumped 18 per cent, according to Veda, Australasia's largest credit reference agency.
Generation Y, those aged 18 to 38, were the biggest group needing help, pushing up personal loan demand by 20 per cent.
Financial Services Federation executive director Lyn McMorran is concerned people will make huge financial mistakes by going loan sharks.
"Who are these borrowers actually dealing with. Are they reputable? Are people going to get themselves into trouble when interest rates go up?"
Labour's Consumer Affairs spokeswoman Carol Beaumont said while the legislation has been on the backburner, a greater number of loan sharks were preying on home buyers and struggling families.
The reform bill had been "abysmally handled" with more people getting into debt every day it was delayed, she said.
"The level of debt is higher. More people are hooked into high-interest loans."
The Government had a lot to answer for, she added.
"I don't understand why [the Bill] wasn't a priority. This is about ordinary New Zealanders. At this rate it won't be in place until the next election."
The legislation, now before a select committee and due to be reported back in March, was introduced as a response to growing calls to clamp down on unscrupulous lenders.
In June 2011, former Consumer Affairs minister Simon Power called for greater protection for people seeking loans.
"The preying on vulnerable people by loan sharks has to stop."
More than two years on, the Government is defending the pace of change.
New Consumer Affairs Minister Craig Foss said the Government had to wait for a 2012 report into credit repossession laws in order to add extra protections in relation to repossession.
- © Fairfax NZ News
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