Government to target loan sharks

The Government is to target unscrupulous credit companies that prey on unwary consumers, the Minister of Commerce and Consumers Affairs, Simon Power, announced today.

He told the Financial Literacy Summit in Wellington that he is organising a financial summit that will look at ways to tackle the problem.

"It's time to make changes in the area of consumer credit.

"There are gaps in the system that allow the unscrupulous to take advantage of the unwary when it comes to access to consumer finance in these tough economic times.

"And when that happens it's too easy for the unwary to agree to something they don’t fully understand and become trapped beyond their means.

"We need to do something about that – and we will.

"The preying on of vulnerable people by loan sharks has to stop.

"There are many credit companies that are transparent and responsible and open. But there are others that aren't, and I'm signalling to that second group today that their days are numbered."

He said the summit, which would bring together representatives of the financial sector and community groups, would not be a talk-fest.

"I want this summit to achieve three things:

• An action plan that has initiatives that aim to help vulnerable people trapped in a debt spiral caused by lack of financial literacy, consumer choice and high, compounding interest rates.

• To send a clear message to all financial sector providers – from the bigger and more mainstream ones to the small, third-tier ones – that they all need to practice and commit to responsible lending and responsible consumer debt management.

• I also want the summit to decide on a clear direction about how the Government can best contribute to improving the financial literacy of New Zealanders

"I will approach the discussions with an open mind but I'm expecting them to result in outcomes that address irresponsible lending.

"The Credit Contracts and Consumer Finance Act is the primary law affecting credit provision. Essentially, it provides for disclosure of information to help credit consumers make decisions about loans.

"The key question that needs to be asked is whether the Act needs to be amended to provide more protection for consumers – including from irresponsible lending – or whether the same outcomes can be obtained from voluntary industry initiatives."

The summit will be held in Auckland in August.