The Bill amends the Credit Contracts and Consumer Finance Act by strengthening requirements to lend responsibly.

It is designed to clamp down on predatory lending practices and stop borrowers being caught in a spiral of unaffordable debt.

Writing in The SpinOff, business editor Maria Slade notes:

"The Catholic Archdiocese of Wellington points out that most borrowers use payday loans to cover ordinary living costs such as power bills, not one-off or unexpected expenses as many financiers claim."

In a submission on the Bill, the Archdiocese quotes Pope Francis. "Usury [excessive interest] is an ancient and unfortunately still concealed evil that, like a snake, strangles its victims.

"It tramples on the dignity of people, is a vehicle for corruption and hampers the common good.

"It also weakens the social and economic foundations of a country."

The proposed changes in the law cap the amount financiers such as Moola and NeedCashNow can charge by limiting total interest and fees to no more than 100% of the original amount borrowed.

Moola can charge annualised interest rates of up to 620% plus fees.

Slade says church, community and budgeting agencies are almost universally in support of an interest rate cap.

Many are calling for other restrictions such as a ban on shopping trucks, equal protection for loan guarantors as for borrowers, and a ban on the use of direct debit authorities by high-cost lenders.

Steve Brooks, the businessman behind a bizarre unauthorised ad for the National Party, runs a payday lending operation that has opposed government efforts to limit the amount vulnerable borrowers must pay.

Brooks is a director and co-owner of NZ FinTech which runs fringe lenders Moola and NeedCashToday and the car finance firm Zooma.

Source

• parliament.nz
• thespinoff.co.nz
• Image: pacific.scoop.co.nz Nicholas Jones

Te Puea Memorial Marae chairman Hurimoana Dennis has named the South Auckland lenders and retail outlets whom he says are most commonly owed money by homeless families coming to the marae for help.

They include KiwiOwn, Cash Converters, UBuy, Red Rat Clothing, G-Mana/Kiwi Auto Finance, Fair Value and Lelei Finance.

The businesses have denied any wrongdoing, saying they lend and sell responsibly.

But Dennis said debt was a problem with each of the 30 homeless families that Te Puea had helped over the past year.

New measures to control businesses offering loans have been recommended by Commerce Minister Kris Fa'afoi, in an MBIE discussion paper reviewing the Credit Contracts and Consumer Finance Act.

The recommendations include increased licensing for money lenders, and introducing "more prescriptive" requirements for affordability assessments.

Fa'afoi said it was becoming clear the 2015 amendments to consumer finance laws didn't go far enough, and it was now time to "finish the job" to protect the most vulnerable.

He said ethical lenders and agencies such as the Salvation Army tried to help people, (but) the laws needed to have the right settings to stop people getting into terrible situations in the first place.

"Ensuring the credit settings are right, so that people can borrow appropriately when they need to but are not dragged into a long-term debt spiral is another way we will ensure all New Zealanders benefit in a strong and inclusive economy."

Source

• nzherald.co.nz
• nzherald.co.nz
• Image: nzherald.co.nz

The inspiration for the scheme came from a similar one run in Australia by a financial institution and a microfinancing body which was started by Catholic nuns.

The Community Finance Scheme in New Zealand starts with $10million in initial finance from the Bank of New Zealand and a small government subsidy for administration costs.

A pilot scheme has been launched and will run at the Salvation Army's Manukau and Henderson offices, but only a handful of loans will be able to be processed initially.

If the pilot proves successful it will be rolled out in other cities, including Wellington and Christchurch.

Two types of fee-free loans will be available.

A no-interest loan scheme ("NILS") of up to $1000 for up to 18 months will be available from early September.

"StepUp" loans of between $1000 and $5000 for up to three years at 6.99 per cent interest are now available.

Both loans are only for "essentials" including buying and repairing second-hand cars, new household appliances and computers, and health and educational costs.

They are not available for other uses such as paying for bills, fines, funerals or travel, the New Zealand Herald reported.

Both are available to people who qualify for a community services card, have used up any entitlements they have for loans from Work and Income and can't borrow from mainstream banks, but can provide bank statements or other proof that they can repay the loans.

Applicants also have to provide proof of identity, proof of address and documents showing all their existing payments on regular bills and debts.

Both types of loans have been copied from similar schemes run in Australia for the past decade by BNZ's parent company National Australia Bank and Good Shepherd Microfinance, founded in 1981 by Catholic nuns of the Good Shepherd.

In New Zealand, a state subsidy believed to be about $250,000 a year for three years will be split between the Salvation Army and Good Shepherd Trust.

The trust has provided all its intellectual property for the local scheme, will train Salvation Army and BNZ staff, and has appointed an Auckland-based project manager.

Loan sharks have been charging interest rates at levels of 10 per cent a week, for example.

Sources

• New Zealand Herald
• Stuff.co.nz
• Image: Discovery Finance

Companies with interest rates of up to 43 per cent are being accused of "targeting the vulnerable" in Auckland's lower socio-economic groups.

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