The Government has announced this afternoon it is fast-tracking measures to protect people from loan sharks due to the financial stresses being put on Kiwis by Covid-19.
Commerce and Consumer Affairs Minister Kris Faafoi said the measures are being put in place to save Kiwis from falling into financial hardship from high-cost loans that could leave them trapped in debt.
“Changes under the Credit Contracts Legislation Amendment Act to strengthen protections for vulnerable borrowers were due to start on 1 June 2020,” Mr Faafoi said.
“However, as a result of the disruption and financial concerns caused by Covid-19, the Government is bringing forward the introduction of some measures.”
Mr Faafoi added early introduction of some protections are part of the Covid-19 Response (Taxation and other Regulatory Urgent Measures) Bill, which is going through Parliament today.
The improved protections will apply from the day after the urgent legislation receives Royal Assent, and mean that people borrowing from high-cost lenders will never have to pay back more than 100 per cent of the loan principal.
A 100 per cent interest and fees cap is among moves to stop the vulnerable spiralling into debt. (Source: Other)
It also means compound interest on high-cost loans will be banned, and fees for defaulting payments will be limited to $30 unless the lender can show that the higher amount reflects their costs.
“These are financially stressful times for many whānau and families around New Zealand,” Mr Faafoi said.
The Government is cracking down on loan sharks and truck shops who sometimes prey on financially-vulnerable people. (Source: Other)
“I urge anyone facing financial difficulties to explore other options before taking on any new loans. They can talk with their lender about alternative repayment arrangements, contact Work and Income for financial assistance, get in touch with Good Shepherd about a no-interest loan, or call the MoneyTalks helpline.
“Covid-19 is putting financial pressures on a lot of New Zealanders and some may have to draw on high-cost, short-term loans. The Government wants to do as much as possible to ensure vulnerable borrowers don’t get trapped in spirals of debt.”
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