Verve Article - August 2016
Chasing down unscrupulous lenders
The National Government brought in a series of law changes last year to help consumers make better informed decisions when borrowing and to reduce predatory lending practices.
I saw a glaring example of the sort of problems we face early last year on a visit to financial providers in the South Auckland suburb of Manurewa. I spotted an advertisement for an iPhone 5, worth around $800, advertised as $59 a week for 100 weeks.
In a free world we can't stop people paying too much for things, but we can help consumers make informed choices and protect them from irresponsible lending practices. Real social problems are caused by some unscrupulous truck shop operators and payday lenders.
So the first step is to change laws where appropriate. To meet their responsible lending obligations, provided for in the legislative changes last year, lenders are now expected to include the total amount payable under the agreement when referring to regular repayments for a particular term loan. There are many other obligations.
It is one thing to toughen the law, but it needs to be properly enforced. The Commerce Commission has been active in this area in the past year, and we've seen a number of truck shop operators taken through the courts and fined. I was pleased that Budget 2016 delivered extra resources to the Commission to carry that battle further.
In addition to effective legislation and proper enforcement, the long-term challenge is to improve financial capability in the wider community. This involves government as well as the private and voluntary sector.
The Commission for Financial Capability is responsible for the national strategy to improve financial capability. It manages and supports programmes such as those tailored for Maori and Pasifika communities, including those through the Tamaki Regeneration Company.
Efforts are underway to redesign face-to-face budgeting services, to help build the levels of financial capability among the thousands of New Zealanders who engage with government budgeting services.
A combination of up-to-date laws properly enforced and a long-term commitment to improving financial literacy will enable more Kiwi families to succeed.