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Better financial literacy more important than high interest text loans

July 20th, 2011 -

NZCU Baywide chief executive Gavin Earle says better financial literacy should be more of a focus rather than publicity surrounding the ease of borrowing money by texting.

“We know that it’s more responsible to provide advice and educate before people get into financial difficulty and part of this is not to look for easier loans with higher interest rates,” Mr Earle said.

This week the New Zealand Association of Credit Unions (NZACU) has sponsored a Financial Literacy Summit in Wellington and Mr Earle said it’s always been the objective of credit unions to improve people’s financial situation and provide savings.

“To have in the same week publicity about an easy access loan just proves the level of temptation and how easy it is to get a loan.

“Not only is the loan easy to get but the high interest rates, put further pressure on borrowers.

“We have a responsibility to our customers and communities to do the right thing morally and financially by them,” he said today.

Mr Earle added that credit unions have taken the approach of listening and understanding members’ needs and providing options for them to reach their financial goals.

Mr Earle said loans should be structured to suit affordability, not to get borrowers to over commit.

He added that it was important lenders fully disclosed interest rates and fees up-front with no hidden surprises and harsh penalties.

“We believe that financial literacy provides members with the tools and financial savvy to ask the right questions and to avoid getting into trouble with some of these types of instant loan contracts.

NZACU is working with Workbase, a not-for-profit organisation and the largest provider of literacy and numeracy in the workplace on an initiative to provide credit union staff with more tools to improve the financial literacy of our members.

Labour’s consumer affairs spokeswoman Carol Beaumont also spoke out about the text loan service saying it was another example of loan sharks preying on New Zealanders struggling to make ends meet.

“I am particularly concerned that the use of texting is a way to target young people and those on low incomes,” Ms Beaumont said.

Ms Beaumont called on the Government to legislate to combat irresponsible lending and protect vulnerable people.

 

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