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NZCU Baywide Chief backs calls to crack down on loan sharks

August 18th, 2011 -
NZCU Baywide Chief

Gavin Earle, NZCU Baywide CEO

NZCU Baywide chief executive Gavin Earle wants to see Government take swift action to shut down lenders who are acting outside the law, following yesterday’s Government’s Financial Summit in Auckland yesterday.

Consumer Affairs Minister Simon Power called for the summit to look at ways of ending the unscrupulous lending practices and improve New Zealanders’ financial literacy. Attendees at the day-long forum included representatives from across the financial services sector.

Mr Earle took up the invitation as the largest credit union in New Zealand is concerned about the number of third tier lenders and their advertising methods.

“I was appalled to hear that 35% to 40% of third-tier lenders appear to have not registered as Financial Service Providers, as required by law. From my experience there is a real problem that no single Government Agency has been willing to take responsibility for holding these lenders to account. Mr Power certainly took on board our concerns yesterday and has vowed to make this a priority.”

Advertising by these lenders tend to target those without an adequate credit history (such as low income earners, beneficiaries, and young people), emphasising the ease, speed, flexibility, and normality of third-tier loans. Research shows that often they do not disclose borrowing costs, and sometimes include incentives to refer friends and families to the lender.

“Many of these unscrupulous lenders operate irresponsibly by targeting vulnerable people and getting them into debt way over their heads. Predatory lenders tend to provide instant approval without taking the time to assess the persons situation to ensure they have the means to repay the debt.

We heard yesterday from various community groups who see the damage that spiraling debt does to families, with some 50,000 children relying on food parcels last year. This is an appalling situation, and as a society we have a responsibility to protect these people” Mr Earle says.

A wide range of suggestions were put forward for the Minister to consider from the summit.

“I thought a couple of particularly good ideas included introducing a mandatory code of conduct across all lenders; declaring loan contracts from unregistered lenders invalid; and ensuring all borrowers receive a simple one-page fact sheet of key loan nformation.

I was particularly impressed with the resolve that Mr Power showed at the summit to tackle the key issues head on, and his promise to take swift and decisive action. I look forward to appropriate initiatives being put in place very shortly”.

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