Draft loan shark law welcomed

The New Zealand Bankers’ Association has welcomed the government’s release today of a draft bill targeted at loan sharks and fringe lenders.

The draft bill, which will amend the Credit Contracts and Consumer Finance Act 2003, proposes introducing a duty for all lenders to practice responsible lending.

The Ministry of Consumer Affairs has acknowledged banks and some other lenders are already committed to responsible lending. “The banking industry supports responsible lending because of the benefits to consumers,” said New Zealand Bankers’ Association chief executive Kirk Hope.

“We are also pleased to see that the draft bill provides for classes of lenders to be treated differently under the Responsible Lending Code. This means loan sharks can be specifically targeted without imposing unnecessary costs for the most responsible lenders in the market.”

The Association is concerned that any law changes avoid unintended consequences and unnecessary costs. The success of the reforms will depend on robust enforcement.

“The best crafted law will have little effect if it is not properly enforced against irresponsible players in the market,” said Hope.