Credit Unions call for cap on lending rates

Wednesday 26th May 2010

Credit Unions are calling on the government to regulation lenders so they fully disclosure the total cost of credit and to put a cap on the maximum allowable annual rate.

Consumers are being ripped off by some unscrupulous lenders charging very high loan fees and interest rates NZ Association of Credit Unions acting chief executive Rob Nicholls says.

"Credit Unions are frustrated by the extent to which vulnerable members of the public are being charged extortionist interest rates, the true level of which can only be determined by disclosure of the total cost of credit taking into account all upfront fees and costs associated with a loan," Nicholls says.

"The removal of the requirement for lenders to disclose the finance rate back in 2003 as a backward step as it led to a proliferation of loan sharks".

Nicholls said more needed to be done by regulators to ensure that those without financial literacy skills were not drawn to ‘loan sharks'.

He says they end up going to loan sharks as the weekly payment was seen to be affordable.

Our members will welcome any reforms that see an end to the financial exploitation of those most in need". We note the government's review of the Credit Contracts and Consumer Finance Act 2003 and the Credit Reforms (Responsible Lending) Bill, which has its first reading at Parliament today, are all considered steps in the right direction.

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