Loan sharks targeted in new lending laws
New lending laws that will come into force on Saturday mean lenders must carry out better background checks to make sure the borrower can meet repayments.
Lender responsibility principles are being introduced from June 6 with changes to the Credit Contracts and Consumer Finance Act 2003, which applies to all lenders who provide consumer credit, take security over consumer goods, or enter into buy-back transactions.
This includes banks, car dealers, pawnbrokers and payday lenders.
Lenders must make reasonable enquiries before entering into a loan or taking a guarantee that the borrower or guarantor will be able to make repayments, or comply with the guarantee, without suffering substantial hardship.
The changes mean lenders must publicly display their interest rates and standard form contract terms.
The stricter rules are governed by the Commerce Commission, which has been making a concerted effort over recent years to crack down on loan sharks.
Commissioner Anna Rawlings says in a statement the new rules will give consumers more protection and better information when borrowing money and require all lenders to act responsibly.
“This is particularly important for vulnerable borrowers. Lenders must ensure loan documents are clear, concise, and intelligible, so that borrowers can understand them and make informed decisions. Borrowers will also need to be prepared for more thorough questions and provide evidence to ensure the loan is suited to them.”
The commission is currently prosecuting a South Auckland payday lender allegedly targeting vulnerable consumers.
Twenty Fifty Club and its sole director, Gavin John Marsich, have been accused of falsely claiming to be a registered financial services provider and member of the Financial Services Complaints dispute resolution scheme, charging unreasonable default and establishment fees and illegally repossessing a debtor’s vehicle.
Mr Marsich is also facing separate criminal charges for allegedly threatening a debtor with a meat cleaver. It is not known if Mr Marsich entered a plea, with the trial due this month.
Repossession laws have also been updated, with lenders no longer allowed to take security over essential goods such as beds and fridges.
If repossession agents are not licenced, they can be fined up to $200,000 and their company up to $600,000.