A raft of proposed new laws to stop dodgy loan sharks taking advantage of people who are strapped for cash have been announced.
Consumer Affairs Minister Chris Tremain today released the draft legislation for the Credit Contracts and Consumer Finance Amendment Bill, which is intended to provide better protection for finance company borrowers.
"The Government is getting tough on loan sharks and lenders," Tremain said.
"Money lenders should not be able to prey on desperate people, leaving them and their families trapped in a spiral of debt."
Among the proposed changes, the bill would make it illegal to lend someone money whose loan repayments would be likely to result in substantial hardship.
The legislation would also require complete disclosure of loan terms and extending the period during which borrowers can cancel their loan.
"These will be the biggest changes to consumer credit law in a decade. It is time for a significant shift in lending laws to increase protection for borrowers and target irresponsible lenders," Tremain said.
Submissions on the bill are open until May 11, and can be made on the Ministry of Consumer Affairs website.
Tremain said he would also be meetings community and consumer groups over the next six weeks.
"With such significant changes, it is important that we get it right. I'm looking forward to touring the country and getting feedback from the community services that deal with people who have been targeted by loan sharks.
"I am also looking forward to meeting with members of the lending industry. I know many lenders are calling for changes like these to help rid the industry of those who give it a bad name."
Key changes include:
Making it illegal to lend money to someone whose loan repayments would be likely to result in substantial hardship;
Requiring more timely and complete disclosure of loan terms, and extending the 'cooling off' period for borrowers to cancel their loan;
Obligating lenders to properly consider applications by borrowers for hardship relief, and provide reasons for their decisions;
Better controls against misleading, deceptive or confusing advertising;
Introducing a new Code of Responsible Lending and allowing for lenders to be banned from the industry for non-compliance;
Providing that borrowers won't have to pay the cost of interest or fees if their lender is not a registered financial service provider.