Moneylenders put on notice

Simon Power. Photo / Sarah Ivey

Mobile trucks, car dealers and anyone else selling consumer goods on credit may have to put up a $20,000 "good behaviour bond" under a crackdown on loan sharks being considered by the Government.

Consumer Affairs Minister Simon Power says he is "open-minded" on the $20,000 bond proposed by National Maungakiekie MP Sam Lotu-Iiga in a private member's bill.

But he says he is now inclined towards a legislative crackdown after saying in June that a financial summit in Auckland on Thursday would discuss whether to legislate "or whether the same outcomes can be obtained from voluntary industry initiatives".

"I am moving more towards a legislative solution, but I'm not wanting to pre-empt the outcome," he said yesterday.

Mr Lotu-Iiga has won support for his bill from a wide coalition including the Bank of New Zealand, Mercury Energy and Credit Union Auckland as well as the Salvation Army.

BNZ chief operating officer retail Glenn Patrick said banks were licensed and required police checks on all their employees and the same rules should apply to other lenders.

Mercury's head of commercial and pre-pay credit Luke Blincoe said people who fell behind with power bills had often "got into a hole with various spurious ... operators".

"Regulation is a good step."

Salvation Army social services director Major Campbell Roberts said Mr Lotu-Iiga's bill dealt with most of the issues around loan sharks.

Four years ago, when an Auckland University study found lenders charging up to 520 per cent interest and recommended a legal interest rate cap, Labour Consumer Affairs Minister Judith Tizard rejected it.

An official discussion paper in 2009 proposed making lenders disclose more information and banning penalty fees once a borrower applied for hardship relief. But the proposals languished while Act MPs Heather Roy and then John Boscawen held the Consumer Affairs portfolio.

In May, Mr Lotu-Iiga won National Party caucus support to give at least a first reading to his Moneylenders (Licensing and Regulation) Bill, if it comes up in the ballot for members' bills.

Mr Lotu-Iiga's bill proposes that any interest rate over 48 per cent would be presumed to be "oppressive", and therefore illegal, unless a court found that it was reasonable.

Mr Lotu-Iiga's bill would require police to certify that anyone applying to be a moneylender, or to work for a moneylender, was "of good character" and "a fit and proper person".

It would also regulate fees and stop lenders taking a wide range of personal assets, such as passports and children's clothing, as security.

Proposed changes

MP Sam Lotu-Iiga's bill
* All moneylenders to be licensed and put up $20,000 bond.
* All persons working for moneylenders to be certified.
* Police reports on applicants' character.
* Interest over 48 per cent presumed "oppressive" unless good cause shown.
* Fees regulated.
* Passports, children's clothing and other listed items cannot be taken as security.