Exclusive GE deal

Photo / APN

Consumer lender GE Money has signed an exclusive deal with Harvey Norman to provide finance to the furniture retailer's customers.

The move comes as the finance industry adopts a voluntary set of responsible-lending guidelines, drafted in conjunction with the Ministry of Social Development and budgeting services.

New Zealand managing director Aaron Baxter said GE had a similar arrangement with Harvey Norman in Australia. Its consumer-lending business was focused on strategic partnerships - it also had an exclusive arrangement with appliance retailer Noel Leeming, offered personal loans to Kiwibank clients and car loans to Trade Me customers.

"It creates a scalable operation for us and helps position us as the clear alternative to banks in the New Zealand market," said Baxter.

GE had a relationship with one in four New Zealand households, he said.

The clean-out of the finance company sector had created an opportunity for it to introduce innovations.

The company would launch a credit card this year that he predicted would create a new segment in the market, other than existing low-rate and loyalty scheme-based cards.

GE is a member of the Financial Service Federation and is subject to its new Responsible Lending Guidelines, launched last week. The guidelines say a responsible lender may decide to not extend a loan if it believes the borrower is unable or would find it extremely hard to repay it, or if the type of loan does not meet the borrower's needs.

It also says the lender should do its best to make sure the borrower understands everything about the loan and offer fair terms. If the borrower misses payments it should treat them reasonably, work with them to find a solution and refer them to a budget adviser.

GE, owned by the United States' General Electric, was subject to its own international responsible-lending guidelines and believed it was ahead of the game, Baxter said.

It now puts notes on its statements urging customers to pay off more than is required and has a relationship with the New Zealand Federation of Family Budgeting Services.

Four out of five customers taking up the interest-free offers provided through retailers such as Harvey Norman paid off their loans without incurring interest, Baxter said.

However, those who did not pay them off within the interest-free period were currently paying 26.65 per cent interest, he said.

Financial Services Federation executive director Kirk Hope acknowledged the guidelines were only voluntary but said until now there had been nothing of the sort in the market.

They had been designed with the Federation of Family Budgeting Services and other groups which represented the perspective of the vulnerable borrowers.

Some of its members lent to credit-impaired clients, which helped them rehabilitate their credit records and reduced the chances of them turning to pay-day lenders who charged huge interest rates.

All financial services providers now had to be registered with an independent dispute-resolution body such as Financial Services Complaints, Hope said.