Consumer credit laws to get overhaul

The Government intends to offer consumers more protection against loan sharks and unfair credit practises by changing the law.

Minister of Consumer Affairs, Jim Anderton, today announced the Government's intention to replace the Credit Contracts Act 1981 and the Hire Purchase Act 1971 with a tougher single Consumer Credit Bill.

Mr Anderton said the current legislation was out of date, complex, difficult to understand, and gave consumers very little clout against unfair behaviour.

"The new bill will modernise the law and will be designed to cater for existing credit practices, including the growing computerisation of banking and loan services."

He said the Ministry of Consumer Affairs had recently highlighted two examples of companies who had been acting in ways that were unacceptable.

One company was using contracts that did not disclose any financial information and was charging excessive fees while another was setting stiff penalties on early repayments for vehicles and inflating the price of vehicles on contracts.

"Although many of these practises appear to be unlawful anyway, these reforms will send a clear message to all bad loan companies that we will no longer let them get away with ripping people off," said Mr Anderton. The bill aims to remove outdated credit concepts and make the law easier for consumers and business to understand. It will also be flexible enough to adapt to new credit products in the future.

"The important features of the proposed reforms are improved redress for consumers, a public enforcement agency, better information for consumers to help them make better credit decisions, and a fairer deal in relation to interest charges, fees, and early repayment.

"Responsible credit and lending institutions such as reputable finance companies and banks have nothing to fear," said Mr Anderton.

The New Zealand Association of Citizens Advice Bureaux said the proposed changes would provide consumers with better information and greater protection from unscrupulous lenders.

Association CEO, Nick Toonen, said today the Association's 88 Citizens Advice Bureaux will be delighted that consumer credit law will be strengthened.

"Many of our clients are on low incomes and because of the pressures on their finances, sometimes need credit to get by day to day. In 2000, our bureaux received over 10,000 enquiries and complaints about financial matters, including hire purchase, credit charges and loans, and over 6,000 calls from people facing debt problems."

"In our experience, people often go to 'lenders of last resort' and are consequently overburdened by credit payments and high interest rates.

"It is vital that consumer credit law puts an obligation on dealers to better inform consumers on the full and true cost of credit and ensures that dealers can't hide crucial details in the small print."