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Loan sharks will face up to two years in jail or fines of up to $300,000 for breaches of a scheme unveiled in a Government crackdown yesterday.
All moneylenders, including banks, credit unions, finance companies and fringe lenders known as loan sharks, will have to be registered under the new law.
Anyone convicted of a crime involving fraud or dishonesty in the previous five years will be banned from being a senior manager, director or controlling shareholder of a moneylending company.
Companies breaking the law will face fines up to $300,000. Individual offenders could be fined up to $100,000 or be jailed for up to two years.
Commerce Minister Lianne Dalziel and Consumer Affairs Minister Judith Tizard announced a package of measures which also includes independent complaints authorities covering all moneylenders along the lines of the existing Banking Ombudsman.
Budgeting agencies welcomed the package, which follows an explosion in fringe moneylenders over the past few years.
A Government survey last year counted 185 "fringe lenders", with the largest concentration in Manukau.
"It is very exciting. I'm extremely happy," said Federation of Family Budgeting Services' executive officer Raewyn Fox.
Veteran anti-apartheid campaigner John Minto, who launched a union-backed drive against "parasites on poverty" two years ago, said regulations should cover interest rates, loan set-up fees and charges for defaulting on payments, which sometimes added 30 per cent or more to the cost of a loan.
He also urged the Government to follow some Australian states which make it illegal to lend to someone who cannot afford to repay the loan.
"Without any regulation around those things, people are going to be very vulnerable even though a dispute resolution procedure exists," he said.
One of the biggest fringe lenders, Instant Finance, said it had been consulted about the changes and saw them as "a triumph for common sense and good dialogue".
"The only one that I'm confused over is the dispute resolution process. I don't think there was any dialogue on that," said chief executive Richard de Lautour.
