Govt has loan sharks in its sights

Commerce Minister Simon Power File photo

The Government has unscrupulous loan sharks in its sights, with a financial summit to look at tackling credit companies that prey on unwary consumers.

Commerce and Consumer Affairs Minister Simon Power today announced the summit would look at tackling gaps in the system that allowed companies to take advantage of people in tough economic times.

"When that happens it's too easy for the unwary to agree to something they don't fully understand and become trapped beyond their means,'' Mr Power said.

"We need to do something about that - and we will. The preying on of vulnerable people by loan sharks has to stop."

Power said many credit companies were transparent, responsible and open, but he was signalling to those that were not that "their days are numbered".

The main law around credit was the Credit Contracts and Consumer Finance Act, which provides for disclosure of information to help credit consumers make decisions about loans.

Power said the key question was whether the Act needed to be amended to provide more protection for consumers, or whether the same outcomes could be obtained from voluntary industry initiatives.

The summit would bring together representatives from the financial sector and community groups.

Power said it would not be a "talk-fest" and he wanted it to come up with an action plan.

The plan would include initiatives to help vulnerable people who were trapped in a debt spiral caused by a lack of financial literacy and high, compounding interest rates.

It would send a clear message to all financial sector providers that they needed to commit to responsible lending and responsible consumer debt management.

The summit would also decide on a clear direction about how the Government could contribute to improving the financial literacy of New Zealanders.

Power said he would approach discussions with an open mind but he would expect outcomes that addressed irresponsible lending.

The summit will take place in Auckland in August.

- NZPA