A women’s loan fund says capping the rate of interest on borrowing as other countries have done is necessary to protect the country’s most vulnerable.
Linnea McDonald (left) and Cara Penny (right) of the Thames Coromandel Women's Loan Fund tell the Finance and Expenditure Committee a cap on interest rates charged in New Zealand is essential to protect its vulnerable members of society. Photo: VNP / Phil Smith
Legislation was passed in 2014 to make lenders responsible for checking that the borrower and guarantor can make payments without them suffering substantial hardship.
But the Thames Coromandel Women’s Loan Fund told the Finance and Expenditure Committee that there should be a cap on interest rates charged in New Zealand.
“We’re not protecting our financial consumers from financial products that are endangering people’s livelihoods and their future,” said one of the Fund’s investors, Linnea McDonald.
The Fund is staffed by volunteer women which helps families “put into survival mode because of these non-banking financial lenders” she said.
“They don’t understand the consequences of these loans. Going into debt like this has been normalised because it’s legal. They think it’s normal to go and get these high interest rates.”
Chair of the Finance and Expenditure Committee Chris Bishop. Photo: RNZ/Rebekah Parsons-King
Committee chair and National MP Chris Bishop said a cap was considered two years ago when the legislation was introduced.
“The argument that people strongly put was that if you introduce a cap that becomes the default,” he said.
“So it’s actually, ironically enough, maybe counter-intuitively better to not have a cap ‘cos otherwise the cap that we set becomes the default which becomes what people will charge.”
The Women’s Fund’s Cara Penny said interest rates have been going up over the years regardless and a cap is needed.
“I just did a case where a women had three cards...she cut them up and she was paying $250 a month on them, principle nothing, interest only,” she said.
“We feel that slowly we’re watching this creep up, if we don’t stop it somewhere, put a cap on something, then it will just continue.”
