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Updated at 8:35 pm on 20 August 2012
Medical researchers are pushing for a cap on interest rates to stamp out loan sharks who target low-income earners.
A two-year study by Otago University's Wellington Medical School reveals that interest rates of 500% a year are trapping people in a vicious cycle of debt.
Lead researcher Associate Professor Louise Signal and says Maori and Pacific people borrowing for everyday needs are being targeted by loan sharks.
Ms Signal says some states in Australia cap interest rates at 48% and believes that should be the case in New Zealand also.
However, Consumer Affairs Minister Simon Bridges says a cap could set a dangerous benchmark which is used in place of a lower rate.
Mr Bridges says he plans to tighten up lending rules through changes to the Credit Contract and Consumer Finance Act at the end of this year.
Short-term cash lender Save My Bacon, which has an interest rate of 574% a year, says a cap could lead to an unregulated black market.
Copyright © 2012, Radio New Zealand
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