2 Apr 2012

New legislation aims to get tough on loan sharks

10:19 pm on 2 April 2012

Consumer Affairs Minister Chris Tremain hopes a law change will force some loan sharks out of business.

Draft legislation released on Monday aims to put better protections in place for borrowers.

The Credit Contracts and Consumer Finance Amendment Bill would require complete disclosure of the terms of the loan, including fees and interest rates.

The cooling-off period during which borrowers can cancel a loan would be extended from three to five days.

Lenders would have a greater responsibility to consider whether borrowers could afford to repay the loan.

Mr Tremain says the proposed law change would target the 30% to 40% of money lenders who are not registered.

"They are the loan sharks, they are the ones that we are after. They are the ones that are putting people through undue hardship, who are coming and acquiring assets that weren't on the original loan documents," he says.

"They are doing a whole lot of unscrupulous behaviour that we need to sort out."

Labour's Consumer Rights spokesperson Lianne Dalziel says there should be a cap on interest rates, as there is in parts of Australia.

"They have been very effective in terms of bringing the interest rates down to a manageable level. It doesn't act as a target, it does act as a cap and it does actually separate behaviours from a very shady end of the market."

The Green Party also supports a cap on interest rates.

Chris Tremain says the legislation would encourage lenders to be registered.

It would also introduce a new Code of Responsible Lending and allow for lenders to be banned for non-compliance.

There will be a six-week consultation period before a final version of the bill is drawn up.