"We know that many consumers are trapped in a cycle of debt, causing extreme hardship – and often, intergenerational poverty – for them and their families. This is an unacceptable situation and the Government is taking action to address it," said the Minister of Commerce and Consumer Affairs Kris Faafoi.
"The Credit Contracts Legislation Amendment Bill currently going through Parliament contains new measures that will ensure people taking out high-cost loans never have to pay back more than twice the amount they originally borrowed.
"Following public feedback on the Bill at the select committee, we've decided to include a 0.8 percent per day cap on interest rates in addition to other changes which will strengthen protections for vulnerable borrowers.
"At the moment, high-cost credit is too easy for people in hardship to access. While this type of credit can be an immediate solution to financial problems, we know that high-cost, easy credit leads to worse problems in the long run," Kris Faafoi said.
Another change the Government is making is to regulate mobile traders, such as 'truck shops', who often sell goods on credit at inflated prices, especially in low-income areas.
"While most mobile traders are already subject to some regulation, some are not. We believe all mobile traders who sell goods on credit should be subject to the same levels of disclosure and responsible lending requirements – including affordability checks - before credit is given," Mr. Faafoi said.
"I know that some lenders are already referring customers who are struggling with repayments to financial mentoring services and this is good to see because it ensures that those struggling with debt can access the advice they need to get back on their feet. I encourage other lenders to follow this example. We are changing the law so that this can become a requirement in the future if needed.
"I thank everyone who helped develop this Credit Contracts Legislation Amendment Bill so that is workable and combats the very serious problem of predatory lending."
The Bill is expected to pass this year and will come into effect, in stages, starting in March 2020.
(With Inputs from New Zealand Government Press Release)