Citizens Advice Bureaux Give Government Credit For Bill

The New Zealand Association of Citizens Advice Bureaux has welcomed the Consumer Credit Bill in its submission presented today to the Commerce Committee, saying it will provide consumers with better information and greater protection from unscrupulous loan sharks.

The Association’s CEO, Nick Toonen, says the country’s 87 bureaux receive an average of 36,300 enquiries relating to personal finances and budgeting each year – that’s about 700 each week.

“Many of the enquiries relating to loans offer cause for concern: excessively high interest rates, unreasonable fees, inflexible terms, security which is unreasonable compared with the size of the loan, contracts which are completely incomprehensible, and unscrupulous lenders.

“The Consumer Credit Bill seeks to clean up many of these issues by ensuring that potential borrowers are provided with adequate, useful and accessible information in order to help them make good decisions about borrowing. It also seeks to ensure effective enforcement when things go wrong.

“However the Association remains concerned that some areas of the Bill need to be further amended in order to give full effect to the intentions of the Bill.

“The sections relating to the terms and conditions (disclosure) of loan deals need to be strengthened to make sure they are effective. We would like to see the terms and conditions made in a mandatory and standardised format, with a one-page summary containing the most important information.

“This key information should also be given to guarantors, so their rights and obligations are clearly and fully explained. In our experience guarantors often face the same issues as borrowers in that they are not given enough useful and clear information, and they are not fully aware of their obligations.

“We would also like to see lenders providing the terms and conditions written in the same language in which the credit was advertised. At present lenders can advertise in the borrower’s first language then provide a contract in very complex English, which in many cases can’t even be understood by native English-speakers.

“The Association believes the Bill would be further strengthened if it allowed borrowers to change loan contracts on grounds of hardship, and if it adopted an ‘amount of security’ clause which would prevent lenders obtaining security which far outweighs the value of the credit, such as a house as security for a $6,000 loan.

“Citizens Advice Bureaux experience is that people who go to ‘lenders of last resort’ often become financially stretched with credit payments and high interest rates. It is vital that lenders are legally obligated to better inform consumers about the full cost of credit and that they can’t hide crucial details in the fine print.”

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