NZ Bill proposes Interest Rate Cap

Monday, 24 August 2009

The NZ Parliament is to consider setting a maximum interest rate that so called loan sharks can charge.

Labour MP Charles Chauvel's Credit Reforms (Responsible Lending) Bill proposes capping the interest rate lenders can charge under a consumer credit contract at 48 percent.

It would also render a contract unlawful if a lender reasonably believes the borrower will not be able to repay the loan and limits the amount a creditor can recover from a debtor.

Mr Chauvel said the bill was seeking to curb the actions of loan sharks who charge excessive interest rates.

Payday loans from loan sharks at 2000 percent a year are a disgrace and New Zealand is one of the few countries left that does not have laws in place to deal with them, he said.

The bill was drawn out of a ballot for laws proposed by backbencher and opposition MPs.

These bills usually make slow or no progress through Parliament as they are only dealt with in a specified fortnightly session.