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Protection against loan sharks is being fast-tracked

Emma Olsen
Loan sharks are circling, ready to eat away at the vulnerable
Loan sharks are circling, ready to eat away at the vulnerable   Flickr

The Government is fast-tracking new protections against loan sharks due to COVID-19.

Protecting Kiwis from getting trapped in debt from high-cost loans is something the Government is aiming to avoid.

Measures have been fast-tracked measures to prevent people finding themselves in financial hardship, Commerce and Consumer Affairs Minister Kris Faafoi said.

"Charges under the Credit Contracts Legislation Amendment Act to strengthen protections for vulnerable borrowers were due to start on June 1, 2020. However, as a result of the disruption and financial concerns caused by COVID-19, the Government is bringing forward the introduction of some measures."

The Taxation and other Regulatory Urgent Measures are part of the COVID-19 Response Bill passed through Parliament yesterday. 

Improved protections will apply the day after the legislation receives Royal Assent.

This will means people borrowing from high-cost lenders will never have to pay back more than 100 percent of the loan principal. The compound interest on high-cost loans will be banned and fees for defaulting payments will be limited to $30.

"These are financially stressful times for many whanau and families around New Zealand. I urge anyone facing financial difficulties to explore other options before taking on any new loans," Faafoi said.

Information about support for people in financial difficulty as a result of the pandemic is available here.