Payday lenders in New Zealand must conduct their business in accordance with the Responsible Lending Code which is under the governance of the Ministry of Business, Innovation and Employment. Although the code does not include absolutely everything a lender should or should not do to be considered responsible, it describes processes, practices and procedures that all payday lenders should follow.
Overview of the Responsible Lending Code and other requirements for payday lenders
The Responsible Lending Code is divided into sections that broadly follow the life cycle of a loan
For example:
- Obligations that apply before and throughout an agreement
- Advertising
- Enquiries into and assessment of borrower's requirements and objectives
- Assisting borrowers to make an informed decision
- Fees
- Subsequent dealings
- Default and other problems
- Enquiries into and assessment of substantial hardship
- Oppression
As well as complying with The Responsible Lending Code, payday lenders must also comply with other legislation including the Fair Trading Act 1986 and the Financial Service Providers (Registration and Dispute Resolution) Act 2008.
Overview of the Responsible Lending Code for payday lenders
Payday lenders are required to act with care, diligence, and skill before and throughout the lifetime of a loan agreement. Advertising must not be misleading, deceptive or confusing to borrowers.
Borrowers should expect several questions when they apply for a payday loan. Initial questions relate to confirming their identity, personal details and employment. Further questions are around how much they want to borrow, why they want to borrow, and how much can they afford to repay each payday. Payday lenders may ask more questions than these to help the borrower make an informed decision, depending on the answers the borrower has given already.
Times are tough for most of us. Jobs aren't easy to find, unless you’re prepared to work for variable hours and low pay. It can be like the old days in a bygone age where men queued each day in the hope of work. By the time you've paid the rent or the mortgage, there's not a lot left for everything else. That doesn't mean you can't enjoy a great life. Money’s not everything. There are ways to live better for less. But there are times when you just need a few hundred dollars to settle and account or deal with an emergency. That’s where a payday loan from The Little Loan Shop in Wellington can come in handy.
All set up fees and default charges must be reasonable and lenders must be able to justify the amounts. At all times, payday lenders must ensure all communication with borrowers is clear, concise and easy to understand.
What happens if things go wrong
If a borrower falls into unforeseen hardship, the lender needs to inform the borrower what the implications are when the loan repayment plan changes. The lender needs information from the borrower about their hardship to be able to assess the situation and come to a new, mutually agreed payment arrangement.
General guidance for lender behaviour
Payday lenders must at all times ensure they do not conduct business in an oppressive manner. In other words they must always treat borrowers reasonably and ethically. Borrowers must be made aware of the complaints process they should use if they are dissatisfied with any part of their borrowing experience.
Is The Little Loan Shop right for you?
- Only take out a loan if you can comfortably manage the repayments
- Our loans are for short term only, usually 1 to 6 weeks. Don't use this type of loan for long term financial needs
- Late of missed payments will mean extra charges and may affect your credit rating
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