Demand in society for short-term credit never goes away. Many consumers require access to small sum short term loans to manage their finances effectively, and for a variety of reasons are unable to get help from their bank. Payday lenders fill this gap in the financial marketplace and are governed by laws in New Zealand. These laws are aimed at preventing consumers from being drawn into unmanageable debt and include lender responsibility principles.
The responsibility principles mean payday lenders must:
- Make reasonable enquiries before entering into a loan contract to be satisfied that the loan meets the borrower's needs
- Be satisfied borrowers will be able to meet the loan repayments without suffering substantial hardship
- Help borrowers make informed decisions by expressing loan terms and conditions in a clear and concise manner
- Treat borrowers reasonably and in an ethical manner at all times.
In addition to these responsibility principles, payday lenders must meet disclosure obligations before a loan contract is signed. Standard contract terms and the cost of borrowing must be displayed prominently and clearly by the company on their website and in all business premises. This information must also be available free of charge on request.
The laws also include a broad range of enforcement tools for the NZ Commerce Commission, including penalties for payday lenders who break the law. All in all these laws have been made to strengthen and protect the rights of consumers against unscrupulous payday lenders.
For full details on your rights, go to the Commerce Commission New Zealand website at http://www.comcom.govt.nz.