Vulnerable families targeted by "friendly" loan sharks will be better protected, now the rules around high-interest loans have changed, the Retirement Commissioner says.
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The long-held plan to change rules around high-interest loans was accelerated through parliament yesterday.
It forms part of a Covid-19 response Bill that becomes law once it gains Royal assent.
Borrowers taking out high-cost loans can now only be charged interest and fees up to and not beyond the amount initially borrowed.
Retirement Commissioner Jane Wrightson told Morning Report the law change is good news at a time many are facing financial difficulties.
"We're getting more and more reports of people needing to borrow for food at the moment."
Sudden life events like needing a car repair or needing to buy a second-hand fridge can force people to turn to loan sharks, she said.
She said New Zealanders not in financial difficulty would think the interest rates being charged by loan sharks are extraordinarily high.
Wrightson said there also needs to be targeted and practical advice for struggling families.
"When you're in financial bother, and we know increasing numbers of New Zealanders are, access to credit becomes really crucial. Banks are scary for some people; loan sharks are not."
The maximum fee that can be added to a loan is now 0.8 percent per day.
People in financial difficulty should look at all of their options before doing something drastic in their financial life, she said.
"There are options there."
