No Loan Shark Feeding Frenzy
Who's going to lend the struggling worker money for car repairs so she can get to work? Chris Hipkins? Arena Williams? Random people on Twitter?
The government has announced significant reforms to consumer lending laws, with 11 pages of stringent regulations to be revoked. These regulations, originally implemented in December 2021, are very prescriptive and have discouraged lending to consumers as a result. The idea behind the revocation is to make credit easier to obtain where the lender is confident the borrower can meet its repayment obligations.
The soon-to-be-junked regulations were introduced by former Commerce Minister David Clark of the Labour Party. Clark is an ordained Presbyterian minister, which is appropriate because they exude a cultural Presbyterianism towards debt. Clark’s reforms compelled ordinary New Zealanders to almost plead for permission to borrow a bit of money to do up their kitchen by proving that they are deserving debtors.
The rollback has been criticised by the Labour Party claiming that easing regulations to allow banks and other regulated lenders will be a boon "loan sharks." This narrative, amplified by New Zealand’s media, taps into public fears about debt traps and financial exploitation.
The constant use of the phrase "loan shark" is grating because that traditionally refers to individuals or entities that offers loans at extremely high interest rates under illegal conditions. Loan sharks operate among vulnerable borrowers who are desperate for immediate financial relief and who are without recourse to legitimate lending due to poor credit or other financial issues. Repayment is frequently enforced by coercive and unlawful means.
Whatever you might think of banks or even payday lenders, they don’t tend to show up at their debtors house brandishing a baseball bat.
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