enhancing food security and physical activity for maori, pacific and ...

Enhancing Food Security and Physical Activity for Māori, Pacific and Low-income Peoplesorganisation. They allow people to buy groceries on credit with no interest and goodsare not as expensive or poor quality as goods on some of the other trucks.Concerns about fringe lendersThree of the participants agreed that fringe lenders charge very high interest and are‘unsafe’ compared with mainstream banks. However, one Pacific participantacknowledged the dilemma faced by poor people and felt hopeless as to a possiblesolution for this problem stating that fringe lenders,“are a source of money that people have access to when they are really in direstraights and I know it is not a good answer because they get locked into highinterest rates but what do you do?”One participant working within the consumer lending field noted there is a maximumon the interest rates charged by credit providers under the legislation. The interestcharged, however, reflects the riskiness of the consumer. Moreover, borrowers shouldassess the total cost of the loan, which includes the interest rate plus the fees.One participant was very concerned that through her job she had come across somepeople who had signed credit contracts that they have not really understood. Itappears that some lenders do not encourage people to take the contract away forsomeone to have a look at, instead, “they put pressure on people to sign it there andthen”. She added that some lenders also sign people up for repayments that areoutside their ability to pay and when they get behind, the penalty fees are often veryharsh.InterventionsThree of the participants agreed that some form of regulation around fringe lenders isneeded. While two participants strongly felt that regulation around lender responsibilityshould be in place, one participant was uncertain on the degree of regulation. Oneparticipant stated that lender responsibility involves lenders doing credit checks onpeople to make sure they have the ability to make repayments. It was suggested thatthere needs to be better credit registers in New Zealand in order for lenders to getinformation on what other credit people have and to assess their credit worthiness. Itappears that that the Credit Reporting Privacy Act, which is currently under review,could allow this to happen.One participant felt that Pacific people should be encouraged to use mainstreambanks and the Government should support banks to be more user friendly. All of theparticipants strongly recommended providing information and financial literacyeducation for people. One participant stated that his organisation is committed toimproving training and educational outcomes for Pacific peoples so they can get intogood paying jobs and not have to resort to fringe lending in the future.Feasibility and SustainabilityThree of the participants believed that regulation of fringe lenders is feasible andsustainable in the long run. The remaining participant noted that the issue of fringelender responsibility is a current concern amongst lending enforcement agencies in anumber of jurisdictions. They noted that there is discussion about “whether there is aneed for a specific legislation directed at fringe creditors or additional protection forvulnerable consumers”.47