The Credit Contracts and Financial Services Law Reform Bill - nicknamed the ''loan shark Bill'' - passed its first reading this month and has been sent to the commerce select committee.
Consumer Affairs Minister Craig Foss said the Bill would ''crack down on unscrupulous lenders'' who left borrowers trapped in ''a spiral of uncontrolled debt''.
The Bill would result in more ''informed borrowers and responsible lenders''.
Many lending organisations were already tightening up their behaviour but the lender must seek ''honest and upfront'' information from a borrower.
''Those that prey on others, sadly, will continue to do so. What this [Bill] does, though, is make it much harder for any organisation, big or small, to exploit anyone's vulnerabilities.''
Door-to-door truck shops were motivation for the Bill, Mr Foss said. The target of the Bill is ending exploitation.
Anglican Family Care director Nicola Taylor, of Dunedin, said she had heard sales-truck companies often provided little borrowing information to customers.
Borrowers needed to ''stand up'' and question lenders, she said.
''This law reform is a very good start, but it's also education and awareness for the more vulnerable that are exploited. They don't stand up for their rights.''
If the Bill had enough ''teeth'', it would, hopefully, result in fewer people in debt coming to the family support service for budgeting advice.
'Loan Shark' Bill
Changes proposed in the Credit Contracts and Financial Services Law Reform Bill include. -
• Making it illegal to lend money to someone whose loan repayments would be likely to result in substantial hardship.
• Requiring lenders to properly consider applications by borrowers for hardship relief.
• Requiring more timely and complete disclosure of loan terms, and extending the ''cooling off'' period for borrowers to cancel their loan.
• Better controls against misleading, deceptive or confusing advertising.
• A new code of responsible lending which will allow for lenders to be banned from the industry for non-compliance.
• Providing that borrowers will not have to pay the cost of interest or fees if their lender is not a registered financial service provider.
• Preventing goods from being repossessed unless they are specifically identified in the credit contract and limiting essential household items from being listed as securities.
• Licensing of repossession agents and employees.
• Strengthening powers to prevent certain entities or individuals from becoming registered financial service providers or to revoke their registration.
