Maori Affairs select committee members have slammed a Consumer Affairs report on loan sharks which they say fails to seriously address the issue.
Presented by Consumer Affairs Ministry officials in Parliament today, the report outlined how "fringe lenders" generally targeted low income areas with high Pacific Island and Maori populations.
Borrowers were generally not able to get mainstream loans, and as a last resort accepted offers from lenders charging huge interest rates and fees, severe penalties, inflexible terms and conditions and little documentation.
Research identified over 180 fringe lender companies, including "pay day" lenders, who offered advances to cash-strapped borrowers waiting for their next pay cheque, but gouged huge fees in the process.
The report cast doubt on the potential effectiveness of introducing legislation to cap interest rates, and also suggested the problem of falling into debt to loan sharks was not as much of a problem for Maori as was commonly thought.
The latter comment prompted Maori MP Hone Harawira to question who the report's researchers had consulted and demand to know which Maori groups had input.
He didn't accept the officials' offerings and also rubbished a comment in the report saying grants were often available through iwi programmes to assist with tangi.
"These are very broad statements and I want you to either clarify them or retract them," he told the ministry's general manager Liz MacPherson.
"If you're going to make these statements you'd better be backing them up." Mr Harawira said it appeared the ministry was more concerned about protecting the loan sharks than the consumers they targeted.
"I don't believe we are looking after the loan sharks," Ms MacPherson said.
She said there was no suggestion loan sharking was not a problem within Maori communities.
The report said the problem was far reaching within the Pacific Island community.
Labour MP Parekura Horomia labelled loan sharks "foul mongrels" who were pushing vulnerable people to the wall.
He said he was aware of people who were being forced to mortgage homes for outstanding debts of a few thousand dollars.
National's Hekia Parata said more reliable information was needed if robust legislation was to be put in place to tackle loan sharking.
Information in the report was "very uncompelling and less than helpful", she said.
Labour MP Charles Chauvel has drafted a new member's bill, the Credit Reforms (Responsible Lending) Bill, proposing the ministry come down hard on loan sharks through various means including interest rate caps.
He today dismissed suggestions in the report the introduction of caps might be ineffective.
The report said some Australian states had introduced a 48 percent interest rate cap, but such measures could lead to loan sharks using that figure as a default rate and ramping up fees to get around the legislation.
"How can you say that a cap of 48 percent would be a problem, or would pose the danger of becoming the default rate, when you already have a default rate of between two and three thousand percent (annually) right now?" Mr Chauvel said.
Ms MacPherson said the ministry was focusing on disclosure arrangements and efforts to try and make consumers aware of what they faced when signing up to loan sharks.
