9 August 2011
Consumer Affairs Minister Simon Power today released research into third-tier lending ahead of the Government's Financial Summit to be held in Auckland on Thursday.
The main piece of research, undertaken by the Ministry of Consumer Affairs, identified 218 third-tier lenders (lenders who provide personal, non-mortgage loans, excluding banks, building societies, and credit unions) operating in New Zealand, and examined the advertising methods they used.
Key findings include that:
"I'm disturbed that so many third-tier lenders don't appear to have fulfilled the most basic requirement to register as a Financial Service Provider," Mr Power said.
"Given this, it's also unlikely that they've joined an approved disputes resolution scheme, meaning consumers are being deprived of consumer protection and access to redress when things go wrong.
"The turnover in the third-tier lending market reflects the ease of market entry in an environment where just about anyone can become a credit provider because they don't have to meet any competency or conduct standards.
"The growth in this industry, coupled with advertising targeting the most vulnerable members of our community, highlights the importance of the Financial Summit to tackle the issue of irresponsible lending."
Around 250 people, representing community groups, budgeting services, banks and credit companies, are expected to attend the summit in Mt Wellington which will look at ways to help vulnerable people trapped in a debt spiral, promote responsible lending and debt management, and improve the financial literacy of New Zealanders.
Mr Power also released research by Colmar Brunton which looks at New Zealanders' use of third-tier lenders, their experiences, and how the third-tier lenders operate, as well as background statistics for considering credit issues produced by the Ministry of Consumer Affairs.
The research reports can be found here.