The loan shark bill

The Herald reports:

A members bill to stop loan sharks is up for its first reading tonight but the Labour MP behind it is fearful it will be voted down.

Carol Beaumont’s Consumer Credit (Responsible Lending) Bill was introduced to Parliament last August.

It would allow maximum interest rates to be set and would require a lender to reasonably believe a borrower would be able to repay a loan.

It also seeks to limit the ability of lenders to recover more than they initially lent in the event of a default.

Ms Beaumont said her bill was aimed at preventing loan sharks from charging excessive interest rates and lending irresponsibly.

“Many loan sharks lend out money at obscene rates, without checking to see whether the borrower will be able to meet the repayment requirements.”

This bill is well intentioned, but may have unforeseen consequences. A maximum level of interest rate you can charge could in fact lead to many lenders increasing their rates to the ceiling. Limits often become targets.

But having said that, I think Parliament should vote the bill through to a select committee. It is an honest attempt to deal with what is a real problem. It would be good to allow a select committee to hear submissions for and against what the bill proposes.

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