8389 (2024). Arena Williams to the Minister of Commerce and Consumer Affairs

8389 (2024). Arena Williams to the Minister of Commerce and Consumer Affairs: What evidence, if any, does the Minister have that New Zealanders are currently borrowing from "loan sharks”?

Hon Andrew Bayly: Although there is no formal definition of a “loan shark”, this term is often used to refer to lenders who offer consumers credit products with extremely high interest rates and adopt aggressive enforcement practices. In March 2020, MBIE identified 21 high-cost credit lenders who were registered on the Financial Services Providers Register and who offered loan products with an annual interest rate of 50 percent or more. Of these lenders, nine appear to still be operating in 2024, now offering loans in the 30 - 50 percent annual interest range. In 2023, the Commerce Commission also identified at least 26 lenders offering loans with interest rates between 30 - 50 percent. I am also aware of concerning practices in the vehicle finance industry. A report by Christians Against Poverty (a consumer advocacy organisation) in 2022 found many examples of vehicle loans that have spiraled to more than double the value of the vehicle due to very high rates of default interest. I have heard that borrowers can become trapped because the value of repayments and default interest rates are so high that the debt compounds rapidly.