Commerce and Consumer Affairs Minister Kris Faafoi says the government has decided to add new measures around high cost short term lending to the Credit Contracts Legislation Bill.
He says that following public feedback on the bill at select committee, the government has decided to include a 0.8% per day cap on interest rates, as well as other changes which will strengthen protections for vulnerable borrowers.
"The new interest rate cap adds a limit on how much a lender can charge borrowers, right from the start of a loan. It reduces the dollar amount of regular repayments. Indirectly, it also limits how much risk lenders can take on borrowers, which will help reduce high-cost loans being given to those who can’t afford them," he says.
Another major change will be a requirement that all mobile traders, such as truck shops, have to make sure that any credit given is suitable and affordable for each borrower, and that the borrower is helped to make an informed decision about the contract.
Mr Faafoi says the bill is expected to pass this year, and will come into effect, in stages, starting in March 2020.