Payday lenders in New Zealand are finance companies that offer small short-term cash loans. Repayments are scheduled to coincide with the borrower’s payday over four to six weeks. This type of loan is an unsecured personal loan. No collateral is required from the borrower. Loan fees and interest rates vary among lenders.
In New Zealand, changes in the law that came into effect in June 2015 introduced new lender responsibility principles. The reason these principles were introduced was to strengthen protection for people wanting to borrow money. The principles protect borrowers by requiring lenders to be fair and reasonable at all times, beginning before a loan enquiry is made.
Before enquiring about a payday loan
Payday loan advertising must be clear and concise so that the person making the enquiry is not misled, deceived or confused. Applicants must be aware of the fees, the interest rate and the total amount they will have to repay.
As well as complying with the updated Credit Contracts and Consumer Finance Amendment Act 2014, payday lenders must also be compliant with all of their other legal obligations to borrowers including those under the Fair Trading Act 1986.
See the link Review of Credit Contract and Consumer Finance Act
During the application process for a payday loan
Payday lenders must make reasonable enquiries before a new loan contract is signed with a borrower. he lender must be satisfied that the loan will meet the borrower’s needs and the borrower will be able to meet the repayments without suffering substantial hardship.
Making reasonable enquiries means that the lender will ask for a photo ID as well as bank statements that show sufficient income from employment regularly going into the applicant’s bank account. A responsible lender will also ask the reason for borrowing and run a credit check. They will use all of the information they gather to make the lending decision.
What happens if things go wrong?
Lenders must state in plain language what penalties will occur if a borrower misses one or more loan repayments. They also have to state clearly up front what the borrower’s options are if they fall into unforeseen hardship and are no longer able to make any loan repayments at all or for a temporary period of time.
What payday lenders must do at all times
Payday lenders must at all times guide applicants to make informed decisions. This obligation starts at the first enquiry to find out what the applicant’s needs are. For example, whether or not the applicant should enter into a loan contract at all or what type of loan would be best for them. Finally, lenders must treat borrowers in an ethical and reasonable manner at all times.
See how to get a fast cash loan from Cash Relief.