The draft Responsible Lending Code has been released for consultation today.
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Consumer NZ made a submission on the discussion document in August and is pleased some of the changes it wanted around advertising practices have been taken onboard.
The draft code warns lenders against using claims such as “no credit checks”, “pre-approved”, “instant approval” or “guaranteed acceptance”.
It also says lenders’ advertising should display an annual percentage interest rate when referring to an interest rate and disclose if it is variable.
Lenders also have to state if any fees apply. For example, if a lender claimed its loan was interest free, it would also have to state if an establishment fee applied.
Consumer will now make a submission on the draft code.
Submissions on the draft code close on 23 December. The code is due to come into effect in June 2015.
Commerce and Consumer Affairs Minister Paul Goldsmith said: “We want our most vulnerable to have better access to information, and better protection from the predatory practices of loan sharks and unscrupulous pay-day lenders when taking on debt.”
Whether the code achieves this goal will depend on active monitoring and enforcement by market negotiators.