CPAG Calls for a Legal Limit on the Total Cost of Credit  - CCCFA Review

Child Poverty Action Group (CPAG) endorses the Nga Tangata Microfinance (NTM) submission on the Review of Consumer Credit.

"Child poverty will not be solved until there is a safe, ethical credit environment for low-income consumers in Aotearoa," says Dr Claire Dale, CPAG and NTM spokeperson.

"It is critical that a legal limit on the total cost of credit is introduced."

The Dunedin longitudinal study has revealed that for those children who do survive growing up in poverty, their physical and mental health as an adult is profoundly compromised: seven or more adverse childhood events takes 20 years off life expectancy.

As well as a culture of low welfare benefit payments, Aotearoa has a culture of low wages, so many families in poverty are also families in work.

Dr Dale says that having a low income means, for many families, that financial crises occur regularly. As a result, they are under greater financial stress. 

"Financial stress and poverty do not create an environment where children are likely to thrive.  

“In Aotearoa New Zealand, where it is legal to charge 500% interest, and then charge administration fees on top of that, having a low income and borrowing money is very high risk. But when there is no money for food, what choice do you have?”

Alongside the urgent introduction of a legal limit on the total cost of credit, other changes CPAG hopes to see as a result of the Review include:

• The real interest rate (annual) and all other additional charges are written in the contract.

• The total cost of credit (excluding possible default charges) is included in the contract.

• A ‘cooling off’ period of 5 days (minimum) is included whereby the contract can be cancelled.

• A Requirement for the lender to take formal steps, including reviewing bank statements, to ensure the ‘affordability’ of the proposed credit.