The Government is set to crack down on loan sharks, introducing a range measures designed to stop the lenders exploiting vulnerable or financially-naive people.
Minister of Commerce and Consumer Affairs Kris Faafoi announced the measures today, which include a cap on the amount of interest that can be charged, as well as a cap on fees.
There will be "stiff" penalties for lenders who break the rules, Mr Faafoi said, and lenders, door-to-door salespeople and truck shop operators will now be vetted with a "fit and proper person" test.
"The 2015 amendments to the Credit Contracts and Consumer Finance Act (CCCFA) did not go far enough in protecting our most vulnerable consumers from loan sharks," Mr Faafoi said.
"The introduction of an interest and fees cap on high-cost loans will prevent people from accumulating large debt from a single small loan.
"For example, if you borrow $500 you will never have to pay back more than $1,000 in total, including all fees and interest.
"The changes also lift the level of professionalism across the industry, by requiring directors and chief executives of lenders offering consumer credit contracts to pass a 'fit and proper person' test in order to register as a Financial Service Provider.
"Any lenders breaching the responsible lender principles will face stiff new penalties of fines up to $600,000 under the strengthened enforcement provisions in the CCCFA.
"We listened to consumer advocates and the finance sector's feedback and will also be seeking increased resources for enforcement and monitoring to ensure lenders who break the law are detected and stopped."
The new measures will also strengthen the legal status of "do not knock" signs on premises, to combat uninvited salespeople.
Mr Faafoi said the new measures will come into effect from 2020, subject to Parliamentary timeframes.