Targeting the “loan sharks”

I see National wants to get tough on “loan sharks” – a good idea.

http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=10764304

But what beats me is that they are not including credit card companies.  If you were looking for people who are taking middle NZ to the cleaners – look no further. The credit card interest rates from the 4 big banks on purchases range between 19% and 20% (excluding a very limited range of highly conditional low rate cards) and are even higher on cash advances.

And if you thought the people’s bank, Kiwibank, would be much better, think again, their rate is only a couple of points or so less on most of their cards

You can compare rates on this site:

http://www.interest.co.nz/borrowing/credit-cards

Now when judging the reasonableness of these rates, you have to acknowledge that there is no mortgage or other security.  But on the other side these banks have voluntarily issued these cards to their customers.  Their risk is very small compared to the lenders of last resort who lend to people who can’t get money from banks or any other traditional source because their credit risk is so high.

So I think interest on credit cards should be no more than say 50% above mortgage rates and for lenders of last resort say no more than double.  Those rates might still sound high but they would save people a whole heap compared to now.  It is tricky to start setting caps on interest rates – but I think a limit in proportion to mortgage rates would work.