Lenders must share the burden
Credit plays a key role by helping families to become homeowners or to grow a business. However, the finance industry has abused its unique position by allowing virtually unfettered access to credit. Due to a failure of regulatory control there is a lack of honest competition and many are confused by a bewildering array of complex lending options. Household debt is fast becoming an unsustainable problem and stricter lending controls are inevitable. However, we will also provide means to enable people who have over borrowed to recover from this situation.
The New Party will establish a debt remedial bureau to consolidate and professionally manage the debts of borrowers who get into trouble with loans and credit cards. The financial sector will operate the scheme by levying its members according to their share of defaults and all credit card providers and licensed money lenders will be required to subscribe to the bureau. Those on the scheme will be placed on a central register to prevent them obtaining further credit until such time as their situation is stabilised but they will pay only normal rates of interest. We will also introduce a cap on lending rates, similar to that employed in Germany, to deal with fringe lenders.
We will place stricter controls on lending especially on the under-25s. A deposit will normally be required for all purchases above a certain threshold made on credit. We will also make lenders responsible for establishing a client’s total indebtedness in determining whether a loan can be granted. Lenders who do not follow responsible lending rules will be liable for part of the debt in the event of a default.
The business sector has also suffered from banks withdrawing credit facilities with little notice. Banks will be required to carry out a statutory process of consultation before withdrawing borrowing facilities or calling in securities.