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Rules to crack down on loan sharks revised

Tabling Bill: home affairs minister Walter Roban (File photograph)

Proposed rules to crack down on loan sharks are understood to have been revised after public consultation.

The Debt Collection Act 2018 will be tabled in Parliament today after an initial draft was reworked to tackle concerns raised by lawyers, businesses and other organisations.

Among the measures that appeared to be added are to the legislation were specific caps on fees and commission that could be charged by lenders.

The Government said the Bill set out a “comprehensive” regulatory framework that would name the consumer affairs department the licensing authority to enforce rules covering debt recovery action.

The Bill was also designed to tackle “inadequate or unfair” practices by, among other measures, making sure debt was verified through documentation, to offer a debtor the right to review paperwork and to supply them with appropriate repayment records.

It would make it illegal to engage in “predatory lending”, such as applying excessive interest rates and penalties that could cause “substantial financial harm”.

Phone harassment, deceptive documents and misrepresentation of the amount owed would also be outlawed.

The law would make it an offence to hand over a debtor’s information to third parties without their consent.

The revised Bill will be tabled by Walter Roban, the Deputy Premier, who took over the Ministry of Home Affairs from Walton Brown in a Cabinet reshuffle last week.

A six-week public consultation period on the proposed introduction of legal changes to debt collection was launched by the Ministry of Home Affairs in July.

Mr Brown earlier tabled the Bill in Parliament, but he has since become the Cabinet Office minister.

A government spokeswoman said: “Submissions were received from four organisations representing their members’ input, three law firms, five local businesses and one individual.

“The Minister of Home Affairs wishes to express his sincere thanks to those who took the time to participate in the consultative process.

“Their contributions were invaluable in helping shape the Bill and amendments have been made where appropriate based on their input.

“Those who contributed to the consultation will see changes to reflect part or all of their recommendations within the Bill.”

The new draft of the Bill was understood to be “very different” to the original version but further details on the changes were not available.

But Government said a key element was legislation to cap a one-time creditor’s commission at 20 per cent of the original debt amount, a limit that did not appear to have been specified in earlier drafts.

The Bill also included rules for a maximum two per cent monthly administration fee on the outstanding balance, which would only be payable if costs are incurred by required communication with the debtor in that period.

Another significant feature was said to be the right for borrowers in default to lodge a complaint against debt collectors with the licensing authority, which would investigate and “apply the appropriate remedy”.

Debtors are also to have the right to validate paperwork from the lender and to dispute the amount.

Yesterday, on the eve of the Throne Speech, Government said the Bill represented the first set of proposals in fulfilment of last year’s Throne Speech commitment to “introduce regulations for debt collection agencies, regulate payday lenders who lend money at extraordinary interest rates, and bring banking, insurance and other financial service conduct under the umbrella of an updated Consumer Protection Act”.

Further legislation is expected to deal with consumer concerns about banking, insurance and other financial service agencies after consultation with the public and private sectors.