Guest post by Kevin O’Brien
Let the borrower beware.
Once interest rates beyond 48% annualised were unconscionable, now in New Zealand, we have no limit. The Credit Contracts and Consumer Finance Act 2003 is a national disgrace in removing the old restraints and general possible review of loan contracts by the Courts. The Act has smoothed commerce but it now putting smiles on the faces of the loan orcas ( like loan sharks but nastier) who are increasingly becoming more predatory. ‘Save My Bacon’ – a NZ loan company – may do anything but that if they call in external debt collectors following a default. They say they freeze the interest after 45 days before they renegotiate from there, with the amount repayable growing by a further 67% during that time. The daily interest rate is 1.5%. Depending on compounding the annualised rate may exceed the 547.5% (1.5%x365).
Disclosure mostly sufficient
See below: ‘Save My Bacon’ online loan application The Ministry of Justice site gives the details of the minimal disclosure and acceptance required
New gang in town: Save My Bacon (for the Loan Orca)
From their web site:
About the Annual Interest Rate (AIR)
Save My Bacon’s AIR is clearly displayed on our website’s homepage at 547.50%. The AIR stands for the Annual Interest Rate. We aren’t actually obliged to show this on our website, but we’re upfront.
Yes, a Save My Bacon Short-term Loan doesn’t make for the best looking AIR figure! But this term is an annualised measure that wasn’t devised with Save My Bacon small and urgent loans in mind. Why is this? Our loans only have a maximum term of 31 days and we do not offer a long-term loan product for a year. You can’t actually borrow from us for a year!
Correct, the example above was for only 17 days! This sophistry is to justify their legal bite:
As you can see we don’t really charge hundreds of percent in interest so this annualised measure doesn’t actually represent the true cost of a Save My Bacon Loan.
Your true upfront cost is clearly displayed on the Online Calculator prior to you starting the application process.
This blatant nonsense distinguishing the annualised interest rate from the actual dollar amount of interest charged may meet the requirements of the Act, but it might not if tested in Court. It certainly meets the ultra greedy baconer test. It is a novel concept that is not known in business finance textbooks. Nor is it known to those who place money daily with the banks overnight or buy and sell Treasury Bills or other fixed interest securities, many being held for less than a month.
‘Save My Bacon’ is a despicable attack on those who need money in a hurry and who seek it outside the regular banking system. Even in Samoa the payday loan rate was only ‘6 for 5’ and the culture would not allow the vigorous enforcement legally permitted here. Being a registered Financial Service Provider is required under the Credit Contracts Act to ensure regulatory compliance, particularly money laundering rules. It is nothing to do with being nice to anyone. The formal Financial Disputes Resolution requirements are not for negotiation but to enforce compliance of the strict terms. What is disclosed and accepted has to be stuck to.
We need to see the maximum effective interest rates and charges reviewed and restated. Also Churches can help take this up by partnering with Christians Against Poverty (CAP).
Go here to EMAIL YOUR MP’S AND GOVERNMENT
Fees and Charges from ‘Save My Bacon’ site:
“Our interest rate is 547.50% for most customers when expressed as an Annual Percentage Rate. Our loans are normally contracted to be for no more than 30 days, so interest is charged at a daily rate of 1.5% per day on the unpaid balance (including fees) at the end of that day. Interest is added to your account on each payment date and then form part of the unpaid balance of the loan.
We do not charge default interest.
Fees: Fees which we charge you and that form part of the initial unpaid balance of your loan:
- $15 – Loan Establishment fee
- $ 7 – Direct Debit fee is charged each time we take your payments from your bank account pursuant to a direct debit authority.
Other Fees that might be charged:
- $30 – for the cancellation of a direct debit authority
- $35 – for each loan extension granted (max. of two for weekly customers, one for fortnightly, not available for monthly borrowers.)
If you are experiencing financial difficulties and cannot pay on the due date we can help you and will consider your circumstances both sympathetically and positively.
We can help if you are in default under your contract. However, if we have exhausted all our attempts to come to a suitable arrangement with you and you do not demonstrate a willingness to work with us to put the situation right, we may be compelled to take additional steps in recovering the debt which may include:
- Referring your credit file onto a Debt Collection agency for recovery – you will then be charged all collection costs from our 3rd party collection agent including site visits and agent collection costs,
- Charging you all legal costs incurred in the recovery of the outstanding debt.
Implications of Late- / Non-Payment
We do not charge default interest.
However, there is a $60 missed payment fee plus additional daily interest costs. Interest will continue to accrue on your balance for up to 45 days if we can reach an arrangement satisfactory for the repayment of the unpaid balance; or up to 60 days if we cannot reach an agreement.
Credit Score implications
When/where credit scoring is used in NZ a repaid loan will most often positively influence your credit score. However when a missed payment, failed payment or unpaid loan occurs this is likely to negatively impact on your credit score.
You can apply for an extension to your loan at a cost of $35 per extension (max. of two for weekly customers, one for fortnightly, not available for monthly borrowers.). While Save My Bacon does offer extensions, we do not do loan roll overs or loan refinancing, so there are no renewal or refinancing fees. We are committed to providing a hassle free solution to your short-term cash needs.
You can reapply immediately after your final payment has been reconciled on your account, usually around 8am the following morning. However, your payment takes two business days to clear.
Once you reapply, we just need to reconfirm your details and employment.
To help ensure you are a responsible borrower, a Save My Bacon Loan should only be used to meet short-term cash needs.”