Reality: Cash Converters don’t take security and bear the entire risk associated with our small loans, so it doesn’t make sense to approve a loan we think our customer can’t afford to repay.
Just like banks, Cash Converters must review our customers’ financial circumstances to ensure they are eligible for a loan, including proof of income, household expenditure, identity and residence.
Just like banks, Cash Converters must comply with the Credit Contracts and Consumer Finance Act, Financial Services Providers (and Dispute Resolution) Act, Anti-Money Laundering and Countering Financing of Terrorism Act, Fair Trading Act and Privacy Act.
This means a $400 Cash Converters small loan carries the same assessment and compliance obligations as a $400,000 loan.
Reality: If that was true, we’d be out of business. We make a loss when a loan is not paid back.
Our approach centres on shared responsibility between us and our customers. Unlike most lenders, Cash Converters bear the entire risk associated with our small loans. Customers do not provide any form of security. Our products are well suited to our customers who sometimes need a little more support and understanding.
This model strongly incentivises Cash Converters to ensure our customers are able to pay back small loans.
Reality: Our most common customer is mid-thirties, full-time employed, female and earns nearly the median national wage. Often they just need some extra cash to help with unexpected expenses, like a medical bill, vet bill, car repairs, or a school excursion for the children. Our customers come from all walks of life, as the need for convenient, responsible and accessible small loans are attractive across a spectrum of New Zealanders.
Cash Converters is aware of unscrupulous practices by fringe and mobile lenders. We support measures which better protect consumers and which do not restrict access to credit from legitimate providers.
Reality: A payday loan is an advance on your next pay, to be repaid in full on your next pay day. Payday loans can displace too much of a customer’s income and lead to debt spiral. Cash Converters does not offer payday loans.
Reality: The cost of credit on a Cash Converters loan can never exceed the amount borrowed. No exceptions. Together with responsible lending obligations, Cash Converters loans cannot trap customers in debt spiral.
Reality: Cash Converters is not a Loan Shark. Cash Converters has a long-standing reputation for professional, legally compliant, values driven and customer focused conduct in New Zealand.
Loan sharks disregard regulatory obligations and enforce loan repayment with intimidation and violence.
Loan sharks don’t like Cash Converters; we are a greater threat to them than regulators are. We provide legally compliant, responsible products they simply cannot compete with.
Reality: A growing number of New Zealanders are either fully or significantly excluded from obtaining credit from traditional banks. With household budgets that are already stretched, an unexpected expense can often leave people with nowhere to turn.
Our margins are much smaller than a bank will accept, so they don’t do small loans.
Our small loans range from $100 to $2,000 with repayment terms of six weeks to nine months. Our average loan amount is $500.
Learn more about the need for responsible small loans from Raewyn Fox, former Chief Executive of the New Zealand Federation of Family Budgeting: here.
Reality: Small loans come with so much regulation and consumer protection that compliance represents the dominant cost of a small loan. New Zealand has strong consumer protection in place. Legitimate lenders like Cash Converters comply with the same raft of regulations that apply to traditional banks and large finance companies.
Reality: Small loans are regulated by a robust set of consumer protections, including the Responsible Lending Code. Lenders are licensed and policed by the Commerce Commission. Consumers have access to no-cost dispute resolution services if needed.
Cash Converters is supportive of moves to curb undesirable conduct and believes credit availability and consumers’ right to choose legitimate lenders should be retained. Restricting access to legitimate small loan providers would provide immediate opportunity for unlawful lenders including gangs and loan sharks.
Reality: Like many businesses we receive a very small volume of complaints regarding some customer interactions. These are mostly resolved to the customer’s satisfaction promptly after being brought to our attention. In 2017, Cash Converters completed more than a quarter of a million CCCFA transactions with zero Financial Services Provider complaints
Reality: Annual Percentage Rates (APR) are misleading when applied to Cash Converters small loans. Our small loans range from $100 to $2,000 with repayment terms from six weeks to nine months. For example, a $100 loan today, with a repayment of $101 tomorrow represents 1% interest. However, as an APR it is 365%.
As a further protection for our customers our cost of credit can never exceed the amount borrowed, no matter the customer circumstances or how long it takes to repay.
It’s easy to assume that high interest rates = big profits. The reality is that small loans produce small margins for legitimate lenders.
Reality: An interest rate cap could significantly risk credit availability and jeopardise the ability of legitimate lenders to do business. This has been demonstrated recently in Australia. Since introducing caps (equivalent to an APR of around 300% on a typical small loan) the number of lenders, and thus consumer choice, has reduced by more than 90%. Small lenders were unable to cover costs and exited the market soon after implementation of the cap. Even large lenders, who enjoy substantial scale and efficiency, have been unable to continue to offer loans. With the exception of Cash Converters, all publically listed lenders have now exited the market for loans less than $2,000 and Cash Converters Australia is progressively exiting these loans too.
Instead, lenders are being obliged to focus on larger loans to derive a commercial return, with consumers taking larger and longer loans than they need, rather than obtaining a small manageable amount.
Consumer access to competitive, regulated small loans means responsible, regulated lenders have certainty and can provide loans on competitive terms which out-compete unregistered and unlawful lenders.
Reality: Not us. Not here. Cash Converters New Zealand is run independently to the business operated in Australia. Cash Converters New Zealand products and systems are uniquely New Zealand, and its processes are aligned with New Zealand Laws and regulations.
Cash Converters New Zealand is in good standing with the Commerce Commission and is not subject to any legal action. Cash Converters has a 25-year reputation for transparent, responsible and ethical conduct in the New Zealand market.
Reality: Thieves have to be pretty stupid to try and sell to us. Every purchase is captured on CCTV and proof of identity is required. Our processes assist Police to apprehend thieves resulting in few stolen goods being presented at our stores
Every week Cash Converters stores, countrywide, voluntarily provide their local Police with details of every item purchased, including make, model and serial numbers. If any are found to be stolen, they are voluntarily handed over to Police, at a loss to the store.
Nationally Cash Converters has a letter of agreement with New Zealand Police which has been in place since 2004 and we are a long-term financial supporter of SNAP (Serial Number Action Partnership).
Learn more about our close relationship with the New Zealand Police here.