Loan sharks have worsened the problems of people in financial difficulty, the House of Assembly heard.
Wayne Furbert, the junior finance minister, said he knew of cases where $10,000 loans become $66,000 debts in just a year, and that action was needed.
He added: “This has been going on from year to year to year. Our people have been ripped off.”
Mr Furbert said: “Sometimes you just happen to run into problems. Lose your job and cannot pay. You are struggling. What can you do?
“We are in an unforgiving society in many aspects and it’s time to recognise that if it wasn’t for the grace of God, some of us would still be in that same position.”
He was speaking on Friday as the House debated and passed the Debt Collection Act 2018, designed to create a framework to regulate debt collection.
Walter Roban, the Minister of Home Affairs, said the new law would help protect consumers from predatory debt collection practices.
He said: “This bill seeks to introduce fair business practices that will provide a level playing field for creditors and debtors.”
Mr Roban explained the bill was made up of five components.
The bill would create a licensing authority for debt collector agencies and establish regulations to prohibit unfair practices.
The legislation was drawn up to also promote financial transparency, establish complaint procedures and create both offences and a right of appeal to a debt collection tribunal.
Mr Roban added: “Government oversight will be accomplished by a comprehensive licensing regulation framework for those entities engaging in debt collection under the newly created debt collection authority.
“The authority will consist of officers within Consumer Affairs. The regulatory functions include, but are not limited to, oversight, licencing, education, investigation and enforcement.”
The legislation also caps a creditor’s commission to a one-time payment no higher than 20 per cent of the original debt amount and includes 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.
Mr Roban said the bill was appropriate because it came at a time of year when many people spend more than they should.
He added: “We must ensure that we are not spending to the point where we are broke and worrying how to pay our bills in the new year.
“Oftentimes we are our own worst enemy, amassing debt that we cannot pay. Sometimes, however, we incur debt that is of no fault of our own.”
Leah Scott, the Shadow Minister of Tourism and Transport, backed the legislation and added that education needed to be a key part of helping people avoid getting into too much debt.
She said: “The reality is times are still rough for people. There are people that don’t have jobs and we have to do things that assist people as much as we can.”
Jeanne Atherden, a One Bermuda Alliance backbencher, said that a balance needed to be struck to ensure that people are protected, but individuals and businesses are not harmed by “highflying” debtors who choose not to pay.
And she questioned why a separate licensing authority needed to be created instead of giving responsibility to the Consumer Affairs Board.
• To read a press release on the legislation from Walter Roban, click on the PDF under “Related Media”