Community Law Otago is warning against a high-interest lender that is securing power of attorney authority from borrowers.
The law centre complained to the Commerce Commission, which yesterday confirmed it was assessing a complaint about the lender, Rapid Loans.
Rapid Loans was contacted twice yesterday for comment, but no response was received.
The law centre recently emailed local social sector agencies warning about Rapid Loans' practice of procuring power of attorney.
Under the clause, the borrower agreed the lender could ''do anything'' and sign any document deemed ''helpful'' to ensuring repayment.
Community Law Otago board member University of Otago Associate Prof Barry Allan said it gave the lender too much power.
''It's giving them almost complete control over their bank accounts.
''A bank account could be cleaned out before payments get paid out for rent, for food, and for electricity, leaving people destitute until the next pay.''
Prof Allan said that he was aware of a second lender also seeking power of attorney.
Borrowers needed to read contracts before agreeing to the terms, but they were often desperate, he said.
In its email to social sector agencies, the law centre also drew attention to Rapid Loans' 39% interest rate and $18 monthly administration fee.
Prof Allan said while high, the rate was not at the top end of interest rates in the sector.
''It's about 10% more than your typical credit card interest rate, but the short-term lenders, they effectively have interest rates in the hundreds of percents.''
A Commerce Commission spokeswoman said lenders were obliged to help consumers understand what they were signing.
''The courts have the ability to reopen oppressive contracts including where the lender exercises a power under a contract oppressively.
''In our credit enforcement, irresponsible lending is a priority for us because of the significant harm it can cause already vulnerable consumers.
''We continue to work closely with the community budgeting sector to help them identify and report lending practices that may be unlawful through our Red Flags initiative,'' the spokeswoman said.
