The next battle in the war against high-cost lenders was the fight for laws forcing debt collectors to agree to "affordable" repayment schedules for borrowers.

"Debt collectors use tactics that amount to harassment as part of their collection practices," law lecturer Victoria Stace from Victoria University of Wellington told a conference on financial capability in Auckland on Friday.

And, she said: "There is no law requiring them to enter into an affordable repayment schedule with the borrower."

"The battle continues," she said.

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123RF Payday loans have been such a blight on communities overseas, many countries have moved to cap the interest and fees they change. New Zealand is finally following suit.

Speaking at Massey University's Building Financially Capable Communities conference, Stace detailed the research she had done which helped national budgeting service Fincap persuade the Government to introduce interest rate and fee caps on high-interest lenders.

"We have got interest rates down to around 300 per cent a year, and a ban on compounding interest, but that rate is still very high, there is likely to be scope for avoidance," she said.

There was a dearth of research into the payday lending industry in New Zealand she said, which had been an obstacle to persuading politicians to act to protect vulnerable borrowers.

"There's been very little empirical research done in New Zealand on who uses payday lenders, why they use them, and whether the cases being seen by budget services are the exceptions as the lenders assert," Stace said.

SUPPLIED Countries marked in red and purple have interest rate caps on payday lenders. Countries in green (New Zealand included), do not. Map prepared by law lecturer Victoria Stace from Wellington University of Victoria.

That had allowed payday lenders to maintain their loans were not a problem, and that all that was needed was for a crack-down on rogue lenders flouting existing laws.

"Payday lenders are well-resourced, and they are persuasive," she said.

Fincap hired Stace to research the industry, including looking overseas.

"Problems with payday lending we have in New Zealand are mirrored all over the world," she said.

"Recently, Australia and the UK in particular have grappled with these issues. They have put tighter regulation in place."

"That was very helpful because it showed that New Zealand is an outlier and that the norm is to have regulation, and in particular around interest rates."

Overseas research also showed there was a lie at the heart of the payday lending industry.

Payday lenders market their loans as catering to people who need a loan to meet a "one-off" emergency, but Stace said: "People who borrow from payday lenders are generally not using the produce to meet a one-off emergency."

New Zealand now had more than 20 payday lenders, and they commonly appeared on the list of debts of people seeking help from budgeting services with loans with effective interest rates of up to 800 per cent per annum, she said.

Their offices clustered in low-income areas, and payday lending had become "normalised" in poorer communities.

Sometimes building financial capability required the law to step in and take control of financial markets, she said.

"That's what we've been advocating for for the past year and a half."

It was a period in which Stace said she had learnt a lot about how politicians could be persuaded to take action, including witnessing the careful strategic planning of Tim Barnett, the chief executive of Fincap, who as a former MP and minister was a major force in decriminalising prostitution.

STUFF Tim Barnett, former Labour MP, and now head of the Fincap network of budget agencies.

"I realised just how much of the law reform progress is shaped by discussions that go on behind the scenes," Stace said.

But she also witnessed the importance of human stories in winning over politicians.

"What really impacted on the (Finance and Expenditure) select committee, in my view, was the presentation of evidence in person by a borrower, who I will call Sarah."

The woman, who lived in Gisborne, borrowed $400 online from a payday lender to buy birthday presents for her children.

"She was going to have to pay back twice what she borrowed, but that was okay because she expected things in her words 'to pick up'," said Stace.

But once she had missed a payment, she could not catch up.

"She found she was choosing between paying the electricity bill, or paying for food."

She begged the lender to send the debt to a debt collector so she could negotiate an affordable agreement to pay the debt off, Stace said. It refused.

"Sarah said she found it hard to speak out because, in her words, 'Being bad with money is seen as a shameful thing'," said Stace.

But, Sarah told MPs: "It's not as shameful as the way people like me are preyed on by the payday industry."

One year after taking out the loan she got an email from the lender to congratulate her on her birthday inviting her to "treat herself" to a loan.

During Sarah's evidence, one MP on the select committee Googled the lender on their phone, and within a couple of minutes got a message from the lender to "chat about a loan", Stace said.