Loan sharks are still preying on vulnerable New Zealanders and the rules need to be tightened, says Commerce and Consumer Affairs Minister Kris Faafoi.
The minister says research by MBIE has "confirmed his fears" and legislation is likely.
"People are being provided loans they are not going to be able to pay back, and are drawn into situations where the cost of the resulting debt is many times the original due to interest rates and penalty charges," he said.
"We need to act to protect people from the appalling burden these debts can create."
The rules around lending were strengthened in 2015 but didn't go far enough, Mr Faafoi said.
"The research is part of a review of consumer finance legislation regulation and is likely to lead to new legislation."
Mr Faafoi is going to release a discussion paper on proposed solutions around mid-year.
It's likely to consult on options for interest rate caps, improved compliance and lender responsibilities.