Easy access to expensive consumer debt, such as finance company loans, hire purchase, and credit card debt, is ‘crippling’ many Kiwi families.

Experts at the Commission for Financial Capability Summit criticised many third-tier lenders and mobile truck shops, calling them ‘predatory’.

They say they're locking our most vulnerable families into extortionate payment traps.

“There are too many dodgy, shady businesses preying on the most vulnerable,” says, Ronji Tanielu, a lawyer and analyst for the Salvation Army.

“They’re seen as heroes because there’s no alternative.”

Borrowers liked these sources of money because they would get cash fast, and often without the restrictions banks need. But loans could grow quickly if people didn't meet their payments.

Around 46,000 clients working with budgeting service providers owed NZ$60 million in debt arrears, says Linda Ngata, of the National Building Financial Capability Charitable Trust.

Of this, NZ$54 million was to finance companies, she says.

Tanielu says high-cost debt affects our “most vulnerable, marginalised, and struggling families”.

Many make bad decisions, he says.

“But it’s easier to make bad decisions when all the bad options are right in front of you.”

He heard stories of some mobile truck shops targeting those living in a mental-health care facility, successfully signing up the patients

And it isn't just those on low incomes who are affected. Many are middle-class people working with mortgages.

“They just can’t get over the hurdle of debt – and they’re living beyond their means. When the domino falls, it falls. It’s not just a ‘poor’ issue, or a ‘brown’ issue.”

Peter Cordtz, of the commission, says middle-income earners are the highest users of third-tier lending options.

High-cost debt is “crippling many families”, he says.

Susan Taylor, of Financial Services Complaints, spoke about a man who borrowed NZ$4,000 on finance. Ten years later, it had escalated to $20,000. He vanished, and the debt was then passed to his ageing parents. His father then died, leaving his 76-year-old mother to service his huge loan.

“It’s an extreme case, but how was the debt allowed to spiral to $20,000? How was a lender allowed to approach an old lady?” Taylor asked.

Experts agreed that improving financial skills from a young age through education was essential, as was the easier access to low cost, or no cost, loans for those struggling.

Families should be able to access ethical and fair credit, not high-cost credit, they say.

The summit was held in Auckland earlier this week.

First published 15 June, 2018

Story by Claire Connell

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