Loans report an insight into misery

Budget agencies helping struggling borrowers would welcome a simple, fast tribunal to appeal to over abuses by lenders, a report from budget advisory charity Fincap has found.

Fincap, which supports more than 180 budgeting services around the country, surveyed agencies on their experiences of dealing with clients whose financial lives were in turmoil as a result of unsustainable debts.

It found the majority would like a forum similar to the Tenancy Tribunal for renters and landlords, or the Motor Vehicle Tribunal for car buyers.

‘‘There was strong support – 84 per cent – for a suggestion of a tribunal to deal with issues around high-cost loans,’’ said Tim Barnett, chief executive of Fincap.

Fincap carried out the survey to prepare for the Government’s public consultation on lending reforms, due to begin next month.

The charity is pushing for tighter regulation of high-interest lending, and new approaches to make high-interest lenders respect responsible lending laws.

‘‘New Zealand consumers need protection from these predatory companies,’’ said Barnett.

‘‘Our bottom line is that New Zealanders should get the same level of protection as the Australian government has given their citizens.’’

Combined, the 76 agencies which answered the Fincap survey saw around 15,000 clients in 2018, half of them Ma¯ ori, and 20 per cent Pasifika. They went to the agencies as a ‘‘last resort’’, in the face of extreme hardship such as eviction, hunger or having the power cut off, the report said.

Many borrowers were struggling with debts after losing employment, or falling ill. They often owed multiple debts: on credit cards, to high-interest payday lenders, on overdrafts, to truck shops and Work and Income.

Around half of budget agency clients were being pursued by debt collectors who would sometimes even approach borrowers’ neighbours and employers.

Complaints against lenders could take years to resolve.

‘‘The system is so geared in favour of the loan companies,’’ Barnett said.

Despite fears that reform could drive desperate borrowers to underground loan sharks, he said the evidence from Australia indicated this was not happening.

Barnett also believed it was time to stop blaming debtors. Budget agencies reported lowerincome families were borrowing for essentials such as food, rent and power.

‘‘Many of us, if we lost our job, could find ourselves in a similar situation,’’ he said.