Student debtors face credit notes

Student-loan debtors look likely to face a new punishment if they don’t make repayments.

Credit reporting agencies including Veda and Dun & Bradstreet, and the Financial Services Federation of private lenders, want the Inland Revenue to share information on defaulters. And it appears their wishes will be granted.

Taxpayer secrecy laws prevent the department from reporting defaults to the credit agencies.

But now people who fail to make repayments could face creditworthiness problems, meaning difficulty taking out mortgages and personal loans.

Chapter six of the IRD’s Making Tax Simpler consultation document includes a proposal to let the department report serious defaulters who don’t dispute the debt, but are not taking steps to pay it.

The consultation period ended on May 30, and the measure looks likely to come into effect on April 1 next year.

There is growing concern over the large number of student loan defaulters. At the end of June last year there were 728,348 people with student debt. Of those 109,126 were in default, with 80,830 of those overseas and 28,296 based in New Zealand. This represents $933 million in overdue payments.

Lyn McMorran from the Financial Services Federation said logging nonpayment would send a message to defaulters and help lenders avoid them.

She said: ‘‘Why are debts to the Government treated any differently from anyone else’s?’’

Simon Bligh of Dun & Bradstreet believes the Government should also let credit agencies log positive information such as regular repayments.