Bor­row­ers easy prey as sharks push debt

A coun­try singer de­scribes the kind of re­peat-loans night­mare the Govt aims to ad­dress.

Sunday Star-Times - - NEWS - Matthew Rosenberg and Rob Stock re­port.

High-in­ter­est lenders may be banned from of­fer­ing back-to-back loans to bor­row­ers as ev­i­dence emerges of the risks it poses to lower-in­come fam­i­lies. Coun­try singer Margy Orr fell into fi­nan­cial dif­fi­culty af­ter ac­cept­ing re­peated of­fers to top up a loan. ‘‘Each time you’d get to the end of pay­ing off what you owed, they’d of­fer you more money,’’ Orr said. ‘‘You’d ring up and ask your bal­ance and they’d say ‘oh, you can have another $500 . . . you never re­ally got to the end.’’ Her jour­ney into fi­nan­cial hard­ship be­gan af­ter a case of mis­taken iden­tity left her with se­ri­ous in­juries from a home in­va­sion. Alone, she moved to Auck­land for a fresh start, bor­row­ing from an Auck­land fi­nance com­pany and us­ing her bank credit card to set her­self up. She’d landed her­self a job as a care­giver, but the job was not as se­cure as she be­lieved. ‘‘They [my em­ployer] said the fund­ing was there for two years so I thought, ‘I’m sweet, this is the way out of all my trou­bles’. ‘‘Af­ter eight months of hav­ing this lovely wage com­ing in, sud­denly there’s no in­come and I’ve got this loan and I’ve got a credit card that’s maxed.’’ Her health also wors­ened, and she found her­self on the ben­e­fit with ‘‘huge’’ med­i­cal bills. Orr’s story of re­peat loans is allto-com­mon, a re­view of con­sumer credit by the Min­istry of Busi­ness, Innovation and Em­ploy­ment shows. One lender’s bor­row­ers took out an av­er­age of nine loans each over a two-year pe­riod, and some bor­row­ers took out up to 36. Some short-term lenders had ex­traor­di­nar­ily high num­bers of bor­row­ers strug­gling to make re­pay­ments, de­spite laws re­quir­ing re­spon­si­ble lend­ing. Orr’s debts were just $3500, on a bank credit card, and to a pri­vate fi­nance com­pany. But at the lower end of in­come spec­trum, that’s enough to get the debt col­lec­tors cir­cling. The Gov­ern­ment plans to over­haul lend­ing laws to rein in ‘‘con­tin­ued ir­re­spon­si­ble lend­ing’’. The pro­pos­als in­clude bring­ing in a ‘‘cooling off’’ pe­riod pre­vent­ing high-in­ter­est lenders from of­fer­ing new loans to bor­row­ers for 30-90 days af­ter the orig­i­nal debt was re­paid. Lynn McMor­ran, ex­ec­u­tive direc­tor of the Fi­nan­cial Ser­vices Fed­er­a­tion, which is a lobby group of lenders, said it was ‘‘not un­sym­pa­thetic’’ to putting some lim­its on lenders be­ing able to re­peat­edly ex­tend loans. It would make its sub­mis­sion to Par­lia­ment on Wed­nes­day next week, and would call for UK-style lim­its on pay­day lenders, which can charge an­nual in­ter­est rates of over 300 per cent, re­peat­edly rolling over loans. Orr’s story ends hap­pily. With the help of Chris­tians Against Poverty she clawed her way out of debt in 16 months. Her ad­vice to oth­ers: ‘‘It’s easy money to get . . . very ex­pen­sive to pay back.’’

CHRIS SKEL­TON/STUFF

Margy Orr man­aged to fight her way out of debt.

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