Borrowers easy prey as sharks push debt
A country singer describes the kind of repeat-loans nightmare the Govt aims to address.
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.’’
Margy Orr managed to fight her way out of debt.