Spike in docked wages for debts
The number of people having money docked from their benefit or wages to repay debts has increased fivefold in the past year.
A thousand ‘‘attachment orders’’ a month are being issued, up from 200 a month one year ago, the Commerce Commission says in its Consumer Issues 2015 report.
Released yesterday, the report places debt, and its impact on vulnerable people, high among the commission’s priorities for the next year.
Among those concerns are abuses of the court-imposed attachment order system, against debtors who have fallen behind with repayments. Attachment orders allow overdue repayments to be deducted directly from a debtor’s wages or benefits.
‘‘Changes to the civil debt enforcement system in April 2014 appear to have made attachment orders an attractive option for creditors to recover outstanding debts following a judgment in their favour,’’ the commission says.
The commission has found instances of the courts not being told that a debtor’s possession has been repossessed, which normally freezes the debt and means no further interest or fees can be charged.
There have also been cases where, even after attachment orders, lenders pressure borrowers to increase payments, or impose interest and fees without the court’s permission. ‘‘The Ministry of Justice is currently introducing controls . . . to ensure that the system is being used appropriately by lenders,’’ the commission says.
The rise in attachment orders is just one of a number of concerns the commission has about debt among poorer communities.
Household debt increased sixfold in the 20 years to 2011, the commission says. In poorer communities, the use of high-interest payday lenders, and buying from truck shops (also known as mobile traders) is now seen as ‘‘normal’’.
The report says budgeting services fear some lenders are targeting people who have limited knowledge of their rights.
Certain groups, such as Pacific Island families, faced pressure to accumulate debt for large funerals, tithing to churches or sending money to relatives.
The commission has particular concerns about ‘‘mobile traders’’, which now operate throughout the country but are particularly concentrated in Auckland.
Problems include continuing to make direct debit deductions to build credit for future purchases, even after a debt has been paid off.
Nearly 50,000 new clients went to the New Zealand Federation of Family Budgeting Services for help last year, including a disproportionate number of Maori and Pacific Island people.
Among the new clients were more than 2600 GE Finance clients owing a combined $30 million; about 1280 QCard holders owing $4.3m; 2300 clients of mobile trader Home Direct owing $1.5m; and 943 Instant Finance clients owing $4.3m.
Finance company loans made up $99m of debts owed by the federation’s clients, compared with $72m of bank credit card or personal loans.
In addition about 1670 people struggled to pay their mortgages, owing a combined $206m.