Loan sharks at­tack by Labour’s Kris Faafoi

The Press - - News -

Some cyn­ics might say the Gov­ern­ment’s crack­down on loan sharks and truck shops has a whiff of easy, vir­tu­ous pol­i­tics, but in re­al­ity it is a wel­come and overdue move. That there has been no crit­i­cism of it from the Op­po­si­tion or even the Right-wing blogs that rou­tinely at­tack most of the Labour-led coali­tion’s de­ci­sions shows the move is both nec­es­sary and un­con­tro­ver­sial.

The back­drop to the re­view of the Credit Con­tracts and Con­sumer Fi­nance Act (CCCFA) is that a 2015 over­haul un­der the pre­vi­ous gov­ern­ment did not do enough to pro­tect vul­ner­a­ble con­sumers. The 2015 changes came in a con­text of in­creas­ing me­dia and po­lit­i­cal at­ten­tion on poverty and over­crowd­ing, and a grow­ing aware­ness that even the work­ing poor find it hard to make ends meet.

When the Gov­ern­ment talks about vul­ner­a­ble con­sumers, it refers to peo­ple with low lit­er­acy and nu­mer­acy skills, who may not be con­fi­dent speak­ers of English or are un­der fi­nan­cial pres­sures, time pres­sures or both. These are the peo­ple who fall vic­tim to loan sharks and truck shops in ar­eas such as south Auck­land and Porirua.

Porirua is the turf of Mana MP and Min­is­ter of Com­merce and Con­sumer Af­fairs Kris Faafoi, who is be­hind the leg­isla­tive changes. As he told Stuff in July, he has seen the prob­lem first hand: ‘‘I’ve cer­tainly had close fam­ily who’ve been in this sit­u­a­tion and it’s not pretty,’’ he said. ‘‘See­ing the things they can’t do for their chil­dren be­cause they have to pay back huge amounts of debt.’’

The prob­lem of debt is de­scribed in the foot­notes of the Cab­i­net pa­per re­leased this week. Two Wha¯ nau Ora providers, one work­ing with Ma¯ ori fam­i­lies and the other with Pa­cific fam­i­lies, said ‘‘most of’’ their clients strug­gle with un­man­age­able debt. When one sur­veyed 74 Ma¯ ori Hous­ing New Zealand ten­ants, they found 42 per cent had debt to lenders, 43 per cent had debt be­ing pur­sued by debt col­lec­tors, while a stag­ger­ing 89 per cent re­ported run­ning out of food due to lack of money, some­times as of­ten as once a week.

When many are barely get­ting by, and are of­ten very close to go­ing un­der, the ap­peal of easy credit is not hard to un­der­stand. Rapidly ac­cu­mu­lat­ing debt from high in­ter­est rates be­comes a prob­lem for an­other day.

The new mea­sures will limit debt size. An in­ter­est and fees cap means the debt can­not be more than dou­ble the orig­i­nal loan. As the Gov­ern­ment ex­plained, ‘‘If you bor­row $500 you will never have to pay back more than $1000 in to­tal, in­clud­ing all fees and in­ter­est’’.

That will ben­e­fit the bor­rower. Other new mea­sures will reg­u­late lenders, the most strik­ing a fine of up to $600,000 for breach­ing the re­spon­si­ble lender prin­ci­ples. The leg­is­la­tion also de­mands greater trans­parency from lenders and tests en­sur­ing lenders are ‘‘fit and proper’’.

As Prime Min­is­ter Jacinda Ardern said, this crack­down must be matched by the creation of more rea­son­able, even gov­ern­ment-led, al­ter­na­tives, but end­ing the debt spi­ral is the first pri­or­ity.

Few would dis­agree that preda­tory ac­tiv­i­ties tar­get­ing vul­ner­a­ble, un­in­formed, des­per­ate com­mu­ni­ties must be stopped. The big­ger and tougher prob­lems of poverty and in­equal­ity mak­ing such ac­tiv­i­ties pos­si­ble also need ad­dress­ing.

‘‘When many are barely get­ting by, and are of­ten very close to go­ing un­der, the ap­peal of easy credit is not hard to un­der­stand.’’

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