Archive for the ‘Loan Sharks’ Category
The damage caused by loan sharks lending irresponsibly and at excessively high interest rates is no joke. In the current environment where the cost of living is increasing dramatically and many New Zealanders are struggling to make ends meet loan sharks are thriving.
This is the reason that a community alliance to stop loan sharks was recently launched with organisations like the Salvation Army, the NZ Federation of Family Budgeting Services, FINSEC (the Finance Sector Union) and many others committing to do what they can to put pressure on Government for action to be taken. Along with my colleagues Charles Chauvel and Carmel Sepuloni, I was present at the launch to stress our continued commitment to regulation in this area. Carmel and I will both be entering Members Bills which seek to deal with excessive interest rates and irresponsible lending in the next Ballot. I will continue to keep asking the Government why they are failing to deal with this blight on our community.
The response of the Government over the last two weeks has been telling. At the time of the relaunch a Spokesperson for the then Minister of Consumer Affairs John Boscawen was that rules governing loan sharks were ..”being examined as part of the review of the Credit Contracts and Consumer Finance Act”. Of course there was no mention that the suggestions in this review did not include any regulation of interest rates. Furthermore the Government has delayed by the review over 12 months.
Then there was the launch of Responsible Lending Guidelines by the Financial Services Federation. I congratulated the Federation and acknowledged these best practice voluntary guidelines are a step in the right direction. However these guidelines do not regulate excessive interest rates and they will be ignored by the worst predatory operators. It was absolutely appalling that the Government media release, in the name of Paula Bennett, seemed to indicate that the guidelines showed the Government was doing something and that loan sharking would not be tolerated.
A full week later National MPs released a generic media release with just the name of the electorate changed. All of them had apparently seen loan sharks offering interest rates of 8% per week that can add up to over 2000% per annum. All of them welcomed the new guidelines as if they would help in dealing with these sorts of excessive interest rates.
In the face of real harm in our community and a huge demand for action to be taken to deal with irresponsible lending and excessive interest rates these sorts of statements are opportunistic and an absolute joke. It is time to get serious and do something that will really help vulnerable consumers.
Today in Onehunga a community coalition to Stop Loan Sharks was launched. Throughout last year I committed to continuing this campaign no matter what happened to the ‘Credit Reform (Responsible Lending)’ Bill I had picked up from Charles Chauvel. Since the defeat of the Bill at the hands of National and ACT I have been constantly asked “why” and “what next”.
And of course the need for action has continued increasing – ever increasing prices, evidenced today by a huge increase in the CPI, and static or reducing incomes (often starting from an inadequate base!) are a recipe for disaster for many New Zealanders. New Zealanders who struggle to make ends meet, New Zealanders who need food parcels and increasing numbers of New Zealanders who end up taking out loans at excessive interest rates that they cannot realistically pay back.
Today I was joined by my colleagues Charles Chauvel, Carmel Sepuloni and Green MP David Clendon all of whom along with the rest of our fellow party members will continue to campaign on this issue within Parliament. Carmel and I will both be putting Members Bills in the ballot. Both will deal with the need for responsible lending practices and both of which (in different ways) seek to limit excessive interest rates.
We were joined by groups and individuals committed to dealing with the fringe lending sector. They included Church organisations, budgeting organisations, unions, lawyers, anti-poverty groups and credit unions. In addition to me the speakers included the Salvation Army, the NZ Federation of Family Budgeting Services, FINSEC, Charles Chauvel and the Mangere Budgeting Service. We were also addressed by a fine young man who last year, not far from where we were today, went ‘undercover’ seeking to obtain loans from a number of loan companies. He pointed out how easy it was to get money and how no real checks were undertaken. One of the interest rates he did manage to get disclosed was 24% per month.
In the course of the launch we heard of the massive increase in food parcels being supplied by organisations like the Salvation Army, the massive increase in workloads of our budgeting services and the increasing level of indebtedness of those seeking help at budgeting services. The case studies we heard included a pensioner with six loans with interest rates varying between 25% and 49% and a Samoan family of five with multiple loans with interest rates between 19% and 82%. We heard of the reality of many families (both on benefits and in work) where paying food and rent comes after the payment of high interest loans. The impact on children was stressed and how the consequences can be with them for the rest of their lives.
The Government’s response is seen as not only inadequate but also irresponsible. The delay in the review of Consumer Credit is impossible to fathom. The delay was a deliberate decision of the Government. The Ministry of Consumer Affairs website states that submissions which closed in August 2009 are still being scrutinised! It should be noted that while there are positive suggestions from that review which are languishing this doesn’t include proposals to deal with excessive interest rates.
The Community Coalition to Stop Loan Sharks will seek in this election year to keep the issues centre stage and to put pressure on all parties to identify solutions. Solutions that other countries have been far more proactive in seeking than New Zealand.
In the end this issue is about people, often people who have children, people who are poor and who are vulnerable. How we react to this issue is a measure of our sense of decency and fairness. I am absolutely clear that most New Zealanders find loan shark behaviour abhorrent and that they want the Government to take action.
A reminder of a previous post on school PPPs :-
Public Private Partnerships seem to be an obsession of the National Party but I think they would have more success if they concentrated on PPPs of another kind – ‘Put Party Politics’ aside.
Speaking in the House last night I congratulated National’s Jackie Blue for putting forward the Consumer Guarantees Amendment Bill.
Labour supports this Bill for being a sensible and fitting response to concern in the community over consumer protection. It is about protecting the consumer in the evolving, modern market-place we currently live in. Politicising aside, this is a common sense Bill which addresses real issues and concerns in the community.
My colleague Carol Beaumont also put forward a sensible and much-needed Bill.
Carol’s Credit Reforms (Responsible Lending) Bill, more commonly known as the ‘Loan Shark Bill’, aims to protect the most vulnerable people in our community by cracking down on loan sharks.
However, National was unable to put party politics aside and voted down Carol’s Bill in the House last night.
It’s a shame when pieces of legislation that will help the most susceptible people in society are voted down due to party politics. This is a bill that would have prevented many families from getting into mounting debt.
It’s interesting to note the contrast between Carol’s much needed Bill and National’s Paul Quin’s farcical Electoral (Disqualification of Convicted Prisoners) Amendment Bill.
I want to congratulate the Attorney General on the opinion he expressed towards Paul Quin’s nonsensical and jumbled attempt at tackling the crime issue in New Zealand.
Mr Quin’s Bill sets out to prevent prisoners who have committed a minor crime the right to vote, if they are detained in prison on Election Day.
Currently, prisoners have to be detained for over three years before they are denied the right to vote. I didn’t realise that for Mr Quin it was such a burning issue in the community that this needed to be altered.
It is unsurprising that the Attorney General stated that Mr Quin’s Bill was inconsistent with the Bill of Rights Act.
I want to tell Mr Quin that all New Zealanders are worried about the spiralling crime rate in New Zealand and this Bill is a slap in their face.
These are loud gestures that don’t tackle the real issue. The crime statistics make grim reading since National have taken office.
– There were 451,405 recorded offences in 2009, an increase of 20,002 from 2008
– Violent crime increased by 9.2 percent in 2009
– Domestic Violence increased by 18.6 percent in 2009
– 65 murders were recorded in 2009, 13 more than 2008
For all of the National and ACT’s tough talking, all we got is an increase in crime.
We need real policies, not empty rhetoric. Or we should tell National’s dear leader that PPP matters.
I don’t want to get into too much detail while there are ongoing investigations, and hopefully even new investigations to be opened.
But todays Herald shows us three different ways of dealing with creditors.
While the massive (at least for Oamaru Timaru) rally in support if the Hubbard family is described as misguided by the Herald editorial and Brian Gaynor properly warns us that regulations not personalities count theirs is a quiet dignity that contrasts with the wide boys currently or formerly based in Auckland.
Rod Petricevich living in a $4.4m home while out on bail on Bridgecorp related charges is being pursued around Auckland by debt collectors chasing the $2.2m transfered to a family trust in order to keep it away from investors. They got the Porsche earlier.
And poor old Mark Hotchin is pulling the $30m currently tied up in his new Auckland home out and staying offshore as is his mentor Eric Watson. Poor guys don’t want to look into the eyes of people who lost nearly half a billion dollars as they ripped tens of millions out of Hanover Finance and partied around the world. And it is still continuing.
Above John Key saying National would never sell Kiwibank.
Below John Key denying he said it.
Just over two months ago I launched my campaign to stop loan sharks. In one weeks’ time, Wednesday 26 May, the First Reading of the Bill that is part of this campaign – The Credit Reforms (Responsible Lending) – will take place. Currently I believe I have support from five parties. Unfortunately this will not be sufficient. I need your help to urge National to vote for the Bill to go to Select Committee.
Here’s why I think you should support the Bill and work to get National to support it.
The Bill is a genuine effort to deal with aspects of a truly harmful industry, an industry that causes damage to many low income families who struggle to make ends meet. Extremely high interest rates, some in three or four figure percentages, and irresponsible lending put families at risk. At risk of a never ending cycle of high interest borrowing and much needed money going to lenders rather than on things that families actually need. The tales of human tragedy I have heard over the last two months are truly terrible. We need to do something.
I have spoken to hundreds of people including many from the agencies that deal with the people who are in terrible financial trouble because of loan sharks. Every Budgeting Service I have met with tells me the majority of people they see are hooked into high interest rate loans. One in Mangere told me that everyone they see is in this position. No-one denies the problem and everyone I have spoken to wants something done.
There is an opportunity here for Parliament to show leadership, for all parties to support this Bill to a Select Committee so it can be properly scrutinised, so that the public can make submissions and share their experiences and so that we can look at what is being done in other countries. Interest rate caps for example are widespread internationally but you would not know this if you listened to the Minister of Consumer Affairs or indeed some National MPs who assert that interest rate caps won’t work. Some are saying the Government is already working in the area of consumer credit. There is some truth in that statement as there is a Review of the Credit Contracts and Consumer Finance Act which is proceeding at a glacial pace (sadly) There were some very good suggestions made in the Discussion Paper and in the 59 responses to it. Suggestions in the area of disclosure of loan terms and security for loans are a couple of examples. I have said to the responsible Minister, Heather Roy, that the review is weakest in the area of ‘fringe lending’ and that my Bill alongside any proposals the Government may (finally) make could be considered together at a Select Committee. Many people have made specific suggestions to me that would really add to the possible range of ways we can address this problem.
And then of course there is at least one National MP who is saying my Bill doesn’t go far enough without concrete suggestions for anything else. I have been explicit that the Bill is not the whole answer. How can it be when there are a range of issues that surround the loan shark industry eg inadequate income levels, difficulties for some in accessing credit on a fair basis, poor enforcement of current protections and of course shocking financial literacy and understanding of consumer rights. There are a range of additional things that could and should be done. I would welcome any suggestions for strengthening my Bill or dealing with related issues.
None of these excuses that I am hearing that some National MPs are trotting out are reasons to vote against my Bill. In the community people are asking me questions like – how could National vote against sending this to a Select Committee? Will they do so just because you are a Labour MP? Well let’s see next week but please try to encourage National to do the right thing, I am certainly continuing to do so.
The more I have heard in the last two months the more passionately I feel that we must regulate this industry as well as continuing to seek solutions to the wider set of issues surrounding it. I committed at the launch of the campaign that irrespective of the outcome of the vote on the Credit Reforms (Responsible Lending) this campaign will continue. The support for the campaign is wide ranging from Churches, Community Law Centres, Budgeting Services, Pacifica and Maori organisations, Unions, Citizens Advice Bureaus, student groups, Women’s organisations, Local government politicians, lawyers and decent concerned citizens including some National Party voters and people who have personally been hurt by this industry. My resolve on this matter has only strengthened over the last two months. If you want to help you can act now and join in with the ongoing campaign. If you want more information go to www.stoploansharks.co.nz
Yesterday at Mangere I launched my Stop Loan Sharks campaign. Along with Sua William Sio, Len Brown Mayor of Manukau (and prospective Mayor of Auckland), Darryl Evans Mangere Budgeting and Family Support Services and Andrew Shann a long time campaigner against loan sharks (not pictured) I described elements of this exploitative practice and possible solutions.
I have been impressed by the level of support and interest in the lead up to the launch and in the 24 hours since. The issue is well understood to be a significant problem within low income, Maori and Pacific communities but even so people are shocked by the details.
One story I told yesterday was of a Tongan family who needed $3,200.00 to repair their car. This family has 5 children under the age of 13. Husband works as a Store man at an airport based company and the wife is a stay at home mother. His total take home pay is $598.00 per week. They took out a loan with a company in Otahuhu and put up their car (valued at $4,500 as well as two cultural mats which had been in their family for over 80 years. The loan was for $3,500.00, interest charged was 55%over 24 months, which meant they had to repay $1,925.00 in interest or in total: $5,425.00. They defaulted on the payment in the 3rd month when default payments were established. Some 9 months later this family have had the car repossessed by this company and they also had to pay for the towage and storage of the vehicle. At today’s date they owe just under $9,800.00 and the case is still not resolved. The family want their mats returned but the company refuse until such time the debt is paid off in full. They have no car and still owe almost $10,000.
This is not an isolated story. Hard economic times are good news for loan sharks. For many New Zealanders struggling to make ends meet loan sharks end up being their only alternative. There are a range of issues that make this the case – people struggling on completely inadequate incomes – low wages or benefits; people unable to get credit from mainstream banks; ease of credit from some providers coupled with low levels of financial literacy. Whatever the reason people end up paying obscene interest rates and in a far worse financial position than they started.
I want to acknowledge the work of community law centres, budgeting services and Citizens Advice Bureau who seek to help people struggling to make ends meet, unfortunately usually when they have become trapped in a spiralling cycle of debt. Their work is extroadinary especially when the real limits of their resourcing is considered.
The Stop Loan Sharks campaign aims to shine the light on this unacceptable situation and build support for action. I will be encouraging people to share their stories and putting the heat on the Government to do something concrete to end this exploitation. The campaign includes building support for my members bill the ‘Credit Reforms (Responsible Lending) Bill. Initially submitted by Charles Chauvel , who remains along with Andrew Shann a keen advocate for legal reform in this area, the Bill will have its First Reading at the end of April.
The Bill allows for maximum interest rates to be set; a power that doesn’t currently exist in New Zealand law. It also requires the lender to reasonably believe the borrower will be able to repay the loan and limits the ability of loan sharks to recover more than they initially lent in the event of a default. Finally, it allows registered pawnbrokers to charge administration fees, thereby removing the need for higher interest rates.
The capping of interest rates, despite what the Minister of Consumer Affairs says, is not radical or unusual – many countries have such provisions eg Australia, Japan and Canada for example. Barrack Obama is currently in the process of capping interest rates in the USA.
I believe this Bill should be supported by all parties to Select Committee to be thoroughly scrutinised and debated. It is a genuine attempt to deal with a real problem. I will be seeking the support of politicians across the House although Heather Roy has already rejected the Bill on ACT’s behalf.
Whatever happens to the Bill I intend to continue campaigning on this issue. Next week a website www.stoploansharks.co.nz goes live. It wll provide you with ideas and updates on how to help stop loan sharks.