Loan sharks circle poor
Christchurch's most at-risk residents are being targeted by dodgy lenders and by mobile-truck shops, with some scouting for sales outside welfare agencies, the City Missioner says.
Michael Gorman is calling for tougher laws on high-interest payday loan companies after a resident visited the City Mission seeking help for what he says was "one of the worst loan schemes we've ever seen".
He also sought a tightening of rules around mobile-truck shops, saying his staff frequently noticed lenders parked up outside the building trying to attract customers.
Mission social worker Connie Smart said a desperate mother-of-four recently visited the mission unable to repay a credit from an online short-term loan company.
She had borrowed just over $500, but was faced with an annual interest rate of 584 per cent, to be paid over three weeks – accruing her almost as much as she borrowed in interest.
A clause in the contract granted the loan company legal power of attorney to take 20 per cent of her income directly from her employers if she defaulted on a payment, until the loan was paid.
"I don't even know if she did realise how bad it was," Smart said.
She referred to another loan company saying: "Home Direct come and sit outside, trying to get our clients to sign up, knowing they're the most vulnerable".
A spokeswoman for online and mobile shopping company Home Direct said the company had "strict regulations", and items could not be sold to people without a long-term residential address.
In reviewing a GPS tracker the company had found a mobile store "has been in that vicinity over the past few months and these visits coincided with interactions with customers in nearby apartments.
"On further investigation, we have found while making these sales calls, a sales person has on occasion been approached by long-term customers who have temporarily needed to stay at the mission," she said.
"Home Direct will be reviewing this matter internally and taking the appropriate action."
Gorman described the practice as "immorality on a grand scale".
Christchurch Budget Service chairman Don Johnson said they had seen a 40 per cent increase in clients this year.
Dodgy lenders had disappeared for a while, but were now "coming back with a vengeance".
One client of the Budget Service was being called every 10 minutes by a loan company after he defaulted on a repayment.
He had also heard complaints of a loan company frequenting the city's poor areas in order to make a sale. "They don't do it in Fendalton, but they certainly do it in some other suburbs."
Labour Consumer Affairs spokeswoman Carol Beaumont said regulations imposed on the companies were "completely inadequate". Her Credit Reforms (Responsible Lending) Bill was voted down in July 2010.
New legislation aiming to curb dodgy lending had its first reading in Parliament in September.
Minister of Consumer Affairs Craig Foss said the Government was "currently overhauling consumer laws, and creating a new law to protect vulnerable Kiwis".
A representative from a loan company called Cash in a Flash said he "could not comment on individual cases" but said the company is "fully compliant of the laws of New Zealand".
Blake Swift, of short-term loan company Save My Bacon, said it was "trite to say that short-term lenders prey upon the vulnerable". Seventy-five per cent of first loan applications were declined.
- © Fairfax NZ News
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