When rising debt becomes a black dog
A little old lady loses her job. Soon she's swamped by late payment fees on the power bill and other debts, which make it impossible for her to get financially back on track. Now she talks about how easy it would be to "top herself".
A 73-year-old man has finally got his debts under control. Then he's threatened with legal action by a creditor trying to scare him into paying up. He picks up the phone in tears, talking about ending it all.
All of these people are willing to repay what they owe. All are teetering on the edge of financial ruin. And none have any protection from the creditors baying for their blood.
These are the harrowing tales Matthew Nutter, chief executive of debt management firm KiwiDebt. deals with on a daily basis (names have been withheld to protect confidentiality).
The self-styled Debt Doctor says the people he meets are a far cry from stereotypical deadbeats.
"My clients are people who say, ‘I know I've got the debt, I know I've got a responsibility to pay it, I want to pay it'."
Most in the credit industry would recognise that, and rather than hounding people into bankruptcy, would waive penalties and work out repayment plans in everyone's best interest.
But if a debtor owes several people money - as they often do - it only takes one pushy lender to ruin it for everyone.
Nutter's clients ask their creditors to communicate with KiwiDebt directly, but some simply continue to target the borrower.
Nutter has had to send harassment notices to companies who won't let up. "One of our clients had eight calls in one day - 20 calls in a week."
New technologies are only making the problem worse.
"They're using auto-diallers, normal telephone calls, text messages, email messages and of course, letters in the mail," says Nutter.
Nutter's had a gutsful of the bullying. He says New Zealand lags far behind the United States, where all the behaviours described above have been illegal since 1977.
The Fair Debt Collection Practices Act in the US forces collectors to stop calling if the debtor asks them to knock it off. Collectors aren't allowed to threaten legal action if they have no intention of following through, and can't call you at work.
Calling outside the hours of 8am-9pm is also off-limits, and they have to comply if you nominate a third party as a point of contact.
Here you're protected from threats of violence, but almost everything else is fair game.
Some of the most aggressive are said to be "payday lenders", who offer small loans at exorbitant interest rates to tide people over until their next pay.
Arguably, they fill a gap in the market as lenders of last resort. They have a range of fees and tactics.
One of the more prominent payday lenders is Finnish company Ferratum, which set up shop here in 2011. Some of its interest rates range higher than 500 per cent, meaning a $1000 loan can become a $1500 debt within five weeks. If the loan isn't repaid on time, steep default fees and interest apply.
Ferratum country manager Richard Yoon was defensive when asked how many times a day his staff would typically contact debtors.
"It depends. Why should I tell you that?" he says.
He insists his staff are well-trained and friendly to customers.
Another payday lender, SaveMyBacon, charges annual interest rates of almost 550pc and a missed payment fee of $60.
The company says it does send borrowers texts and emails if they miss payments.
But operations manager Blake Swift says once contact is made, interest is capped at 45 days, and a repayment schedule is worked out.
Nutter thinks debt is one of the biggest root causes of violence.
"We call it ‘kick the dog syndrome'. You get hassled by your creditors, or your boss. You take it out on your kids, partner, pets."
Often, there's nowhere to go to get help.
Auckland clinical psychologist Steve Malcolm says mental health professionals do need to talk about debt more with their patients.
However, sessions can be quite expensive, "and that's probably not a great combination with somebody who's in debt".
Malcolm recently treated a man who borrowed money so he could take his wife and kids to visit their homeland.
His work started to dry up when they got back, and he struggled to support the family while also helping his wife through higher education.
The client became very depressed and had thoughts of self-harm, which Malcolm says isn't uncommon.
Supposedly, the Harassment Act protects people from any form of unwanted contact. But there's a defence for activities with a "lawful purpose" - which almost certainly covers debt collectors going about their business.
Two lawyers specialising in the field were unsure whether lawful purpose could be over-ridden by the sheer volume of calls, or the "tone" of the messages.
The issue rarely comes to light because this sort of harassment is a civil matter, not a criminal offence. Debtors are the last people capable of fighting a series of courtroom battles.
He's adamant debtors need better protection, but has had little joy with the MPs he's contacted.
There is one potentially saving grace. The Credit Contracts and Financial Services Law Reform Bill, introduced in April, contains a range of measures for protecting consumers.
Labour's consumer rights spokeswoman Carol Beaumont says the Government has been too slow to act. The Bill is still to go to the select committee stage.
Consumer Affairs Minister Craig Foss says ministry staff are in discussions with the debt collection industry.
"That discussion could go from self-regulation, right through to regulation itself. Often the fear of regulation manages to sharpen quite a few pencils pretty quickly.
- © Fairfax NZ News