Young men in the red - Trust

SARAH JARVIS
Last updated 05:00 15/08/2014

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Banks and other financial institutions are making it far too easy for South Canterbury's young men to get into debt, says Timaru Budget Advisory Trust co-ordinator Don Macfarlane.

"There is an over-representation of young men in the 18 to 25 age group who have a reasonable income but unmanageable debt because of the ease of obtaining credit," he said.

Macfarlane said more often than not a vehicle contributed to the debt. "There's a vehicle often involved and floating around. These young men already have hire purchases and a car just tips them over."

In Macfarlane's opinion not enough questions were being asked by banks, finance companies and other lending institutions when giving loans to young males.

"The serious onus is on lenders to actually explore the real need of the loan and to explain the consequences of not being able to pay back the loan. Lenders need to look at the whole picture - they simply don't ask enough questions."

Parents bailing children out of debt is not the answer, according to Macfarlane.

"We often have to say to parents: ‘Don't bail them out ... it doesn't teach them how to deal with the consequences of their actions'.

"They need to walk into a wall."

Dealing with young men and their debt is not a new issue facing the Timaru Budget Advisory Trust.

"For so many people in this age bracket it's about avoidance. They think something will come along and save them [like a pay rise] ... I call this fairies at the bottom of the garden."

New Zealand Bankers' Association chief executive Kirk Hope said the allegations were "surprising".

"The customer's ability to service the loan is a key factor in any lending decision. It's important that people are up front to the bank about their circumstances and their ability to repay the loan."

He said defaults on bank loans were "low" because of the prudent approach that banks took.

"Banks also work very hard with customers who find themselves in financial difficulty. People who are having trouble should speak to their bank as soon as possible."

Ninety-five per cent of Timaru Budget Advisory Trust's clients are in some sort of debt.

"There is a widespread ‘got to have it now' mentality."

Macfarlane said it was imperative people sought help before they got in too deep.

"They need to seek help sooner rather than later. The penalties can be horrendous. If it gets to a debt collection agency the amount could have up to 29 per cent added on."

Asked if young men wanted to get out of debt, Macfarlane replied "too right they do".

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"It's encouraging when they do, however. Too many young men are having to learn the hard way."

Banking Ombudsman Deborah Battell said her office saw relatively little evidence of banks lending irresponsibly.

"I am uncertain whether this is because young people do not know that they can contact the Banking Ombudsman or because the majority of problems lie with non-bank lenders. If there are allegations of banks lending irresponsibly I would be keen for affected parties to contact us."

HAVE YOUR SAY

The Timaru Herald would like to hear from young South Canterbury males in debt (or concerned parents) who are prepared to share their story. Email sarah.jarvis@fairfaxmedia.co.nz or phone 687 1338. 

- The Timaru Herald

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