Loan sharks leaving families unable to buy food, say experts

NZ Herald Apr 19, 2011

Children are going to school hungry because their parents don’t have enough money left for food after paying exorbitant interest rates to moneylenders, budget agencies say. Family Budgeting Services Federation chief executive Raewyn Fox said her agencies’ clients owed a total of $63 million to finance companies, exceeding all other forms of debt except mortgages for the first time. Mangere Budgeting Service chief executive Darryl Evans said debt repayments meant 1000 of his clients, with an average three children each, spent an average of only $83.33 a week on food – less than half the $226 which Otago University’s annual food cost survey found would be needed for a “basic diet” for two Auckland adults, two 5-year-olds and a baby.

…The agencies spoke yesterday at the launch of a campaign by the Labour Party, unions and other groups to crack down on loan sharks by capping interest rates and requiring lenders to ensure borrowers can afford to repay a loan before approving it. Labour MP Charles Chauvel said loan sharks were “the only part of society that relies on defaults” – deliberately lending to people who could not afford to repay so they could repossess the borrowers’ assets such as cars, beds and fridges.

…A spokesman for Consumer Affairs Minister John Boscawen said the rules governing loan sharks were being examined as part of a review of the Credit Contracts and Consumer Finance Act. Submissions on a discussion document closed in November 2009. He said work on the issue had slowed while officials worked on a reform of other consumer laws, including extending consumer protections to Trade Me and other auction sites.