$65 million in Overdue Debts
Budget Service Clients Present $65 million in Overdue Debts
New clients to the Federation of Family Budgeting Services, over a twelve month period, owed a total of $64,692,741 in overdue payments.
The Federation has recently compiled its annual statistics for the twelve months to 30 June 2006. Their analysis shows the total debt arrears figure, which is a measure of the overdue portion of client debts, has risen by over 14 percent year on year. Taking into account the reduced number of clients over this period, this is a massive average increase in overdue payments of 27 percent per client.
Federation services throughout New Zealand gave in-depth, ongoing advice to 10,733 clients over the twelve months of the reporting period. Their statistics show these clients now have an average of $6,027 worth of outstanding debts. Last year that figure was just $4,736 per client.
Federation President Shirley Woodrow says its little wonder people are in strife.
“We are constantly seeing younger people with higher levels of debt. Some of our budget advisers see contracts where the client can’t even afford the first payment. There is almost an expectation out there now for families to take on more debt.”
The situation is certainly a lot worse than it was a decade ago and some of our longer serving volunteer advisers are throwing their hands up in the air and wondering what can be done about it, she says.
The drastic increase in overdue debts comes at a time when inflation is soaring, the annual inflation rate increased by 4.0 percent over the same period. Federation Chief Executive Raewyn Fox says higher petrol, food and accommodation costs put the squeeze on families already living on tight budgets.
“The increases in the cost of living are really making a difference. It’s the basics that are pushing people over the edge now. Petrol, in particular, is making it real tough for some families; especially for those in rural areas.”
As Federation clients are less likely to own their own homes the debt arrears they present are predominantly from credit contracts, credit cards, personal loans and government debt and fines. Unfortunately, these forms of debt usually come with hefty interest rates and are compounded by overdue payment fees.
The ease of access to credit, along with the lack of rigorous lending criteria from some finance companies, is not just having a major impact on the economy but is also creating more complex client cases and this is why debt crisis is becoming much more common in New Zealand, says Mrs. Fox.
“The complexity of credit contracts, and juggling multiple debts, which some finance companies do not have robust enough systems to check for, is increasing the complexity of many cases our advisers deal with. Of course, if clients come to a budget service before they get into financial trouble, the cases are much more easily managed.”
She urges people to take their credit contracts to a Federation trained adviser to analyse before they sign them. This expert advice is free to the public and could save clients a lot of time and expense later on, she says.