Parasites on Poverty Campaign Launch
6 June 2005
Parasites on Poverty Campaign Launch
Tonight GPJA will launch its “Parasites on Poverty” Campaign.
The campaign targets Loan Sharks and Pokie machines – these are the “Parasites on Poverty” to which the campaign name refers – and it will be launched at the regular monthly forum of GPJA – 7.30pm at Trades Hall, 147 Great North Road, Grey Lynn. (Speakers at the Forum are John Stansfield of the Problem Gambling Foundation and John Minto – GPJA spokesperson – who will outline the campaign)
The campaign is in response to the financial crisis which exists in low income communities when families try to bridge the gap between low wages/low income and the money needed to keep a family above the poverty line. The problem exists throughout New Zealand but is at its most acute in low income communities.
The government’s own unpublicised research points to the extent of this human tragedy. The March 2005 Newsletter of the “Ministry of Consumer Affairs and Energy Safety Service” reports on a telephone survey of 700 people they undertook into the borrowing habits of New Zealanders. Under the heading “Key Findings” the Ministry reports –
“The research found that more than half (53%) of all respondents had borrowed in the past 12 months. Of these, 28% reported they had borrowed for essential items such as paying for household groceries or to pay the power bill”
These figures are a national scandal. Were this a crisis in the sharemarket where the incomes of New Zealand’s wealthy elite were threatened the government would react in the blink of an eye. However people on low incomes are seen as politically expendable.
The campaign will include community action as well as pressure on the government to act. More broadly it aims for a healthier society based on “empowering local communities” to decide important issues in the face of poor regulation and unsympathetic governments.
The issues of loan sharking and pokies are often directly linked and despite the fact they have such a HUGE social impact these issues usually come under the radar of society in general. They are problems across the whole community but have their sharpest edge in low income communities.
Even to a casual observer the crisis is palpable. In Auckland it is most prevalent in West Auckland and South Auckland. In both areas in the last couple of years loan shops have sprouted like mushrooms. In other centres around New Zealand middle and low income communities have also been targeted.
This explosion of Pokies/Loan shops/Pawn shops – often side by side – in these communities comes with a massive loss of limited community income. For example $92million is extracted each year from the Manukau region by pokie machines alone!
Within ethnic communities – eg Pacific peoples – the problems are often endemic. Last year we sent Minister of Finance Michael Cullen the example of Lelei Finance which operates from an office in the Mangere Town Centre. Lelei Finance offers small secured loans at a barely believable interest rate of 25% per month. Then in typically despicable fashion Lelei publishes advertisements with the photos and names of people unable to meet their loan repayments. These photos appear in papers such as the “Taimi o Tonga” newspaper which circulates in the Auckland Tongan community. The devastation this causes in the community for the families and extended families is immense. Loan Sharks like this are feeding in a cannibalistic manner on the community.
Lelei is by no means on its own. People in these communities tell us of interest rates of 20% per week being not uncommon for cash loans for essential living expenses. It is a frequent occurrence for a person to borrow $100 to pay an electricity bill for example but pay back $300 to $400 over the following 2 or 3 months. Typical also are cases where a person borrows $5000 to purchase a car and ends up paying back $14,000 over the following 2 years.
Other companies with lower interest rates create much the same effect by charging large administrations fees. For example South Pacific Loans offers loans of $500 at an interest rate of 16% pa. However there is a $200 booking fee which brings the finance rate to more than 60% over one year. This company – which won the Best Emerging Business Award in the Manukau Business Excellence Awards shortly after it opened 4 years ago – offered a free XMAS ham for all borrowers during December! Such benevolence!
We are not aware of a single MP with constituents in any low income community to have spoken out against loan sharking and pokie machines which are devastating families in their communities.
Last December GPJA wrote to Finance Minister Michael Cullen asking for action on loan sharking. We sent copies to two Labour MP’s who have constituents in low income communities – Taito Philip Field (Mangere) and Ross Robertson (Manukau East). We received no response from any of these 3 Labour members of parliament.
In fact so far removed are the main political parties from any interest in poverty that the Labour Party – even after its assistance package for low income families takes effect – will still leave some 175,000 children living in families below the breadline. National Party policy is no better.
Aims for government policy change as follows -
A “simple English” loan form – translated as necessary – would be required for all lending (cash loans, HP purchases, car purchasing, credit cards, mortgages etc) This loan form would feature the amount borrowed; the total amount to be paid back; the finance rate (which includes interest charges and fixed charges) and the number, frequency and amount of repayments.
Maximum finance rates would be set for all borrowing and related to the rate of inflation.
Penalty rates for non payment would be set at the finance rate applied to the amount overdue.
All commercial money lenders would be registered with all loan documents themselves registered (as occurs for bond payments in residency agreements)
Failure to register and use the “simple English” loan form would remove any legal redress for a lender.
A government funded education campaign for schools and the wider community with information on the dangers of debt and debt repayment.
Local communities (through local councils or local neighbourhoods) be given the power to refuse to have any pokie machines in their area through a community decision or a local referendum. (Currently local authorities have the power to ban NEW pokie sites but not those established before September 21 2001)
A government funded education campaign for schools and the wider community with information on the dangers of pokie machines and the destructive impact of gambling
The Campaign Strategy
The campaign will focus firstly on the Manukau community and involve
Letters to government to set out the central demands of the campaign as outlined above
Community leader endorsements for the policy changes sought through the campaign (civic leaders, councillors, community board members, community leaders, school principals, MP’s and candidates, community groups)
A series of public meetings in communities to build support for the campaign
More specific details of campaign activities will be revealed as these are rolled out. However in a broad sense these will include –
- Information campaigns involving posters and leaflets etc
Approaches to ethnic community newspapers to refuse to run loan shark advertisements and adds with pictures of loan defaulters
Pickets of loan shark premises
Civil disobedience activities aimed at Pokies and Loan Sharks
A “Parasites of Poverty Website” which will include the following
A list of groups/individuals supporting the campaign objectives
A “name and shame” section for premises with pokie machines
A “name and shame” section for loan sharks
Leaflets/posters to download for community groups
A place for people to tell their stories re pokies/loan sharks
Support information for people suffering gambling/loan problems (Contacts for CAB’s, law centres, budget advice services etc)
Regular campaign updates
(The website at www.pop.org.nz is running but not yet with the features listed above)
(1) The companies mentioned above
Sole director and sole shareholder UFI, Ilaiasi Lelei 14 Solent Street, Mangere, Auckland
Loans (sole director Christopher Connell Parkinson)
PARKINSON, Christopher Connell 1 Hopkins Crescent, Kohimarama, Auckland
PARKINSON, William Frank 424 Remuera Rd, Remuera, Auckland
The former Credit Contracts Act was replaced from 1 April 2005 by the Credit Contracts and Consumer Finance Act (CCCFA) 2003.
According to the background information on CCCFA 2003 it improves the information disclosure requirements for consumer credit transactions and regulates methods of interest charging, fees and payments. It also regulates consumer leases and allows for changes to the terms of contracts on the basis of hardship to a consumer. The CCCFA provides for the reopening of oppressive credit contracts, penalties if the Act is breached, and an enforcement role for the Commerce Commission.
However these changes will make little difference for loan sharks. It will regulate methods of charging but put no restriction on the charges themselves. For most this will simply require a couple of extra lines in their contract agreements. The new Act has no restrictions on -
Publication of photos or details of loan defaulters
Providing “incentives” for people to take out loans
For example here is a description of the part of the Act which covers interest charges.
36 End of day
(1) A consumer credit contract may specify when a day ends for any purpose under the contract.
(2) Different times of the day may be specified as the end of the day for different purposes.
37 Creditor to ensure that contract specifies annual
interest rate or rates
(1) This section applies if interest charges are or may be payable under a consumer credit contract.
(2) Every creditor under a consumer credit contract must ensure that the contract specifies the interest rate or interest rates under the contract in terms of an annual interest rate or annual interest rates under the contract.
(3) An annual interest rate may be specified by describing how the annual interest rate is determined in accordance with the contract.
38 Early debit or payment of interest charges prohibited
(1) A creditor must not, at any time before the end of a day to which an interest charge applies, require payment of or debit the interest charge.
(2) A consumer credit contract may provide for an interest charge to become payable or to be debited at any time after the day to which it applies.
(3) Subsection (1) does not apply to the following:
(a) the first payment or debiting of interest charges under a consumer credit contract if the payment or debiting relates to interest charges for a period that is less than the normal period for which interest charges are to be periodically debited to the debtor's account:
(b) the debit of an interest charge under a consumer credit contract before the end of the period to which the charge applies if—
(i) the charge is debited on the last day of the period; and
(ii) the amount debited is not treated by the creditor as part of the unpaid daily balance for that day for the purpose of calculating interest charges under the contract.
39 Limit on interest charges
(1) The maximum amount of an interest charge that may be imposed or provided for under a consumer credit contract is,—
(a) in the case of 1 annual interest rate applying to the unpaid balances under the contract, the amount determined by applying the daily interest rate to the unpaid daily balances; or
(b) in any other case, the sum of each of the amounts determined by applying each daily interest rate to that part of the unpaid daily balances that it applies to under the contract.
(2) However, an interest charge under a consumer credit contract for a week, a fortnight, a month, a quarter of a year, or a half of a year may be determined by applying the annual interest rate or rates, divided by 52 (for a week), by 26 (for a fortnight), by 12 (for a month), by 4 (for a quarter of a year), or by 2 (for a half of a year), to the whole or that part of the average unpaid daily balances that it applies to.
(3) This section does not prevent the imposition, in accordance with the consumer credit contract and section 40, of default interest charges.
40 Default interest charges
(1) A consumer credit contract must not provide that an annual interest rate applicable under the contract to any part of the unpaid balance will differ according to whether the debtor has breached the contract.
(2) However, a consumer credit contract may provide for a differential rate if the higher rate is imposed only—
(a) in the event of a default in payment and while the default continues; or
(b) in the event of the debtor causing the credit limit under the contract to be exceeded and while the credit limit is exceeded.
(3) This section does not limit Part 5 or any other rule of law that limits the amount of a default interest charge that may be imposed.
(3) Ministry of Consumer Affairs
The Ministry of Consumer Affairs has the following page of advice for people getting cash loans: