Rising debt amongst the poor compounds social deprivation
Rising debt levels amongst the poor compound social
It is not surprising that the suburbs identified by the recent New Zealand Deprivation index as being most social deprived are also the areas frequently targeted by mobile lending trucks and payday and doorstep lenders.
Referring to New Zealand’s latest index of socioeconomic deprivation by the Department of Public Health, University of Otago, Wellington, the Education and Development Manager at Westforce Credit Union, Tu Nuualiitia, said today that assertions by researchers that the geography of poverty within New Zealand will take generations to change, is optimistic at best because the problem is compounded by debt.
“People are digging themselves deeper into debt everyday and reversing that trend must be a priority before anything else can happen.
“Loan sharks make holes in people’s lives that are almost impossible to escape. The index researchers used different variables for calculating the deprivation index, like income, employment, owned home, living space and transport, but improvements in any of these areas would be undermined by rising debt.
“It’s not how much money you earn, it's how much money you manage to keep – which is not very much when their payday loan is charging more than 800 per cent in interest,” he said.
Mr Nuualiitia said loan sharks are active in many of the poorer Maori and Pacific areas identified by the index because they know that socially deprived people are vulnerable, and their use of aggressive marketing practices repeatedly undermines any assistance initiatives.
Credit Union Westforce is active in many of the areas identified by the index as being amongst the most socially deprived in New Zealand, including Mangere, Onehunga, Papakura and Avondale, and recently launched interest free payday loans to try and counter loan shark activities.
“We have an opportunity right now to make a massive contribution to reducing social deprivation and poverty in many areas with the Government’s revision of the Credit Contracts and Consumer Finance Act 2003, but its slipping through our fingers.
“Unlike similar legislation in Australia, the United States and the United Kingdom, the New Zealand legislation does not cap interest rates that loan sharks can charge.
“While the legislation puts onus on lenders to disclose details of interest and fees, the most vulnerable communities are struggling with low levels of literacy and financial literacy, never mind the skills required to make sense of loan shark contracts
“When your back is to the wall, as it is for many of these people, you will take help from any quarter to relieve the pain, only for it to come back ten times worse when the interest rates and penalties start mounting up.”