Christians Against Poverty is calling on the government to ban the use of vehicle immobilisers in the vehicle finance industry.

The call comes as part of Christians Against Poverty’s ‘Lifting the Bonnet’ report into unethical practices in the vehicle finance industry in Aotearoa, New Zealand.

Says Michael Ward, Senior Policy Advisor at Christians Against Poverty:

“Lenders are making people pay to have vehicle immobilisers installed, and then immobilising their car when they miss repayments. This is degrading for people, and often dangerous, particularly for those with children.

“Christians Against Poverty’s client Valeti* couldn’t pick up her children from day care after work, because her car had been immobilised. Another client had her vehicle immobilised at night in winter in a remote location with two toddlers. She had to abandon her car and walk along the highway with her children until she found phone reception.

“Vehicle Immobilisers were designed to prevent car theft—not to be used as a debt collection tool. It’s entirely inappropriate to use them in this way.

“Christians Against Poverty therefore calls on the government to ban the use of vehicle immobilisers as a punitive measure for forcing repayment—or at least make it clear that a responsible lender would first exhaust all other options to arrange repayment.”

Christians Against Poverty is also calling on the government to follow other countries and ban flex commissions on interest and insurance.

“The higher the interest rate, and the more add-on insurances, the higher the commission is for dealers. So from the very start, there is an incentive to make car loans as expensive as possible,” says Ward.

“We see the effects of this every day at Christians Against Poverty: One out of every two families who come to us for help have out-of-control car loans stacked with poor-value add-on insurances, and exorbitant fees and interest. Families simply can’t afford the huge weekly repayments, but they rely on their cars to get to work and transport their children to school, so they sacrifice essentials like food and power to avoid repossession. It’s a recipe for financial hardship and misery.

“Our client, Kayla, was sold a defective vehicle on finance, stacked with poor-value add-on insurances—none of which covered mechanical issues. When her car repeatedly broke down, the mounting costs of continuous repairs and additional insurance expenses led to financial hardship—as well as threats of vehicle and phone repossession.”

“Christians Against Poverty is therefore calling on the government to follow other countries like the UK and Australia in banning flex commissions on interest and insurance.”

Finally, Christians Against Poverty calls for enforcement agencies to enforce responsible lending laws

“Our Lifting the Bonnet report also found existing responsible lending laws are not being adhered to by lenders,” says Ward

“The law already requires lenders to conduct proper affordability assessments before granting a loan, but many lenders are not meeting their obligations to act responsibly and are giving people unaffordable loans that end up tipping them into financial hardship.”

“Christians Against Poverty therefore also calls on enforcement agencies to better enforce existing responsible lending laws.”

Valeti’s* story:

Valeti works full time in the Education sector and has five children, from 1 to 9 years old.

She bought a car through finance in what she describes as “a very fast process” through Facebook marketplace.

“I found a car I wanted and applied online and a couple of days later a guy drove the car around to my place with a bunch of forms to sign, and that was that. At no point did I realise it came with an immobiliser.”

When her paid parental leave ended in between jobs, she says she missed two repayments, and was shocked to find her car had stopped working after coming back out of the supermarket to drive home.

“At first I thought it was a mechanical fault, but after calling the loan company, I was surprised to hear an immobiliser had being activated in my car. I was told to text ‘enable’ to a number and my car would start again to get home, but I could only do this six times over the duration of the loan. I used all these ‘enables’ over the next few days getting around to appointments.”

Valeti was then prevented from picking up her children from daycare after work, when she found her car had been disabled due to a missed payment.

“I had to hold on the phone and then beg and convince them of the urgent situation, and that a payment was on the way. They allowed the car to work for a certain amount of time, but the next morning it was dead again and I couldn’t get to work or daycare, so I had to call them again. I was late dropping the kids off to school and late to work. This continued until the payment went through, and they would only allow it for a certain amount of time so you had to rush to get home.”

Valeti says this took a heavy toll on her mental wellbeing.

“It made me feel really frustrated, like they don’t understand. Could they just not give me a call and we can discuss my situation, rather than disabling my car? It doesn’t matter how many times you reason with them. It was incredibly stressful, especially when you’re sole parenting. My anxiety was at an all-time high and I couldn’t get to sleep at night.”

She says her message to vehicle lenders is to be up-front and honest.

“My message to these companies would be: surely there’s a better way than using immobilisers. I’m business-minded, but as a struggling parent and what I’ve gone through I would say talk to people about their situation. And don’t hide anything, be transparent and explain things up front.

*Name changed to protect identity.

Kayla’s story: Sold a lemon, insurance add-ons didn’t cover mechanical issues.

Christians Against Poverty client Kayla Buchannan says her experience with car loans is a mix of the good, the bad and the ugly.

She says the good part was the ease of acquiring the vehicle of her choice, on finance. The bad part was she was sold a defective vehicle that had mechanical issues, but mechanical insurance was not included as one of the many additional insurance add-ons.

A year after the purchase, she says her endless trips to the mechanic began.

“It was a year and one month, and then, from that moment, I have just [spent] like $1,000, $2,000, $4,000 on mechanical things... none of those insurances that I had covered issues that were mechanical.”

Beleaguered by the cost of continuous repairs and additional insurance expenses, her finances took a hit. This did not stop creditors from chasing her down for repayments.

She was asked to surrender the phone used to secure the vehicle loan, which she was unable to do as it belonged to her ex-partner. She was hounded with incessant phone calls and threatened with vehicle repossession, as well as police involvement to possess the phone.

“It was just so overwhelming that I was not going to have a car. And then I thought: they’re going to take the car, and I am still going to owe money,” she says.

She recalled telling the finance company: “You are not listening. I do not feel safe with you involving the police…”

At this point, Kayla had sought Christians Against Poverty’s help and Christians Against Poverty was able to negotiate an affordable repayment plan and convince the creditor to halt the repossession process.

“I cried to Christians Against Poverty one day because I was like, ‘I do not know what to do. They are going to take the car, they are going to do this, that,’ and then they [Christians Against Poverty] sorted it out, and that was that.”

Managing ordeals with creditors and dealing with spiralling debt has brought its share of struggles for the single mother. However, since coming to CAP, Kayla has stayed on track with debt repayments and describes her journey with CAP as non-judgemental, and helpful and says life is looking brighter. The crushing feeling she used to have regarding her vehicle loan and additional debt is slowly wearing off as Kayla works towards the debt-free finish line.

Read CAP’s full ‘Vehicle Finance: lifting the bonnet on unethical practices’ report here: capnz.org/research-and-policy/vehicle-finance/

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