Coming Recession Highlights Need To Shine Light Into ‘Wild West’ Of Debt In NZ

Recession is widely predicted. The cost of living is surging, inflation is at record highs, and more and more New Zealanders will fall under the shadow of debt.

The true economic effects of recession are yet to be seen, but one thing is certain: More New Zealanders will be exposed to higher debt, and the debt collection industry. Debt collectors often use deceitful practices—including debt collectors dressing up as police officers, and collection companies sending letters to employers faked to look like official court orders.

Maxim Institute Researcher ’Alapasita Teu has described our situation as ‘the Wild West’.

“Our concern is that despite the current consumer credit laws, many vulnerable families and communities continue to be exploited through harmful lending practices,” says ’Alapasita, “most often through high-cost, short-term (HCST) loans.”

Included in these loans are Buy Now, Pay Later schemes. Many people are not even aware that these are, in fact, loans. With this entire sector completely unregulated, and more people are taking them as options, we are wide open to exploitation.

“Evidence from Australia suggests that many BNPL consumers are cutting back or going without essentials to take out additional loans to make BNPL payments.” Adds ’Alapasita, “The potential long-term impacts include affected credit ratings and the normalisation of relying on credit for luxuries and basic living necessities.”

Maxim Institute wants to get the discussion going on how to protect New Zealanders before the recession arrives. Today we releases our issues paper, Beyond the shadow of debt—shining a light on high-cost lending. The paper points to the desire behind the changes to the CCCFA, to protect all lenders, not only those who can afford houses.

The upcoming review of the CCCFA is an opportunity to develop oversight, management, and regulation for the Wild West of lending here in Aotearoa New Zealand.

Our paper’s recommendations include:

1. Include Buy-Now-Pay-Later in the scope of the Credit Contracts and Consumer Finance Act 2003 (CCCFA)
2. Develop a licensing framework for debt collection agencies and collectors
3. Maintain increased funding for Building Financial Capability (BFC).

© Scoop Media