Govt Commissioned Report Into Loan Sharks Shelved

A long-awaited Government commissioned report that examined loan-sharks and lending shysters who prey on low socio-economic communities has been put on hold - almost on the eve of it being publicly launched by two Labour ministers - Judith Tizard and Luamanuvao Winnie Laban.

The Labour-led government commissioned the report after revelations surfaced that loan sharks were targeting needy south Auckland families, lending small secured loans at interest rates up to 25% per month. See… GPJA - Urgent Action Needed on Loan Sharking! – Scoop December 19 2004.

Scoop has issued an Official Information Act request seeking details of the report and all correspondence that has transpired between the Ministry of Consumer Affairs, the Minister of Consumer Affairs, and those commissioned to research and write a report based on their findings, conclusions and recommendations.

Many families, community groups and advocacy workers in south Auckland and beyond are dismayed that the government has postponed releasing the report.

From 2006 through to early 2007 people from Auckland's Pacific Islands communities have been interviewed by researchers in a move anticipated to be the precursor of a government-led crack down on sharks and smooth talking lenders. Many of those who took part in the research were interviewed in their native tongue so-as-to ensure accuracy of circumstance and impact.

What followed was a huge translation exercise: the result being a comprehensive first-hand and first of its kind account of the severity of human poverty in low-income suburbs and how credit has become an institutionalised means of meeting day-to-day living costs.

Recommendations in the report are believed to identify need for legislative and regulatory reform to the Credit Contracts and Consumer Finance Act (CCCFA).

Researchers discovered people were borrowing from loan sharks to pay day-to-day bills, consumer goods, and cars.

Those involved with the report, from the south Auckland community, anticipated its release to be on Friday April 27 at the University of Auckland's fale, and launched by the Minister of Consumer Affairs, Judith Tizard, and Associate Minister of Pacific Island Affairs, Luamanuvao Winnie Laban.

But Scoop understands that this meeting has been called off - despite a relations group having been contracted to organise the report's launch. The planned event was to include speeches by both ministers and invites were to be issued to community groups, representatives, and media.

Back in December 2004, Global Peace and Justice Auckland (GPJA) wrote to the Minister of Finance Michael Cullen urging him to step in and curb the activities of loan sharks operating in low income communities of New Zealand. In a statement issued at the time, GPJA noted local newspapers circulating in Auckland's low socio-economic communities peddled loan shark services to those in need. For example the November 23 2004 edition of the Manukau Courier had 37 advertisements offering cash loans at usurious interest rates.

Later, on Wednesday March 30 2005, a community meeting was held in Mangere, Manukau City, where residents agreed to develop a community based campaign to counter loan sharking and casinos.

One year after this meeting the government moved commissioning a report into loans and financing in low socio-economic communities – examining the impact on Pacific Islands people.

Recent information shows many Pacific Islands families are struggling. Why? Consider this: If the reality of your life delivered a mere $10.40 per/hour (as was described in a recent New Zealand Herald report by Simon Collins) then you have few options.

On Saturday March 17 2007 the New Zealand Herald's Simon Collins wrote in a detailed report: "The gap between rich and poor has widened. Real incomes in 2004 were still lower than in 1992 in the four poorest tenths of households, but increased spectacularly up the income scale to a 39 per cent increase in real terms for the richest tenth of households."

Simon Collins offered real examples of our neglect. He wrote of Fa'afetai Afoa's situation: "At $10.40 an hour, she (Afoa) earns just $312 a week gross or $254 after tax. She pays $131 a week in rent to Housing New Zealand, takes a half-hour walk to work in the morning and catches a bus home. She needs to feed herself and her son and donates money to her church. Her phone has been disconnected."

Afoa told Collins: "'I asked my son to leave school and help me and pay my bills for the house and the telephone because my pay rate is so low,' she says. Her son has found a part-time job packing in a warehouse," Simon Collins wrote.

The gap between rich and poor as described by the New Zealand Herald has widened despite Finance Minister Michael Cullen achieving huge gains for the New Zealand economy.

On Tuesday April 17, Cullen told those who gathered at a business breakfast at Westport's Motor Hotel: "What we are seeing is an economy with considerable underlying strength:

"• Since 2000 economic activity has increased by a quarter.

"• Over the economic cycle we have been growing faster than the average of developed countries.

"• We have come a long way towards building a stronger, fairer economy.

"• More Kiwis than ever before - 2.1 million of us - are in jobs and our unemployment rate is the lowest in a generation.

"• Last week unemployment benefit numbers fell to 28,845, 82 per cent down from 1999, Maori unemployment fell below 10,000 (9902)

"• Our public finances are sound and counting the New Zealand Superannuation Fund we no longer carry any net debt at all.

"• Our business sector has particularly prospered. Profit growth has averaged over twenty percent a year in recent years. And that's been good for business investment," Michael Cullen said.

And on March 28 2007, the Labour-led government stated: "The Minister of Labour reviews minimum wage rates annually for adults, youth and trainees, seeking submissions from a wide range of organisations, including employer, union, Pacific, Maori and women’s groups. Ruth Dyson said the Labour-led government’s goal is for the adult minimum wage to reach $12 an hour by the end of 2008, if economic conditions permit."

While the strengthened economy has enabled Labour to advance incremental increases to the minimum wage, and pace ahead with its Working For Families package (designed to place more dollars in the pockets of working families) many, especially the lower paid, fail to benefit in real dollar terms due to a sustained and across the board shower of increased living costs.

Today, thousands of families continue to borrow as a means of meeting basic living costs demand. And today, as it was three years ago, many lending business continue to line up ready to exploit those in need.

While Afoa (as referred to above) asked her son to leave school to help her pay for living costs, many others feed their families and meet their social responsibilities by borrowing from whoever is offering. To these people, their primary concern is getting food on the table and meeting essential household bills. Less is the concern for trumped up interest rates, outlaw-ish repossession practices, and financial stand-over tactics.

Questions:

Recommended Reading:

Te Waha Nui AUT Newspaper Report -The High Cost of Easy Cash

Te Waha Nui AUT Investigative Report - ‘I’m no loan shark’ – money lender Johnson Funaki speaks out

For Background on this issue, see…

GPJA - Urgent Action Needed on Loan Sharking! – Scoop December 19 2004

Advice: The Ministry of Consumer Affairs has the following page of advice for people getting cash loans:

Cash loans - www.consumeraffairs.govt.nz

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