Speech for the Ngā Tangata Microfinance Trust event
Fa’atalofa atu, malo e lelei, ia orana katou katoa
I am very pleased to be able to share this celebration with you, and your partner in Microfinance – KiwiBank, on this very important mile stone.
The work that you have done to lift struggling families out of spiralling debt is a credit to you all, so each of you - please take a moment to acknowledge your role in this success.
Thank you Vision West for hosting us all today.
Looking around, I see that we also have people from Good Shepherd New Zealand, and the Commission for Financial Capability here. I want to thank you also for your contribution to microfinance in New Zealand.
I want to acknowledge Robert Choy, Chief Executive Officer of Ngā Tangata Microfinance Trust also director Dr Claire Dale.
As well as trustees Trevor McGlinchey and Nicola Brehaut.
Mark Wilkshire, Kiwibank’s Group Manager Marketing
Justine McFarlane from MSD
And lastly I also want to acknowledge the work of the Commerce Commission – especially their on-the-ground work prosecuting predatory lenders that stalk vulnerable communities.
This Government is committed to addressing poverty in Aotearoa, and we all know the impact of poverty goes beyond not having enough each week for food, or struggling to meet the rent.
There is the stigma, the stress, the sense of hopelessness, the feeling that you have let your family down and that your children are not getting the care and upbringing they deserve. It simply grinds families down.
The Favale family, who approached my office for help, is a prime example.
This young family of four ended up living under a tarpaulin after the father was forced to resign from his job as a sand blaster because of a work-related eye injury.
Unable to pay rent the couple and their two children, ages ten and four, became homeless owing three thousand dollars in rent arrears.
With nearly all of their income going toward servicing debt, including a high interest car loan – there was little left for food and the young family was surviving on bread and tea.
The family was frightened, anxious and despairing. The stress was preventing them from sleeping.
In addition they were somewhat isolated. Originally from Samoa, the family had only been here for three years. Their English was limited and they had little family support here.
My office was able to get this family into a home and connect them with good budgeting advice – but their high interest, high penalty car loan would nevertheless hinder their progress.
Microfinance schemes such as yours, offering low and no-interest loans to people with unsustainably high debt, or who cannot access affordable credit, can make significant contributions to improving the wellbeing of these families.
We all know that even a small amount of debt can take a long time to repay, and the burden of compound interest can be a real problem, sending people with no other option into the hands of pay-day lenders and loan sharks at extremely high interest rates.
Unfortunately it is often the most vulnerable and the least financially literate in our society who are unnecessarily targeted:
One of our most very marginalised constituents who suffers mental health issues, was approached by some men from a Hamilton based company called Ace Marketing while he was living at a boarding house in my electorate.
Excited about the prospect of owning a TV this constituent signed up for the so called “Ace Leisure Combo” deal.
He believed the product would be delivered after making his first weekly payment of $35 and was confused when the TV never arrived.
One of my staff called Ace Marketing to enquire.
According to Ace Marketing the deal went like this:
The “Ace Leisure Combo” consisted of two products – a 55-inch TV and a home theatre system – amounting to a total cost of $5460
Ace Marketing said our constituent had signed the agreement in January of last year and that once he had made 78-weekly payments of thirty-five dollars (a total of $2730) the set would be delivered to him.
However the weekly payments would need to continue well beyond the delivery date as the combo deal wouldn’t be paid in full until a total of 156-weekly payments of thirty five dollars had been made (a total of $5460).
On the 2nd February the man’s mother called Ace Marketing to cancel the deal but she didn’t have authorisation over his account so the payments continued.
By the time he had approached us he had already paid $665 to Ace Marketing. The company told my staff member the cost of cancelling the deal would total more than $900 – 13% of the purchase price plus account set-up fees and weekly transaction fees to boot.
At this point my staff member asked to speak to the manager. She told him the constituent would not have understood the terms and conditions of the contract. She advised of her concerns regarding ACE Marketing targeting marginalised and homeless persons with mental health issues and that in her opinion it was morally wrong to burden someone like him with such a long term unfair financial liability.
Ace Marketing refused to refund the money frequently citing the “legality” of the contract. My staff member brought in a local constable and between them (and the company’s lawyers) they were able to get half of Chris’s payments back without a fee.
This heavy handed approach from Ace Marketing was a far cry from the image portrayed on the company’s website - which states:
“The underlying philosophy that drives Ace Marketing is Corporate Social Responsibility…. We will behave ethically by doing the right thing even when neither the spirit nor the letter of the law applies to the situation.”
Upon further digging we discovered that this predatory and misleading practice was nothing new to Ace Marketing.
In 2016 the Hamilton based company had been slapped with a $150-thousand fine after pleading guilty to 28 charges including failing to provide customers with key information about their loans and misleading customers about their rights.
This was the biggest fine yet for mobile traders taken to court by the Commerce Commission – but still hadn’t stopped them.
The company was also ordered to refund customer fees relating to over 1500 contracts.
Thankfully microfinance schemes not only help people get away from pay-day lenders and loan sharks - they help people become self-sufficient and increase their financial capability.
Looking more widely, these families’ situations are often so complex, it is far from simple to undo the harm. It requires all of us working together, across Government agencies, NGO’s and in this case with the private sector, to make it work.
The Ngā Tangata Microfinance Trust is a great illustration of that approach at work, closely working with a great support partner, KiwiBank, as well Government, and the wider microfinance sector.
The Trust also demonstrates how we can work across every stage of need.The low or no interest loans are highly effective at supporting families that have found themselves trapped in unserviceable debt, but your budgeting and financial literacy work is helping ensure people don’t slip into excessive debt in the first place. And let’s face it, it can be easy to do. There are those in great hardship that our welfare system supports and there are also many who are just one flat tyre or one doctor’s bill away from missing the rent and spiralling debt.
An important aspect of addressing poverty is building people’s financial capability – i.e. having financial tools, products and services they can access to improve their lives and wellbeing.
It is the work at both ends of the support continuum that will see the greatest results over time, and for that work I congratulate you.