MP hopes to cap how much lenders can strip from debtors' benefits

Monday, 24 April 2023

Labour Anahila Kanongata’a-Suisuiki is campaigning to stop lenders from stripping debtors’ benefits.

Labour MP Anahila Kanongata’a-Suisuiki says it is time to limit how much lenders can strip out of debtors’ main benefits.

In 2021, Kanongata’a-Suisuiki persuaded Parliament to ban lenders from repossessing and selling disabled people’s mobility devices, like mobility scooters, if they missed loan repayments.

Now, she wants MPs to vote to follow the Australian state of Victoria in passing laws to limit benefit-stripping through “attachment orders” issued by the courts.

The law allowed courts to issue attachment orders at the request of lenders and debt collectors to divert up to 60% of a debtor’s income to pay their debts, Kanongata’a-Suisuiki said.

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Debt collectors are under fire for bombarding people who owe money, with phone calls, texts, emails and in-person visits.

She wants a 5% cap on the amount that could be taken from a main benefit by attachment orders.

Some lenders oppose the move, saying more laws restricting lending were not needed.

Lyn McMorran, executive director of the Financial Services Federation, an industry body for non-bank lenders, criticised the “emotive” language of Kanongata’a-Suisuiki’s bill.

In the general policy statement of her District Court (Protecting Judgment Debtors on Main Benefit) Amendment private members bill, Kanongata’a-Suisuiki said debts being repaid through court-ordered attachment orders were in many cases the result of “private lending practices designed to profit from individuals in a challenging financial situation”.

“Excuse me. Where did they get that from? That’s an extraordinary statement to make,” McMorran said.

“If it is a fact that there are people being given loans, who are in a difficult financial position, purely for lenders to profit from it, then where is the Commerce Commission in all this?” she said.

If there was irresponsible lending happening, then the commission already had powers to prosecute the lenders doing it, and should be using them, she said.

“If there are people being preyed upon by dodgy lenders, then for goodness’ sake, won’t somebody enforce the law against them, and get rid of them?”

Kanongata’a-Suisuiki said she knew lenders were concerned about her bill, and she would be meeting to discuss it with them over the next few weeks.

Lyn McMorran, executive director of the Financial Services Federation, a lobby group for non-bank finance companies.

She created her bill after learning from the Salvation Army in 2021 about a rapid rise in attachment orders being sought by lenders and debt collectors.

After law changes under the previous National Government, it became easier for lenders to get attachment orders.

That led to a 400% rise in the number of attachment orders being issued each month between 2014 and 1015.

Data from the Commerce Commission showed the number jumped from about 200 a month to about 1000.

According to information obtained by the Salvation Army, Kanongata’a-Suisuiki said only 14% of attachment orders were placed on people receiving wages, leaving a “massive” 86% being imposed on beneficiaries.

Kanongata’a-Suisuiki said benefits existed to enable people and their families to survive, not to repay lenders.

“I just couldn’t believe it that a beneficiary could end up having five or six judgment debts on their benefit,” she said.

“The purpose of the benefit is to support those who are unemployed, or are unable to work for their everyday living,” she said.

Her aim with the bill was to reduce stress on beneficiaries, and to send a signal to lenders who lend with a purpose of profiting from individuals on challenging situations that attachment orders are not a vehicle for recouping debt, she said.

For her private members bill to progress to debate it must either be drawn out of the monthly members bill lottery, or adopted by the Government.

The Salvation Army first began campaigning for Victorian-style laws to protect benefits in 2019 with the release of the Debt Collection and Repossession in Aotearoa report.

At the time, more than 24,000 beneficiaries had attachment orders made against them diverting some of their meagre incomes into the pockets of lenders, report author Ronji Tanielu said.