Loan shark parasites target the vulnerable

Loan sharks – parasites on poverty

Most of us like to think we are wise to the world and not easily shocked. I put myself in that category but was taken aback after a conversation with a Tongan acquaintance a couple of years back. He produced a copy of Taime o Tonga (The Times of Tonga) newspaper with a full page advertisement showing about 20 photographs of members of the Tongan community and a paragraph under each one.

Had these people won awards? Was it a real estate firm showing off its agents?

No. This was a photographic name and shame advertisement of people who had defaulted on loans from Funaki Enterprises, a cash loan company. Along with the photo was included the name, the amount owed and why it was borrowed in the first place. Naively I would have thought advertisements such as this would breach the Privacy Act but apparently not. The right to make public examples of defaulters outweighs the privacy rights of individuals.

Each picture represented a person under huge financial stress with impacts on their families, children and social relationships. The amounts owed were relatively small. Anything from $250 to $4000 and borrowed for family-related reasons.

Another Tongan loan company called Lelei Finance also publishes photos of loan defaulters. They offer small secured loans with an interest rate of 25% per month. Yet another company offers loans from $500 at just 16% per year. This seems more reasonable until one discovers there is a set up fee of $200 which makes the finance rate (what the person actually pays back) over 60% in a year. The same company offered a free ham for people borrowing $500 in the lead-up to Xmas. Needless to say the borrower could have bought several whole pigs by the time they paid off the loan.

So why do people borrow from loan sharks in the first place?

In its March 2005 newsletter the Ministry of Consumer Affairs reported on a survey which found that in the previous year some 15% of New Zealanders “…had borrowed for essential items such as paying for household groceries or to pay the power bill”.

If we translate that overall 15% to low-income communities the figure could be as high as 70 – 80% of families.

In this environment, where families struggle with day to day living costs, loan sharks are thriving.

Last year Research New Zealand looked into what they called “fringe lenders” who advertise cash loans. They found 185 such companies nationwide targeting low-income earners. In Christchurch they are found in Riccarton and Sydenham.

Those who borrow from loan sharks are clearly people in desperate circumstances. They might need $200 or the electricity will be cut off. They will borrow from family or friends if possible but when these options are exhausted a cash loan seems the only way out. It is typical for someone borrowing $200 to pay back $500 in the next couple of months when interest and penalty payments are added.

Looking at this in electoral terms it’s no surprise that Mangere is the lowest income electorate in the country. The third lowest is Wigram and the seventh lowest is Christchurch East.

Labour members of parliament represent eight of the ten lowest-income electorates in the country and yet no effective action has been taken to stop the appalling practices of loan sharks. They are having a field day.

They were a “one-day wonder” for Jim Anderton a few years back but he has been silent since then while these parasites on poverty have raged out of control.

The most recent legislation covering cash lending is the Credit Contracts and Consumer Finance Act (CCCFA) 2003 Act which came into effect in 1995. It regulates methods of calculating interest and spells out what a customer must be told about a loan but it has no effective controls on interest rates, penalty charges or administration fees. Neither does it have anything to say about the publication of names and photographs of defaulters.

The government said it didn’t want to put too many restrictions on cash loans because that would increase the cost of credit for people who have trouble getting money from “mainstream” financial institutions.

At face value it sounds credible but it has spawned a legion of parasites and deepened poverty levels in many thousands of families.

We need such things as simple English loan forms; maximum finance rates; finance rates required in all advertisements; maximum penalty rates and the registering of all cash loans in the same way that tenancy bonds in rental agreements are registered centrally.

Labour has quite rightly been heavily criticised for its shabby treatment of people in low-income communities. Assertive action against loan sharks would be one step forward among the many steps needed.

Lack of ethics in super investments

I once invited a unit from the New Zealand army to address a school assembly. They had risked their lives many times over helping clear anti-personnel mines from areas of Africa and South East Asia in the wake of war.

Their visit was part of an international campaign against anti-personnel mines.

The soldiers made a dramatic entrance into the assembly from the back, dressed in full bomb protection gear and swinging their metal detectors from side to side across the floor in front of them. The detectors made dramatic bleeps as they responded to the rows of nails holding the floorboards in place.

The soldiers explained to the students the logic behind the mines. They were designed to maim, not to kill. If they killed then that took just one person off the battlefield but if they blasted off a foot that took at least three off the field as two were required to help get the maimed soldier to medical help. A vicious, cynical weapon which today still causes mayhem across Africa and Asia, leaving thousands of kids on crutches facing difficult lives.

Like the students that day, politicians and people around the world decried these mines and demanded action to stop their production. In the 1990s Princess Di was the most high profile campaigner.
It is barely believable then to learn that until August last year the New Zealand Superannuation Fund had investments in four companies (Singapore Technologies Engineering Ltd, Alliant Techsystems Inc., General Dynamic Corp. and Textron Systems Corp) involved in the production of these anti-personnel mines.

Is this the level of responsibility we want for taxpayer investments? Is it that the government opposes these humanitarian abominations only until they can make a profit from them? And what about the New Zealanders risking their lives to clear these mines?

The same questions apply to super fund investments in a company processing whale meat. These shares in Maruha Group Inc. were sold just last July. So while environment minister Chris Carter has been so speaking passionately against Japanese whalers in the Antarctic, behind his back the government has turned a quiet profit from the slaughter.

The Green Party highlighted these morally-bankrupt investments in a report last week which identified a further $64 million of taxpayer funding currently invested in 12 companies involved variously in manufacturing nuclear weapons and cluster bombs, massive environmental destruction, appalling employment conditions and human rights violations.

Where are the ethics in all this?

The government instructions to the fund managers are that they must administer the fund in a manner consistent with “avoiding prejudice to New Zealand’s reputation as a responsible member of the world community”.

Presumably the ethically-challenged fund managers think they have met this obligation. It is clear there are no effective ethical guidelines for the fund and the government is at best ambivalent.

Helen Clark has indicated her distaste for investments in the tobacco industry but is unwilling to take stronger action. Labour MP Marian Street has a private members bill in the ballot which aims to ensure ethical investment is to the fore when investments decisions are made by the New Zealand Superannuation Fund.

But this is a spineless sidestep. If the government is opposed to the use of anti-personnel mines, whale meat processing, worker exploitation and environmental destruction then how did the superannuation fund get involved in the first place?

And what about the investments in nuclear weapons? Don’t we have an anti-nuclear policy championed by Helen Clark? Isn’t this hypocrisy or have I missed something? Why is the government not leading the charge with legislation which matches its mouthings?

The Fund itself should never have been established. New Zealand can and should apply “pay-as-you-go” to superannuation funding. Even when the fund is earning at full capacity it will have only enough income to pay some 15% to our total superannuation bill.

The money should instead be invested in New Zealand rather than in helping the economies of our competitors. And the fund is inevitably a gamble. There are plenty of predictions around that international investments will not respond well to issues of peak oil and climate change.

Back in New Zealand this money would make a huge difference where major investment is needed now. Eliminating child poverty, improved transport infrastructure, relieving the fee burden from students, quality healthcare and abandoning school fees are a few of our urgent needs. Looking after the emerging generation is the best way of ensuring we can pay for superannuation for older New Zealanders into the future.

Surely a better option than investing in nuclear weapons or blasting limbs from children.

Flying flags on Waitangi Day

Waitangi – Our National Day

One of the more bizarre sights on Waitangi Day last week was the televised view of a small legion of Transit New Zealand employees lining the girders high on Auckland’s Harbour Bridge to prevent any attempts to raise the tino rangatiratanga flag.

This followed Transit turning down a request from Maori groups for it to be flown on the bridge on Waitangi Day. Transit said approval to raise flags applied only to countries recognised by the government, with their flags flown on their national or independence days.

Transit’s reaction was uptight and nonsensical. As one writer to the local paper pointed out, the flag of the New Zealand America’s Cup team had previously been flown so the policy is applied flexibly when Transit sees fit.

If it’s good enough to fly the flag for a millionaires’ yachting event then the flag which embodies the essence of the second article of New Zealand’s founding document shouldn’t have been a problem.

Even in Australia the symbolism of flying the Aboriginal flag from the Sydney Harbour Bridge has been supported. Not here however.

The government backed up Transit with the Minister of Maori Affairs Parekura Horomia lamely saying the government wouldn’t intervene although they would consider the issue after the event.
It would have been symbolic of the Treaty had Transit flown the Union Jack from one of its twin poles on the bridge and the flag of the Independent Tribes of New Zealand on the other. These were the flags of the original treaty signatories and flying them together would be a potent symbol of partnership.
So why the fuss about a flag? Just what was it that the Transit employees were protecting?
On the face of it it’s a stupid issue for anyone to take seriously except for the fact that somehow this discussion reflects huge pakeha unease about the Treaty and our bi-cultural heritage. The feeling of being under threat from a resurgent Maori nationalism has unsettled pakeha for the past quarter century and continues to do so today.
United Future leader Peter Dunne embodies these feelings of insecurity when he calls for Waitangi Day to be abandoned as our national day in favour of another date for “New Zealand Day”. This would be a cop-out at best. We should not be afraid of conflict, debate or challenges. They are all a necessary part of any societal change and essential to avoid issues festering away out of sight.
Labour and National leaders tried to stay above the fray on the day but they didn’t acquit themselves well. Helen Clark did her best to downplay widespread poverty and John Key patronised low-income families with his hosting of 12-year-old Aroha Ireland at Waitangi, parading her like a trophy in much the same way that Oliver Twist’s benefactor showed him off to his friends.

More importantly the National Party policy Key announced just prior to Waitangi by which the Maori seats in parliament would be abolished in 2014 would represent a leap backwards for New Zealand. It is short-sighted, narrowly focused and fundamentally undemocratic.

At present a party such as the Maori Party has the chance to be represented in parliament through Maori electorates in which Maori vote. If these seats were abolished the Maori Party would have to get 5% of the party vote nationally to gain parliamentary seats. Given that Maori make up around 15% of the population the party would need to get 33% of Maori votes before it could enter parliament. This would be the equivalent of saying that the National Party needed 33% of the pakeha vote before they could be represented in parliament. Clearly a ludicrous situation so why apply it to Maori?

On the one hand it’s reasonable to suggest that all 120 MPs should look out for the interests of Maori but without Maori given the choice this smacks of more paternalism.

The Maori seats may disappear naturally when Maori feel comfortable that they are represented effectively by other parties or parliamentarians. If this happens they will gradually migrate from the Maori roll to the general roll and the number of Maori seats will decrease accordingly. Alternatively if Maori feel unrepresented then they will migrate back to the Maori roll. And why should they not have the choice to do so?

Democracy is sometimes described as the tyranny of the majority over minorities. In New Zealand’s case the Maori seats help mitigate against this.

Waitangi Day is often three steps forward and two back for debate on race and representation. In 2007 it seems there are more steps back than forward.

John Key’s vision for New Zealand

It has been a rare experience to see New Zealand’s “underclass” coming in for such sustained comment over the past week in the wake of John Key’s first major speech as National Party leader.

On the one hand it was good to see Key take some ownership of the issues as it was his party’s policies from the 1990’s which drove working class New Zealanders into poverty in their hundreds of thousands and then held them there.

When John Key talks about people being trapped on the bottom of the social ladder with the rungs missing he should have added that it was his former National Party colleagues Ruth Richardson and Jenny Shipley who smashed the rungs.

Ruth Richardson was positively swelling with pride as she delivered her infamous “mother of all budgets” in 1991 which put the boot into families struggling from Labour’s reforms. But National’s worst social crime was the Employment Contracts Act of 1990. This was quaintly referred to as “deregulation of the labour market” but what it meant in practice was lower wages, longer hours of work (without overtime rates) and heavier workloads.

The 1990s was a decade of despair which created the scene so accurately described in John Key’s speech. Social dysfunction, alienation, illiteracy, poverty and hopelessness are rife throughout our low income communities.

Key can rightly claim he wasn’t here through that decade and not responsible for the policies. He was working the international money markets trading in wealth created by others. Not socially productive but very lucrative.

And while no-one expected Key to provide detailed polices responses to the problems, from his speech we got enough of the flavour of his solutions.

He described his ideas as a mix of carrots and sticks. The carrots include redirecting government funding away from bureaucrats in Wellington to give more of a role to the private sector. Voluntary community groups would receive extra funding while businesses would be encouraged to provide school lunches and sports gear. The sticks would include those on the dole for more than 12 months being required to do community work for one or two days a week.
Unfortunately none of these proposals are heading in the right direction.

They won’t help a father of three I spoke to last week who works 50 to 60 hours each week (no overtime rate) on a 6pm to 6am security roster earning $13 an hour. His wife works a cleaning job for $10.75 an hour from 3pm to 8pm on four nights a week. A teenage cousin of the children looks after them when both parents are working. The father worries about his 10-year-old boy getting into trouble at school. Is it any wonder?

Various combinations of low pay, part-time, insecure, rostered, anti-social work are at the heart of social dysfunction. Unemployment is a much less important issue.

Key says his government aims to reward people who work hard. How? His target group are already working too hard.

Given half a chance the same people Key describes as lost in despair will have no problem raising good kiwi kids if government policy gave them half a chance.

Surely a person should be able to work a 40 hour week and bring home enough income to keep the family at a reasonable standard of living? A policy based around full employment on decent pay should be the centrepiece for social transformation.

Couple this with raising the minimum wage and pegging it to 75% of the average wage and we have the making of a policy which will let families fly and end the litany of problems associated with alienation and dysfunction.

When these two polices are in place we could abolish the dole.

Instead Key, like Labour, shows the same lack of faith in people to run their own lives and their own communities. His solutions are a continuation of the patronising policies which see money tossed around to people trapped at the bottom of the cliff.

Instead of asking businesses to buy school lunches what about a call to businesses to pay decent wages? It’s not that hard. In recent years company profits have increased at twice the rate of wages. Buying a few school lunches and sports gear is a cop-out.

Key won’t adopt policies such as this but as a small step in the right direction he could stop using the term underclass. It is demeaning and disrespectful. These are New Zealanders struggling in low income communities who have been denied a fair go. Let’s give it to them.