Vulnerable borrowers are becoming enslaved to finance companies and action is needed to protect them, an Auckland budgeting adviser says.
Yesterday, two companies owned by disgraced businessman Allan Hawkins and his son Wayne for what a judge described as “cynical” and “deliberate” offending.
The Commerce Commission said that over six years the companies, Budget Loans and Evolution Finance, continually added costs and interests to loans and then illegally repossessed essential goods.
The two companies were under the Fair Trading Act.
The commission said the behaviour kept vulnerable borrowers in a cycle of debt and repossession and caused huge financial and emotional distress.
Hawkins was one of New Zealand‘s richest men in the 1980s until his company Equiticorp collapsed in 1989 owing hundreds of millions of dollars to investors.
Two years later he was sentenced to six years jail for fraud.
Iain Davies is a budgeting adviser with Care Waitakere trust. He told Morning Report getting stuck in debt to finance companies could be a catalyst to mental illness and relationship breakdowns – with children bearing the brunt.
“We given finance companies a lot of freedom but they haven‘t displayed the responsibility that they should be displaying.
“So it‘s kind of a natural consequence to say ‘okay, well we‘re going to put on interest rate caps if you can‘t be responsible, if you can‘t treat people fairly‘.”
He said the sector needed to change but when people had no other ways to get money, that could be difficult.