Lending crisis pushes people into ‘totally unregulated’ buy-now-pay-later arrangements – lender
Mark Taylor / Stuff
First Credit Union is frustrated that some members don’t “fit in” to get a loan and has donated $50,000 to food banks to channel funds to the grassroots. Vinnies managing director Mike Rolton, left, is pictured with First Credit Union managing director Simon Scott.
New credit rules make loans impossible for some and push them to buy now and pay later, a lender has said.
It’s an unintended consequence of recent lending regulations, First Credit Union chief executive Simon Scott said, and their inflexible nature means his organization can no longer help some people overcome short-term hurdles.
The Consumer Credit Agreements and Credit Act (CCCFA) came into force on December 1, 2021, requiring lenders to follow a robust process and ensure that loans are affordable and suitable. High inflation and rising food prices are also shaping the economic landscape.
“In the past, we could lend money to someone who needed a car to get to work. Now they’ve regulated so much they don’t fit in the box, and we have to turn down the loan,” said Scott, who is based in Hamilton.
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“It’s the member we know pays, needs the car for work, but we have to say no.”
Scott said the second step in resolving some issues in March next year would be like putting a “hammer on a nut”.
“We know that buy it now, pay later (BNPL) is a real scourge and the government is simply not doing anything about it.”
Scott said one of the members signed up for 32 BNPLs, each for a minimum of $20.
“It’s incredible that someone can get into debt, and it’s absolutely unregulated.
“To get a BNPL, you don’t need to apply, just walk into the store. There is no regulation or process as to whether they can afford this or anything that we have to go through.
Scott said the bank knows firsthand from members how difficult things are and donated $50,000 last week to eight food banks in Hamilton, Te Aroha, Tauranga, Whakatāne, Kawerau, Taupō, Rotorua and Ngāruawāhia – regions where FCU has branches.
With poverty and inflation on the rise, the one-time donation would be a good way to get money to the grassroots, Scott said.
Waikato’s Vinnies Food Bank provides about 350 food parcels a month, and manager Mike Rolton said the money will help people struggling to get food.
At least 30% of people who took help from Vinnies were new customers.
“The cost of living is the contributing factor…it was the cost of fuel, now it’s the cost of food. We hear that the price of vegetables has gone up 10%. People can’t do everything simply cannot afford to eat every other day of the week.
“We have a lot of people who come here who have to decide at night which children are going to be fed and which adults aren’t that night.”
“Covid-19 really affected people who had small businesses.”
The food bank distributed 4,000 food parcels in 2021 but plans to deliver over 5,000 in 2022.
Te Aroha food bank manager Shirley Gillard said when it started 13 years ago most customers were on benefits.
However, more and more working class people relied on the food bank.
This donation will help our food bank help more people in need, and the donation itself is very generous.
“This year has been better than the first year of Covid, but the numbers are still high and above normal.”