17 Februrary 2008 Media Statement

Work and Income sends indebted families to loan sharks and pawn shops

The Minister of Social Development must explain why her agency is urging indebted families to borrow more money and pawn their belongings, says Labour Social Development spokesperson Annette King.

Ms King today released details of a letter sent by a Work and Income case manager to a client listing what the client should do “to reduce your costs”.

The client had applied for and been granted Temporary Additional Support and the case manager set out the following list of things the client should do:

• “Taking out loans to cover arrears”
• “Pawn my cellphone and childrens Play Station”
• “Rung my debtors to reduce monthly payments or to refinance debts”
• “Seeking a budgeting advice”

The Work and Income letter was obtained by the Mangere Budgeting and Family Support Services and was described by its chief executive Darryl Evans in an accompanying letter as “highly offensive to the client as well as to myself”.

“The whole point of providing budgeting and educational workshops and support to our vulnerable clients is so they do not go out and borrow more money ... Often these families have bad credit and so they are often forced to lend from loan sharks often at exorbitant rates,” Mr Evans said.

“Mr Evans describes pressuring people to pawn their cellphones and children’s toys as ‘absurd’,” Ms King says.

“Furthermore his budgeting advice centre alone is aware of about five other Work and Income clients who have received a similar letter.

“The last thing indebted families need is to be pressured into increasing their debt, especially with some loan sharks charging up to 500 per cent interest. Beneficiaries tend to have cellphones because they are cheaper than landlines. Does Paula Bennett believe Work and Income should be encouraging parents and job-seekers to give up their phones and pawn their kids’ toys?

“The Minister must front up, explain why such appalling advice is being given and what she’s going to do about it,” Ms King said.

ENDS

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