FinCap Report Calls for Funding and Debt Collection Reform in New Zealand
FinCap is calling for increased and sustainable funding for financial mentoring as its latest report shows that client debt has risen sharply over the past five years. The fourth annual FinCap Voices report examines the financial circumstances of thousands of households working with financial mentors across New Zealand.
Client Debt Nears $1 Billion
The Client Voices system recorded more than 30,654 cases, representing a 57% increase from 2021. Over the same five-year period, total client debt rose by 121% to almost $1 billion.
The report also found that the median client was spending $107 for every $100 of weekly income. This meant expenses were exceeding income before any progress could be made toward resolving debt.
FinCap said difficult debt can continue to affect people over time. When opportunities to resolve debt are missed, the consequences can limit financial inclusion, affect physical and mental health, and place pressure on personal relationships.
Report Seeks $30.5 Million in Additional Funding
FinCap said the financial mentoring sector urgently needs a funding reset to ensure its services remain accessible and safe for financial mentors and their clients in the coming years.
To address the funding shortfall, the report recommends a $5.5 million increase in government funding. It also proposes exploring levies and voluntary ongoing contributions totaling $25 million from KiwiSaver providers, banks, other lenders, electricity and telecommunications providers, and other financial services.
The proposed industry contributions would recognize the work financial mentors perform in helping people maintain continued access to these markets.
Debt Collection Practices Draw Concern
The report’s findings also raised concerns about debt collection practices in New Zealand. Its findings show that 86% of financial mentors have encountered debt collectors making repayment demands that would prevent clients from affording essential expenses.
FinCap has also made a submission on the Fair Trading Amendment Bill. Its submission points call for stronger oversight of debt collectors and clearer consequences for harassment and coercion during the collection process.
Together, the report’s recommendations focus on increasing support for financial mentors while strengthening oversight of debt collection practices affecting financially pressured households.
Green Party Pledges Debt Collection Changes
Responding to the report, the Green Party committed to introducing a licensing regime for debt collectors and banning attachment orders against beneficiaries. It also called on the government to implement all the recommendations in FinCap’s latest report.
Green Party Social Development spokesperson Ricardo Menéndez March said attachment orders can require the Ministry of Social Development to deduct up to 40% of a person’s benefit and pay it directly to a creditor. The party said these deductions can leave beneficiaries with less money for essential expenses.
