Thursday, February 19, 2015

How to drive up the cost of borrowing for the poverty stricken

A bit of thinking beyond “Round one” and the “bleedin’ obvious” might have revealed that:

- Many small traders and businesses are Maori and Polynesian. They need their bills paid to stay in business

- Now the incentive is to take greater security over more things one can re-possess

- So expect the list of “things which can be re-possessed” to get longer

- And / or to increase the interest rate penalty for bad payers to cover the new situation

All ways round this drives up cost to both parties while only helping enforcement by a minimal amount.


The Radio NZ News Website reports as follows:

Debt collectors will soon have to have a licence if they want to repossess goods from people who have not paid their bills, and what they can take will be restricted.

From June, when debt collectors enter a property, they will only be able to take valuable items that have already been listed on a lending contract. Agents will also be stopped from taking important items like beds, or kitchen equipment.

The chief executive of Mangere Budgeting and Family Support Services, Darryl Evans, said his organisation had heard many horror stories about what's have taken.

"I've heard of people losing their beds, losing the microwave or in an extreme case I heard of somebody losing the stove. "With many of our Polynesian and Maori families cultural items such as mats and taonga, things that have significant value to the family."

He does not believe that people will be less inclined to pay their debts when some essential and treasured items are no longer up for grabs.

"Overwhelmingly I believe people want to pay, but unfortunately life happens, people lose jobs, they have reductions in working hours, or something has occurred so that they are not able to meet their obligations.

"Ninety percent of families we work with are committed to meeting repayments."

A company will pay $616 and a sole trader $510 to get registered and they will have to update their licence every five years. Those who breach the new rules could be fined up to $40,000.

Commerce and Consumer Affairs Minister Paul Goldsmith said the change was prompted by reports of unscrupulous practices in the industry.

But Ian Caddis who is general counsel for the debt collection agency Credit Link, said the changes would make no difference to dodgy operators.

"The people who are doing it unlawfully are generally the gangs, gangs are out there to do reposession work.

"They get rapid results - because they get rapid results they are attractive to potential clients, particularly desperate ones like smaller traders who are desperate to stay in business."

The Government does not hold figures on exactly how many agents or debt companies will need to be licenced by June, but Mr Goldsmith said he was confident everyone will be processed in time.

"We have the ability to give a temporary licence if people's full consideration has not gone through," he said.

Wednesday, February 4, 2015

It May Not Suit Some Agendas – But the Data is Important

We know that poverty has both absolute and relative aspects. The data on absolute poverty is clear and beyond contention….. the human condition has been improving dramatically on almost every measure since the beginning of the industrial revolution. We simply live longer and the quality of that living is better. Possibly inconvenient in the eyes of some but there you are… indisputable.

Relative poverty is a different matter. There is no end to the number of studies showing that how “poor” we feel or believe ourselves to be frequently depends on how poor we think others are. There are numerous versions of the “Shoebox? That were luxury. In ma day we had it tough” story. Relative poverty over time. Equally stories appeared in the New York Times last year claiming that child poverty included not having a cell phone. Keeping up with those Jones’s is popular and many stories about poverty fail to acknowledge this.

The numerous calls for “fairness” typically equate to equal incomes for all as remedies… and that idea is based on the largely meaningless and downright dangerous notion that fairness is a world of “equal” incomes. The danger comes in numerous forms – one especially pernicious version is that if we lower incomes enough we will be equal – as we have been in the past. Another is that with this kind of “fairness” you can largely forget “acknowledging differences, celebrating diversity, being tolerant, encouraging everyone’s legitimate uniqueness” and a variety of other fashionable objectives of the “fairness” advocates.

That is not necessarily to say that relative poverty is not somehow “real” or that it is acceptable (hence numerous references to “in this day and age”). It is to say that it is relative… and that it makes sense to know “relative to what”.

The following table enlightens in this respect:

After-Tax Value of Unemployment Benefits as a percentage of average workers wage: 2011