Banks blacklist mobile shopping trucks
Mobile shopping truck companies are being blacklisted by New Zealand's banks for their predatory consumer practices
The country’s major banks are refusing to provide banking facilities for companies operating mobile shopping trucks.
Kiwibank, Westpac, ANZ, BNZ and ASB confirmed yesterday they were not offering banking facilities to truck owners, and disengaged if they uncovered the identity of the companies operating these types of businesses.
A Newsroom investigation found mobile shopping trucks operating in poorer suburbs were charging up to five times more than supermarkets for basic food items.
Commerce and Consumer Affair’s minister, Kris Faafoi, has described the trucks as “reprehensible”, and has confirmed the Government was looking to crack down on predatory practices in its review of the Consumer Finance act.
The trucks offer customers lines of credit, but the interest rates, fees and other conditions are often unclear, according to Faafoi.
“At its most basic level, the people that they are preying on need to know exactly what agreement they’re getting into, what they’re buying and what they’re going to be paying back," he said.
"I don’t think even that basic disclosure is happening."
One of the mobile truck companies is reported to have 35,000 customers on its books.
Another turned over $22 million in revenue last year.
Kiwibank said if all banks denied predatory lenders banking services, the dodgy operators would be put out of business.
“The practices and ethics of some of these operators are highly questionable and certainly exploitative. The time has come for action,” the bank's group manager of marketing, Mark Wilkshire, says.
The trucks roll in a couple of days before benefits are due with basic food items - when they know the cupboards are bare and people don’t have any money.
“Our stance is to not do any business with these predatory lenders. But to really make change, it is crucial that other financial institutions do the same. Kiwibank is taking this stance because we want to be part of a finance system where Kiwis are protected, not trapped by predatory lending.”
The New Zealand Bankers’ Association said it strongly supported efforts to crack down on predatory lending, but could not force its members to boycott truck operators or pay day lenders.
Outside of the big five, the association has 12 other member banks.
“The New Zealand Bankers’ Association advocates for the banking industry on non-competitive issues," association chief executive Karen Scott-Howman says.
"It wouldn’t be appropriate for the industry to collectively decide not to bank certain types of customers. It’s up to each bank to decide who they bank. They do so on a case-by-case basis."
Darryl Evans, chief executive at the Māngere Budgeting Services Trust, said many of the people who came to the service for help were victims of the truck operators.
“We work with about 3500 families, and I would say 40 to 45 percent of them have a mobile shopping truck loan.”
Evans said he only had to step outside his office to see the extent of the problem.
“I just see these trucks everywhere. There would be 30 or 40 companies working across South Auckland, even as far down as Tuakau.”
According to Evans, the trucks targeted Housing New Zealand estates, and some used free gifts to encourage business.
“They offer free bottles of perfume, but it is not the nice stuff - it's cheap and nasty, the sort of stuff you would buy at the $2 shop.
“There was even one a couple of years ago … they’d give you a $40 KFC voucher when you signed up.”
Evans said many people become trapped in a debt spiral.
“One woman we work with who has 11 children, she doesn’t really have any other option apart from going to the trucks. There’s just no money, so for her it works.
"I think she’s got debt to about nine different companies. So, she’s got about $36,000 in debt and she can’t go anywhere else.”
The Commission for Financial Capability said it was meeting with the Minister for Pacific Peoples and Mangere MP, Aupito William Sio, to discuss the issue this week.
The commission's community group manager, Peter Cordtz, said the trucks range far and wide, and preyed on vulnerable communities.
“I was in the Far North, in Kaeo recently. The trucks roll in a couple of days before benefits are due with basic food items - when they know the cupboards are bare and people don’t have any money," he said.
"It’s really predatory behaviour, and it just leaves you cold.”
Cordtz said that unless the trucks were caught breaking the law, it was difficult to shut them down.
“You can question the morality of how they work, but the only thing that will exert any control over how they operate is legislation, and whether they’re doing anything illegal.
“At least the banks have some obligation to ensure that the debt can be serviced - that doesn’t seem to be as stringent a requirement with these other types of services."
While the banks offered "cheaper money", Cordtz said many mobile shop truck customers were deemed unsuitable to loan to.
“That’s why they [the trucks] are so popular, I guess. Folk who can’t lend from anyone else are able to go to them.”
Both Cordtz and Evans said micro-financing schemes had an important role to play in helping people escape the debt spiral.
“Families here in South Auckland can now apply for an interest-free loan. Families used to think they didn’t have an option, but they do now."
Kiwibank and BNZ have both made significant investments in micro-financing.
The BNZ supports a community finance programme run by the Good Shepherd organisation.
The programme estimates that its $2 million of lending to date has saved clients $1.1 million in charges they would have otherwise paid with for borrowing with high-cost lenders.
The most popular purpose for high-cost loans were second-hand cars and car repairs.
Kiwibank recently doubled the loan capital it provided to the Ngā Tangata Microfinance Trust to $500,000. The extra funding enabled the social lender to significantly increase the number of no-interest loans it provided to families that needed relief from high-interest debt.
The trust’s executive officer, Michael Choy, said he supported Kiwibank’s call for all banks to turn away predatory lenders.
“We need to change the whole structure around fringe lending," he said.
“Law change is the ultimate goal, but the stance taken by Kiwibank shows banks can be a huge part of the solution now. If other banks get on board, we’re a big step closer toward putting these predators out of business for good.”