Combating Debt in the Wake of COVID-19
Additional funding is being made available to strengthen existing debt solution services with access to debt specialists, and develop a national approach to address problem debt Minister for Social Development Carmel Sepuloni and Minister for Commerce and Consumer Affairs Hon Kris Faafoi announced today.
“Given the economic impact of COVID-19, we’re addressing problem debt by expanding existing specialist debt services to meet the expected increase in demand and the complexity of debt problems,” said Carmel Sepuloni.
“Our services are expecting about 2,000 people to get specialist debt support and about 1,400 people to get no-interest and low-interest debt consolidation microfinance loans or help with variations to high-cost loans via specialist debt solutions.
“This investment shows that this Government is committed to improving financial wellbeing now and in the long-term so New Zealanders can manage their money and look after themselves and their families.”
Carmel Sepuloni said anyone with problem debt can access help through BFC services, currently just over 41% of their clients are self-referred.
The funding boost of $4.3 million over two years is for the expansion of existing specialist debt services, building on the extra $35m of funding ($9.7m cost pressure funding and $25.2m Covid Response and Recovery funding) rolled out for core Building Financial Capability (BFC) services, formerly budgeting services, announced at the end of May.
Kris Faafoi said even before COVID-19, New Zealanders had high household debt, and very low savings.
“In the wake of COVID-19, 74% of households said they’re in financial difficulty, or exposed to financial shocks. By being proactive and ensuring services are in place by the end of this year to support those experiencing overwhelming debt issues, services are removing opportunities for unsafe lenders to put those vulnerable people into even worse situations.
“This funding will help to continue the vital flow of payments to creditors while sheltering indebted people and their wh?nau from the financial, health and social impacts of overwhelming debt.”
Carmel Sepuloni adds that as well as funding problem debt support, the Ministry of Social Development will engage with providers and diverse communities, including M?ori, Pacific and other ethnic groups, to design a comprehensive National Debt Solution for all New Zealanders.