Bay's debt burden hits $10m

The total personal debt of Tauranga's most financially desperate people has snowballed to more than $10 million.
Latest debt figures revealed by the Tauranga Budget Advisory Service show that 720 new clients who used their service in the 2004/05 financial year collectively owed $10,352,250.
Of that, nearly $3.8 million is in overdue repayments - 20 times what it was nine years ago when it was $18,643. Arrears today average out at about $5250 per person.
Debt arrears are indicative of the level of financial difficulty people are in as they show how far they have fallen behind on their repayments, as opposed to the total amount borrowed.
The figures emerged as part of research into a special Bay of Plenty Times Your Money series, launched today.
The top five areas of debt are money owed to banking and financial institutions (20.7 per cent), government departments (17.8 per cent), education including student loans (10.2 per cent), credit cards (9.1 per cent) and household retail goods (8.5 per cent).
The figures give a snapshot of what is happening in the wider Western Bay, and only account for those who have used the budgeting advice service.
Other Bay budget advisory services affiliated to the New Zealand Federation of Family Budgeting Services show similar trends.
Clients registered with the Papamoa Community Support Centre have fallen $91,782 behind in debt repayments compared to $9000 nine years ago, although this has been steadily reducing since 1990/2000 when debt arrears peaked at $875,739.
Figures from Te Puke Community Care Trust were only available from 2001/2002 when their clients were $155,824 in the red compared to $204,793 last financial year.
Budget advisory services provided by Ngaiterangi iwi and Ngai Tamawhariua hapu have respective debt arrears of $200,000 and $96,249 on their books.
The Bay of Plenty Times Your Money series follows a stern warning from Reserve Bank Governor Alan Bollard a week ago about unsustainable levels of borrowing and spending.
Dr Bollard pointed out that New Zealanders do not save any of their income and instead ``dis-save'' around 12 per cent - the worst savings record in the OECD.
The Bay's burgeoning debt problem has been attributed to a combination of greater credit availability and the erosion of the stigma attached to borrowing money.
Marjorie Spicer, office manager at the Tauranga Budget Advisory Service, said that over the past few years she had seen an increase in multiple credit card debt and multiple personal loans.
"When I started, it was multiple hire-purchase debt. Now people are going into debt to pay debt. We had one instance where the person had three credit cards and they were using one to pay the other . . . they were using them in a cycle. Taking loans to pay loans gets them nowhere because it's costing them interest to pay interest."
The number of people using the service had not increased in recent years but people were coming with higher debt and more complex situations, Mrs Spicer said.
"It's not only multi-debt but also multi-families. For instance you have someone who has $30,000 debt, is on the DPB and then you find out the mother-in-law's house is at risk because it's been used as security . . . or a relationship breaks up and they leave the partner with debt."
And, while there were genuine bankruptcy cases, a growing ambivalence towards debt meant there were more people looking for an easy way out.
"We had a girl who wanted to go bankrupt because she had a student loan. The whole attitude of people is changing. It's too `easy come, easy go.' A lot of it is lack of education. We are getting second and third generations of bad money management."
Ministry of Economic development figures show there were 104 personal bankruptcies in the Western Bay last year. The numbers have fluctuated little over the past five years but the profile seems to be changing.
"Most of them are young. There are kids in their early 20s going bankrupt," Mrs Spicer said.
She believed the solution lay with retailers and loan companies who should carry out more stringent credit checks. Ian Cooper, group marketing manager at Baycorp Advantage, agreed it was easier to obtain credit and that people were more comfortable doing so.
"The social stigma is not as strong as it used to be," he added, referring to bankruptcy.
Those who were declared bankrupt however would have it flagged on their credit file where it would remain for five years.
Baycorp held credit files on 2.2 million people and he urged individuals to obtain a copy (www.mycreditfile.co.nz).
"People need to be aware of what's on their credit file."
Tauranga debt collector Delwyn Weatherly said creditors were not to blame.
"There are people who will run up debt all over the place and they use two, three, four names. They have ways of getting round systems ... they even produce evidence."
Creditors were often made to feel guilty for asking for money that was rightfully theirs, she said.
"I get annoyed with debtors' attitudes towards bigger companies. It affects everyone. Unpaid debt is no different to theft. It's no better than burglary."
While the majority of debtors she dealt with were beneficiaries, there were also those at the other end of the scale.
"You are dealing with a low socio-economic group but there are also wealthy people as well."
The type of debt incurred varied from spending on household goods to unpaid utility bills.
"Video hire is a huge problem. Videos and playstations are quite often not returned. That's a real common one, even though most [video stores] have taken huge precautions . . . they take photos and copies of their driver's licence."
With car purchases, Mike Farmer, managing director of the Farmer Motor Group, had noticed a trend towards finance, rather than people extending their mortgages.
"When properties were heading skywards . . . a lot of people increased their mortgages over that period. Now they are trying to keep that funding separate. We're certainly noticing that. We are loaning considerably more amounts of money."
Nice cars had become accessible to more people as the motor industry streamlined how vehicles were financed, he added.
"People have become more comfortable . . . it has become more accepted."
Stuart Locke, associate professor at the University of Waikato's finance department, points out that credit cards only became mainstream in New Zealand in the 1980s.
"We are talking about a generation that has had credit card availability. Prior to that everything was cash or cheques. There was not the same level of consumer borrowing," he said.
"People used to borrow to buy a house and they saw themselves as going into debt. They wanted to get out of debt and pay it off.
"Young people don't talk about debt, they talk about leverage. The whole idea of debt being a bad thing, something to avoid, has changed over the last generation. Now it's acceptable to be in debt and to actually borrow more in order to acquire more assets."