The Government retirement village watchdog is investigating owner/operator loans to residents but a sector chief says businesses are doing nothing wrong and only trying to help people.
Troy Churton, Commission for Financial Capability retirement villages national manager, said operators were offering loans to cover money for entry payments or for weekly village fees.
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But Graham Wilkinson, Retirement Villages Association president, said the number of loans across the sector was extremely small, usually interest-free and never repayable until death.
"We're talking minuscule numbers. For example, I have only two people," Wilkinson said of his five-village Generus Living Group chain.
"We're puzzled about this investigation because anything given is a concessionary benefit to residents," he said.
Wilkinson said he had talked to other operators such as Arvida Group and Ryman Healthcare and found a prevalence of no-interest loans made to help, such as paying for additional rest home care.
"The association is concerned that the commission could have exceeded the scope of the retirement villages jurisdiction and we've received legal advice saying it has. But we'd be happier to co-operate and give all the information that expensive consultants might want.
"Implying that villages are unscrupulous lending businesses means operators could mean no money will be offered, people will be worse off, so it's the law on unintended consequences," Wilkinson said.
Churton said the probe would examine the types of financial assistance offered, credit terms, interest rates and how loans are charged and recouped.
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How operators advertise, represent or inform intending residents and residents about the availability of financial assistance would also be investigated.
The approximate number of intending residents and residents receiving forms of financial assistance, and the range of loan sizes was also under investigation.
The processes operators follow in assessing, offering and administering financial help to buyers or residents and compliance with the Credit Contracts and Consumer Finance Act was another area, Churton said, as was dispute resolution schemes under the Financial Service Providers Act.
How statutory supervisors oversee the lawfulness of operator processes when providing financial assistance; and the protection of residents' financial interests was also being examined.
Wilkinson said: "Wouldn't you want your mother or father who are in a village but a bit short of cash to be able to approach the village owners to see if they can assist them on a very favourable, concessionary basis? Retirement village businesses are more than happy to assist.
"The ability for a resident to know that they will always be looked after, no matter what circumstances may occur, is a highly attractive part of the village offering - another village benefit not easily accessed or found in the community," Wilkinson said.
Colin Porter, Retirement Village Residents Association NZ president, said he was aware of the loans, particularly to help people pay to move from villas to apartments and apartments to hospitals because if they had been in a village some years, prices had risen and repayments for a villa might not be nearly enough to cover buying a unit.
"It's basically a reverse mortgage. If you don't have to pay it back till you leave, it's mounting up. The capital payment when you vacate the property would be less the loan," Porter said.
"Reverse mortgages are bad news. You're just using up your capital and money is disappearing. Generally, financial people would say it's the least best option of raising finance but if you don't have a choice, that's the only way to go," Porter said.
Churton said his report would be delivered to Consumer Affairs Minister Chris Faafoi by next June.