How would you feel if you bought a car for $10,000, but ended up paying more than $40,000, and losing your home and eventually the car to pay it all back? Well, that's what happened to a Pacific Islander in New Zealand by the name of Felisi Bestwick, and her story is all too common.
A new report by New Zealand's Families Commission and the Ministry of Pacific Island Affairs has found that many low-income Pacific Islander familes are burdened by debt, with loan sharks and cultural obligations to donate money the main culprits.
The report also suggests that the Church has stong role to play to in making things better.
PRESCOTT: We've had anecdotal evidence of this sort of thing occurring for some years now in New Zealand. But the report has certainly highlighted and given evidence to that.
COUTTS: And are the Pacific Islands families being targeted? Are the predators targeting specifically Pacific Islander families?
PRESCOTT: No, no, I don't think it's actually targeting a particular ethnicity. It's more that, in fact if we're looking at a target group it would be more than lower social economic income, it's anyone that's in a situation where they're desperate for funds, I mean if they're buying a car and they can't afford cash, or low incomes basically. But that's not necessarily for Pacific Islanders.
COUTTS: But are the loan sharks from within Pacific Islander communities themselves?
PRESCOTT: Well yes what we found for instance in the catchment area in South Auckland, in Otara, there are actually more, well it's a strong work to be using loan sharks, but loan facilities of that nature compared to commercial banks.
COUTTS: Reverend Tevita Finau from the Mount Hermon Methodist Tongan Church, a very good morning to you. In the introduction I mentioned that the donations to the church are also seen as a particular issue in keeping or running families into debt. Is that accurate?
FINAU: Not necessarily so, there are a lot of people who are planning their givings and their savings throughout the year. It's only a few who didn't plan well ahead and planned savings it's a good solution for that.
COUTTS: Is there though pressure on Tongan families to give more than they can afford to the church?
FINAU: They are not pressured in that sense, but sometimes the actual giving are publicly announced sometimes, and people get carried away that they want to give more and more because of these public announcements, and of course they want to put in as much as they can.
COUTTS: And so is the church going to do something to reduce that competition where there's a competition to give more because it's been made public? Are you going to change that method perhaps to reduce that pressure?
FINAU: The church has already done that for many years. People are giving and they are doing it anonymously and their names are not read out, they do it in groups and it's really good that way.
COUTTS: And Dr Prescott the report notes the importance of a whole family focus and the role of women in managing money. Are the men often the ones driving the family debt?
PRESCOTT: No not necessarily. There is evidence of it being the other way round as well, but what we've found is that the role of women in, particularly Tongan society, is such that they tend to come out as being a little bit more careful with the money and sort of balancing the needs of the family, because they tend to be more directly connected with the day-to-day expenses. But that's a bit of a generalisation, that's just a tendency that we've found. It's certainly not the case for all Pacific Island families.
COUTTS: Reverend Finau are you seeing more and more people perhaps coming to you, the families coming to you for assistance because they've got themselves into debt?
FINAU: Not necessarily coming to me, it's me going out to them and also helping through church meetings and programs to explain to them how to stay out of debt.
COUTTS: Well are families coming to you after having lost their houses for instance because they're in debt?
FINAU: I haven't met anyone that extreme. As I said I do work with them and work with them in our programs and activities and events.
COUTTS: What are they going without? Are they going without meals if they can't pay their rent or children's school fees not being paid?
FINAU: I gather from some schools and also from reports that there are kids who go without lunch etc., but they don't give the information whether they belong to which church or which ethnicity.
COUTTS: And Dr Prescott are the loan people breaking the law in any way or are they working within the law and it's just the families aren't budgeting properly?
PRESCOTT: They are working within the laws and they're obviously very familiar with it and they realise that in terms of the process of debt recovery and the enormous penalties that they can place on these families that the law is very much skewed in their favour, and they're obviously using that to their best advantage. Perhaps if there were to be a review of the regulations governing some of these organisations that should be more to balance that out a little bit more, increase the awareness on both sides of the lender and the borrower. But controlling interest rates is obviously not going to work in the long term, I mean it's a market-driven outcome.
COUTTS: Well the question to both of you, but skewed differently, and Dr Prescott is there reluctance for people to approach budgeting agencies because people don't want to let it be known that they're struggling? Is that part of the issue?
PRESCOTT: I mean the whole idea of a sort of commercial existence within the Pacific is one that comes with social status, which is extremely important among Pacific Island people. And admitting that you are struggling financially becomes a bit of a pride issue. And what we need to get over is to let that go because it's actually destroying some families and to seek help before it gets to a desperate situation.
COUTTS: Dr Finau are there taboos attached to this? Are there taboos and a sort of a sense of honour that people won't admit their plight and how desperate they might be? Is that something the church needs to work on as well?
PRESCOTT: I think the church is always working on trying to help people and to make sure that the actual reason why they are supposed to be giving help and when they are supposed to be giving help. I think we are talking here of very few who are a bit extravagant with what they give or giving more than they should or they cannot afford.
COUTTS: Dr Prescott are you intervening before people lose their homes to try and help them budget and work out some pay-back plans?
PRESCOTT: I mean the intervention programs that we've suggested in the report, and it'll take more than just the families commissioned to do it, but may well be farmed out through the Ministry of Pacific Island Affairs, is the financial literacy drive that we've got here in New Zealand. That may well go some way towards educating people about what they're getting themselves into so that they can make informed decisions and perhaps not find themselves in the plight that they're in at the moment. So that's a sort of early intervention process, but also education in terms of how to manage your way out if you are already in that situation is another, but all of that will come under the financial literacy umbrella.