OPINION
The use of attachment orders to collect debts affects 20,000 beneficiaries a year at a cost of $29 million.
Those orders are the cause of significant financial harm to individuals, their families and New Zealand society.
And the punitive practice disproportionately affects Māori and those in poverty.
Figures from the Ministry of Social Development from 2021 show 57.3 per cent of all attachment orders were against Work and Income New Zealand (Winz) clients who identified as Māori, despite the fact they only make up 36.6 per cent of all beneficiaries.
Last week, community advocates sent a joint letter to the government calling for an immediate moratorium on attachment orders against all benefits.
The NGOs include the Salvation Army, Child Poverty Action Group, Good Shepherd, Debtfix, New Zealand Council of Christian Social Services, FinCap and a raft of budgeting services, including ours.
We are calling for the introduction of a judgment-proof debtor policy, similar to that used in the Australian state of Victoria, but are seeking a moratorium in the interim.
The District Court (Protecting Judgement Debtors on Main Benefit) Amendment Bill was pulled from the ballot in Parliament last week also.
Under the bill, an attachment order wouldn’t be able to deduct more than 5 per cent of a beneficiary’s net earnings. We would like to see this strengthened and the 5 per cent figure removed, purely because 5 per cent of a beneficiary’s net earnings is still too much for most to afford.
How attachment orders work
A creditor can apply to the courts for an order if an individual has not paid a debt. If granted, the debtor’s employer, or the Ministry of Social Development, is required to deduct an amount from their income on a weekly basis.
The system works in a way that makes it easier to get an attachment order against a benefit than a wage. Currently, 80 per cent of all orders are collected from beneficiaries.
“We need to stop Winz from being used as a proxy debt collector,” Auckland Central Budgeting Consultants general manager Tim Maurice says.
It is punishing the poor
Maurice says people living on benefits are already experiencing poverty and financial hardship is often a driver for them defaulting on their debt repayments in the first place. An attachment order only serves to punish them further.
“If you are on a benefit, you simply cannot afford additional payments,” he says.
He explained a client struggled with $10 payments on a $130 loan seven years ago. The debt increased 300 per cent due to penalty fees before it was sold to a private debt collector.
A judgment was sought and after court costs, the client now owes $1240.00 and has an attachment against their benefit for $30 weekly. The reality is, they don’t have enough money to live on.
Because of the early defaults and the excessive fees, there is a possibility this debt was in breach of current consumer protection laws.
It is harming our children.
A recent report by the Child Poverty Action Group states that one in five Māori children live in material hardship. This is compared to one in 10 children overall.
Research by Christians Against Poverty in 2021 found that more women than men have attachment orders against their benefits; which is problematic because women are more likely to have children in their care.
At Auckland Central Budgeting Consultants is a client with a young child in their care who has been living in emergency housing. Perversely, it is only because of this that their accommodation costs are low enough for them to just manage to meet the repayments.
The system is not working for the people it is designed to protect. Instead, it sees millions of dollars transferred to creditors and debt collectors while families struggle to put food on the table.
Attachment orders against benefits must stop now.
Teresa White is a senior financial mentor and consumer rights advocate at Auckland Central Budgeting Consultants, helping people with their personal finances and advocating for systemic change.