District Court (Protecting Judgment Debtors on Main Benefit) Amendment Bill

Thank you, Mr Speaker. I move, That the District Court (Protecting Judgment Debtors on Main Benefit) Amendment Bill be now read a first time. I nominate the Justice Committee to consider this bill.

This bill is about keeping people out of poverty and that is a matter which is close to Anahila Kanongata’a’s heart and my own. That member was the author of this bill, and it’s really pleasing to me that I’m able to now continue in this work and bring it to this House. The central purpose of this bill is to limit the amount that can be compulsorily deducted by court orders to repay the debts of beneficiaries from their benefit.

Now, this Government is in the midst of passing legislation to limit the increases in benefit rates, and that’s going to compound the problems of people who are on benefits and who struggle to repay their bills. Benefits are intended to be enough for people to get by on and not a great deal more. In fact, we know as a fact, through the work we’ve done in child poverty reduction, that there are many people who are on benefits who are in poverty. So when things go wrong, when there’s extra expenses and money is borrowed or credit is run up and the creditors chase them up, it causes real hardship.

Now, obviously, when people borrow money they have to pay it back and it’s entirely appropriate that the law and the courts provide procedures and systems for the collection of that money. But we have moved on from a repressive system. Debtors’ prisons are a thing of the past, workhouses are a thing of the past, writs of arrest are a thing of the past. We recognise that when we allow people to collect their debt, there is a balance to be struck; that we need a humane system, a system that doesn’t make people go hungry, go cold, go without shelter, and not able to care for their children and their whānau. That’s what this does.

It is, in fact, a very modest bill. I have discussed this bill and these problems with a number of entities in the finance sector, and certainly some of them would say that there should be no collection of debts against beneficiaries through these attachment orders because, by definition, they won’t have enough to live on. But the member who drafted this bill, Anahila Kanongata’a, has indicated that she thinks it’s appropriate that that amount be capped at 5 percent. So 5 percent of the net amount of the benefit can be deducted, but no more. Because at that level, it’s an indication that their payments are being made but it won’t throw them into the kind of hardship that would otherwise be the case.

There are certainly plenty of studies where beneficiaries have found themselves in trouble and they have had very significant outgoings deducted from their benefits in a way which leaves them—and, of course, the first: rent has to be paid. There are other compulsory outgoings and the thing that is last on the list is often food. So they find themselves with only a few tens of dollars a week to feed themselves and their family, and we know what then happens: poor nutrition, and poor nutrition leads to poor health outcomes. So what this bill does is to cap the amount that can be deducted. It’s a very simple bill, and the bill itself, as can be seen, is a very short bill simply amending the District Courts Act 2016 to insert this limitation. So it’s a simple bill and I’m hopeful to get the support of this House because all it does is really prevent hardships.

We know this new Government has been very clear that it wants to address the cost of living crisis, and this is about the cost of living. We know that, most of the time, lenders act responsibly and there’s been a number of reforms to make sure that lenders lend only when it is affordable to repay. That doesn’t always happen, but the other thing that happens, of course, is that people’s circumstances change: that they might have borrowed money when they had a job, but they now find themselves on the jobseeker benefit. Of course, they can’t then make the payments on their car or whatever it might be, and they simply can’t make ends meet. They can’t pay their rent and their payments on their car and off they go to the court, a judgment’s entered against them. Having worked in that field, I know that once that kind of thing happens, penalty interest accrues, legal costs accrue, and the debt becomes many times larger sometimes than it originally was. Of course, that then becomes a millstone around the debtor’s neck—a trap from which they certainly can’t escape.

Now, there are procedures—we know there’s a no-asset procedure and a bankruptcy procedure—but there’s a lot of people out there who, for their own reasons, and quite good reasons, don’t want to go down that track. Bankruptcy has its own stigma and, of course, the no-asset procedure can only be used once, and, of course, people actually want to repay their debts. There’s a certain dignity and appropriateness in wanting to repay their debts and they often find themselves in this debt trap going through the courts getting these attachment orders.

There are no particular prohibitions in the current law as to the amount of the attachment orders. Judges are expected to undertake an assessment of the ability to pay, but there is also an expectation that they will be repaid, and quite often those attachment orders—which may only be $30, $40 a week, which to most of us wouldn’t seem a huge amount, but it becomes a crippling burden. So this is a simple piece of legislation aimed at making sure that the impost put on beneficiaries on main benefits, when they find themselves in a difficult position with an order of the court—a judgment of the court against them and enforcement proceedings for collection of that debt—that their income, their only income, isn’t reduced to such a point that they are thrown into fundamentally abject poverty.

So following some Victorian legislation in Australia, it’s a very modest move, it’s a humane move, and it’s one I hope this House will support. Thank you, Madam Speaker.

The question is that the motion be agreed to.

Thank you, Madam Speaker. I’d like to preface my contribution to the District Court (Protecting Judgment Debtors on Main Benefit) Amendment Bill by discussing a bit of a background to this bill.

Those not in the legal profession may not know that attachments are the most common use of the law to enforce a civil debt, through which debtors could have their income, whether from Work and Income or from employment, already designated for payment to their creditor. In 2014, the law addressing this civil debt situation was passed to allow for collection of civil debts by an enforcement system. It has been troubling to note that by 2015, the Commerce Commission noted that the numbers of orders per month increased approximately 400 percent after that change—from approximately 200, to over a thousand. Public reporting has further highlighted that, in 2018, over 24,000 attachment orders for civil debt were granted against people on the benefit—beneficiaries. Only around 5,000 of civil attachments were made against people on wages—people who were working. In 2020, the Salvation Army also noted that only 14 percent of attachments in 2020 were placed on people who were working and receiving wages, leaving a massive 86 percent of attachment orders against beneficiaries.

The law, as drafted, seems to offer a limited prospect of reducing the debt burden on beneficiaries. The bill primarily targets orders made under the District Court. The District Court is not the only avenue for attachment decisions to be made, and other legislation allows for that in other jurisdictions as well, outside the District Court. For that main reason, there is a limited scope. It will not stop the large amounts of attachment orders being made to beneficiaries. Also, the District Court already has the power to limit an attachment order on beneficiaries. Currently, that limit is at 40 percent of their income.

I think that the object of the law in 2014 has mainly been to help people take responsibility for the debt that they take on. Yes, circumstances may change, but then the responsibility of taking more debt is a personal one and something that each individual truly needs to get a handle on in life. This is one of the major points in life, that when we take debt, we should be able to take responsibility for that and make repayments. The law, in that sense, also oversteps the decision that District Court judges are already enabled to make, limiting what attachment judgments that they can make decisions on and use the protected earnings rate at 40 percent to limit those decisions. The object, really, is personal responsibility.

If we look at the increasing number and percentage of attachment decisions from 2014 all the way to 2020, which is what we have in evidence, the fact is that a very large sector of persons who are receiving the benefit have found themselves unable to pay for one reason or another—some, surely, on legitimate grounds. But the Government also needs to be responsible in making sure that individuals are able to well foster that ability to make decisions about their expenses and their debt going forward.

The idea of limiting to 5 percent attachment judgments will not incentivise individuals from pushing themselves to taking on that personal responsibility of being mindful of the debts that they incur. We want to foster that knowledge and ability among everyone in the community, and particularly beneficiaries who are dependent on welfare for their daily means. Our objective of getting people back into work also falls within this attempt to get people out of the cycle of dependency and getting them to take responsibility and to get into work.

The bill, essentially, oversteps an existing ability of District Court judges to make that decision. Also, because it is limited to just the District Court, then, essentially, the scope is very limited and will not really—probably slow down the number of people on the benefit who are taking that well beyond their capability.

It is often that we have also heard about lenders’ responsibility, and this has been dealt with as well. While there is legislation for lenders’ responsibility, then providing for a limited cap on what can be attached in a debt judgment to 5 percent does not work to foster their responsibility among individuals to actually be mindful and to control their decisions in seeking debt or borrowing money.

I think that, very often, there is no discussion on personal liability; it has to be the liability of everybody else other than the person taking on the debt, to be conscious of what he or she is getting into. What we are focused on is, really, getting individual responsibility up and getting people to understand that they need to be mindful. It is a responsibility of everyone, and particularly if they are already struggling and having very little means or a very small source of funds or limited funds because their funds are coming from welfare. For these reasons, we do not support this bill.

Thank you, Madam Speaker. I’d like to begin by acknowledging former MP Anahila Kanongata’a-Suisuiki for bringing this bill, and we’ll acknowledge the Hon Duncan Webb for picking it up. For us, this is a matter of justice, and it’s a matter of the systemic failures that have led to so many people on low incomes having attachment orders that basically end up stripping away so much of their income that it makes it impossible to survive. Unlike other jurisdictions—for example, in parts of Australia, there are mechanisms to wipe attachment orders when it becomes basically impossible for people to pay them—we have very little recourse to wipe those attachment orders and to adequately limit them.

So it was interesting to hear from Paulo Garcia, from the Government side, where he identified the problem right at the beginning. He almost got it right. He talked about how, actually, one of the issues that we have is that a huge proportion of those attachment orders are on people receiving income support and that those people are some of the people who are on the breadline. And yet, despite that, while also acknowledging the narrow scope of the bill and that we need to take systemic action, he didn’t speak of any intention by the Government to do anything about this. So what I’m hearing from the Government side is they’re not going to support this, but they’re also not intending to do much to resolve those broader systemic issues, despite acknowledging the extent of the problem which is that a huge proportion of people who have attachment orders are beneficiaries. A lot of them—a great proportion of them—are women and, equally, Māori, which I think becomes a Treaty issue in the sense of the Crown not meeting its responsibilities for looking after our communities. Once again, we’re back at square one by the Government admitting that they don’t want to do anything.

We have had so many advocates on this issue. In fact, recently, last year, we had a coalition of groups including FinCap, Child Poverty Action Group, the Dunedin Budget Advisory Service, Pakuranga and Howick Budgeting Service, Henderson Budget Service, Auckland Central Budgeting, Debtfix, Good Shepherd New Zealand, the New Zealand Council of Christian Social Services, the Society of St Vincent de Paul, and the Salvation Army as well as the Nelson Budget Service penning a letter to the former Ministers at the time, calling for attachment orders to be stopped for people on the benefit. They were the ones who recognised the extent of the issue.

Our front-line service providers are at the front line of recognising that attachment orders on those who are already struggling to survive does not do anything to incentivise better money management as Paulo tried to identify. Instead, all they do is they push people into needing more hardship assistance into more debt. And the key thing here in unpacking that so broken and beaten-up argument over personal responsibility is that you can’t actually make life choices when you don’t have the choice. Like, if you get stripped of so much of your money when you literally have no money left to make decisions on how you spend it, it doesn’t matter how good you’re at budgeting; you’re put in that impossible situation where you then have to take more debt to survive.

Part of these attachment orders on people on the benefit is that it creates a perverse cycle of debt and hardship that creates that poverty trap that people aren’t able to escape. Rather than just preaching about personal responsibility, we should realise the collective responsibility we all have to not have a system that pushes people into poverty, that traps people in hardship, and that fails to acknowledge why people may find themselves with those attachment orders in this place, because we’ve built a House that is broken and that entrenches inequality.

So the Green Party does support this bill. We do think that there is space to have a broader and more systemic conversation on attachment orders, but it would be naive to imply that there wouldn’t be a difference being made by reducing the amount an income can be deducted to 5 percent for somebody who’s on a benefit, and that it would really, really limit the negative impacts that really high attachment orders have on people.

This is one area where I do think we’re starting to fall behind as a country in recognising that attachment orders do not do good. In fact, they do harm, particularly for those people who have very little money already. So it could have been an excellent opportunity by the Government members to support this bill to the select committee to then to be able to hear—from the same people that the previous speaker was talking about who he doesn’t think have made the right decisions—about, actually, what led them to have these attachment orders. And then we could have had a constructive conversation on how to address it, but unfortunately it seems that the Government side is content with the status quo of trapping people in poverty.

Thank you, Madam Speaker. I’m taking this call to say that we won’t be supporting this bill. Can I acknowledge the member in charge, Dr Duncan Webb. It’s good that you have taken on this bill. And can I also add that I can clearly see that the intention behind this bill is a good one, but that intention won’t be delivered through this bill that the member has on the Order Paper. That’s the reason that we have decided not to support this bill.

Clearly, the member is concerned about people, those who are on low incomes, those who are on benefit; if they incur civil debt, they have to repay that. And the attachment orders, yes, will make a judgment on how much should be returned and what kind of instalments. We can fully understand that. But what this bill does is it’s going to create a division between people: those who are on benefit versus those who are in employment. This kind of limit won’t work when people are in employment. In our view, it’s going to actually create a disincentive for people to get into employment. For example, if somebody has incurred a huge amount of civil debt while being on benefit, they will know that if they take up employment, they will have to pay that money back sooner or in bigger instalments than it would be because of this legislation. So overall, it’s not going to actually do good for these people, because the overall wellbeing of people is going to be better if they are in employment rather than staying on a benefit.

And not just that. As I was listening to Dr Duncan Webb, he mentioned that, yes, when people are in hardship, they might need more money, they go out and borrow some money and take some loans. That is the reality of life. Yes, people do borrow money. But if these lenders—the reasonable lenders, I’m talking about—see that this individual is on benefit and that this legislation will apply to them, they’ll know straight away that if they lend money to that individual who is on benefit, then getting that money back will be really hard. Or it would take ages and ages for that person to get that money back. So why would they lend that money to that person who is on that benefit? Actually, it’s going to create more hardship for that person, because that person will not be able to borrow that money or take that loan when they really need it. So I would like to put a big emphasis on this, that people do sometimes borrow money, but people will not be reasonable, lenders will not be lending money to people if they are on benefit because of this legislation, if it goes through.

The other point I would like to make is that courts make a judgment based on individual circumstances. So it’s not like everybody who is on one type of benefit—that their circumstances, personal or family circumstances, are exactly the same, and courts can judge that. So putting this percentage on whatever amount they are getting through Work and Income actually considers that everybody’s circumstances are exactly the same, which is wrong. Because individual circumstances can be judged by judges in courts and that amount can be decided; it could be less than 5 percent, it could be more than 5 percent. We should leave this kind of decision to courts rather than putting this percentage and seeing that everybody on one type of benefit should have the same kind of circumstances if they have civil debt.

So, in our view, this bill, as I said, yes, the intention is good, but it’s not going to deliver what it intends to. It’s not actually going to give any financial relief to these people, those who are on benefit and have civil debt. Actually, it’s going to create more hardship for these people and that’s why the ACT Party opposes this bill. Thank you, Madam Speaker.

Thank you, Madam Speaker. I rise on behalf of New Zealand First to take this call for the District Court (Protecting Judgment Debtors on Main Benefit) Amendment Bill. Firstly, I will thank the Hon Dr Duncan Webb for putting this bill together. It is something that is new in front of me today seeing this. I haven’t had any consultation on this, so I’ve just read today and heard from Mr Webb what the bill’s intention is. As Mr Webb has just said, the intention would be to take this to the Justice Committee, so that is one thing that we probably would agree on if we got to that point.

But my question, quickly, when I started to observe this bill was why would we want to do this? And it isn’t very well explained throughout this bill. Probably the intention is good, because I think we are looking at people that are struggling with the cost of living. We’ve got people that we’ve heard about today in this House that are on benefits that are finding it hard to get by, and I think Mr Webb has tried to put this bill together in that frame of mind.

As we know, cost of living is a struggle for people in New Zealand at the moment; it’s a struggle for all of us. It’s a cost to pay rent—I understand that. From what Mr Webb said through his introduction, it’s a real hard thing at the moment to put food on the table. So, I understand, when we’re looking through this bill and we’re looking at 86 percent of attachments are to beneficiaries—that in itself speaks loudly.

Also, we look through the bill and we get to the point where we make this nominal figure of 5 percent, but there is no reason why we’ve got to 5 percent. I think I heard Mr Webb say he would have zero, but to get this bill up to the House, a 5 percent nomination was put forward. So, when I was reading through this, I was thinking, “Well, what about the victims of crime?” We’ve got the beneficiary who has caused the crime, and now we are going to say to them, “We will give you only 5 percent. You will only need to pay 5 percent of your benefit to that victim.” That’s where this starts to fall apart, because, in our society, we want law and order to actually do the right things; and that’s what we all want from our society. So, all of a sudden, if we passed this legislation, we are actually saying, “If you’re on a benefit, you go ahead and you commit a crime, and it doesn’t really matter because the highest amount you’ll get is 5 percent.” I think and New Zealand First thinks that’s wrong, because what about the victims?

So, as we progress through this, the attachments, we understand—is because it’s around being attachments to beneficiaries, this 5 percent figure that’s pulled out of the sky, but it’s the victims of the crime that will actually suffer here. Actually, probably, for a lot of people there will be no incentive to stop causing crime, and that’s the whole reason, in this case, if you can go up to—and I heard from the member on our side of the House, 40 percent is the maximum amount the court will actually put. So it is about personal responsibility. If you do a crime, you pay—it’s as simple as that. Putting a minimum of 5 percent I just do not think is appropriate. So, yes, the ability to pay if you’re a beneficiary is low, I understand that, but don’t do the crime in the first place. So New Zealand First will not support this bill. It does not make any sense. For that reason, going forward we will not support. Thank you.

The question is that the motion be agreed to.

Thank you, Madam Speaker. I am actually really delighted to have an opportunity to speak on this bill, because, as it was being developed, I had a bit to do with the various budget groups who brought the issue to my attention. I think there are two things I want to address in this speech, which the last speaker, Jamie Arbuckle, referred to. He said, “Well, what is the reason for this bill? You know, people get into debt, but why this bill in particular?”

There’s a bit of a background as to what’s going on here with these attachment orders and why it particularly applies to people with benefits, and it’s to do with the industrialisation of attachment orders. So it used to be that in order to get an attachment order, a creditor, someone to whom money was owed would have to get the attachment order and then take it along to the person’s employer or, in this case, to Work and Income (WINZ)—actually on an individual basis—and get it all processed through the WINZ systems, and eventually perhaps get the attachment order being seen to. That’s sort of the process, sort of, 20-odd years ago—25, 30, maybe longer.

But it turns out that the contemporary process is quite different, because, at the moment, what happens is a person can get an attachment order and take it along to WINZ and it gets processed through the WINZ computer systems automatically—automatically, so the attachment just goes on straight away. In fact, so automated is this process that it turns out that there are companies that specialise in doing it. So they buy the debt and they get attachment orders on it, and they take these debts along to WINZ—the attachment orders—in bulk lots and get them bulk processed through the WINZ systems. But we have enabled the industrialisation of making poverty even worse through the WINZ systems. Now—

💬 Simon Court: Debtors deserve to get their money back.

Of course people deserve to get their money back; there’s no doubt about that. But when a person is on a benefit, it becomes even worse and even harder to survive if a significant amount of money is being taken out in order to pay old debt.

It gets even worse than this, because some of what has gone on is irresponsible lending. So it’s lending where the person selling the products has not taken care, has not taken due regard, to ensure that the person is actually able to repay the debt. The attachment order process makes that worse.

Now, what this bill would do would ensure that if a person is going to lend to someone who is on benefit, or if a person is going to lend at all, because they cannot be sure if they’re going to get their money back, because they can’t do an attachment order so easily, they would actually have to go through the proper credit checks. In other words, it would make sure that people lending money did so responsibly. So that’s one of the first reasons to support this bill. It is because of the industrialised process—at the moment, the industrialised process encourages poor lending behaviour.

I just want to address the issue that was raised by the member from New Zealand First, worrying about the victims of crime. Actually, he’s got a point. He’s got a good point on that one. I think there is some regard that needs to be given to the priority of debt and which debt should be repaid first. I agree that reparations to victims of crime should be perhaps further up the list, but that is exactly the sort of issue that could have been discussed through a select committee process. I urge the member that if he wants to make that priority, this is an ideal bill to do it on, to take that issue to the select committee and discuss it in full. Now, let’s be quite aware that a lot of these attachment orders are not to do with reparations for crime. There will certainly be some of those that would be the case, but I’m going to urge the member to think about taking this opportunity to ensure that there is a full discussion of where debt should be prioritised, what sort of debt should be repaid first out of the limited resources that beneficiaries have. I take his point that it is important to ensure that criminal reparations are properly repaid, but that should not mean that we don’t discuss this bill at all; in fact, it should create an extra reason to discuss this bill.

So for those three reasons—(1) because of the industrialisation of attachment orders, (2) because of the poor lending practices, and (3) because of the way we can talk about the prioritisation of reparations to victims—I think that we should support this bill through to select committee.

Debate interrupted.