In a bid to curb unethical lending in our most vulnerable areas, The Salvation Army will launch a new shopping truck in South Auckland on Tuesday 19th February.
The Good Shop is a roving truck offering vulnerable consumers access to honest financial advice and quality goods at no interest—a stark contrast to the 800 per cent terms that The Salvation Army has seen in some mobile lending operators’ contracts.
The predatory lending industry is booming, growing 39 per cent or by $1.5 billion in the past five years1. With multiple reports about unscrupulous lenders and following Prime Minister Jacinda Ardern’s 2018 announcement to regulate and place an interest cap on non-bank loans, The Salvation Army says its decision to invest time and resource on an innovative ethical option will bring solutions directly to people and offer financial literacy advice.
“We knew we needed to start reform now. Every day we see people trapped in a cycle of debt by these loans, with no other options open to them and often with limited economic understanding. The Good Shop will positively disrupt the current mobile trading business model that can have extortionately high-interest rates and repayment plans that exploit our people,” The Good Shop Project Manager Jodi Hoare says.
“The Good Shop will provide a safe alternative solution to people who may struggle with transport, are unable to make upfront payments or cannot obtain credit from mainstream stores to purchase what they need.
This initiative wouldn’t have been possible without the delivery partners The Warehouse Group, BNZ and Countdown, and additional financial support from the Ministry of Social Development, The Tindall Foundation and Nikau Foundation,” Mrs Hoare says.
“Not only will the initiative bring fair and ethical credit directly to the streets, it will also increase public exposure to financial education and undo some of the damage that has been done by predatory loan services in the community.”
Essential household items such as food, furniture, electronics, appliances, whiteware and baby items will be available via online shopping technology on board the truck. Salvation Army workers will be on hand to assist clients plus provide referrals to other services and welfare that may benefit them, including budgeting advice.
Through The Good Shop, consumers will be able to access The Salvation Army’s interest-free loans supported by BNZ and Good Shepherd NZ to buy cost and energy-efficient items at competitive prices from The Warehouse, Noel Leeming and Warehouse Stationery plus grocery items from Countdown. Credit will not be extended to groceries given it is an ongoing consumable expense, however supporting people to access food at standard supermarket prices is a key role of The Good Shop.
“Thanks to the generosity of our partners, a significant number of people in need have an opportunity to avoid the problem debt cycle as we start to build financial capability in these communities,” says Hoare.
The Salvation Army plans to roll out the initiative across more communities with high deprivation and where The Army currently has a strong presence providing social services, with a second vehicle already planned for Wellington in mid-2019.
Key information about the service:
• Each truck will feature two computers for clients to access online shopping technology with goods available from retail partners. The trucks will not carry any physical goods
• Interest-free loans will be available on a case by case basis and repayment plans fall under The Salvation Army’s Community Finance Programme. Workers are trained to provide financially responsible solutions for both the client and for the programme
• Approximately 66% of clients interviewed for an interest-free loan are approved
• Loans can be used for goods including home appliances, computers, whiteware, TVs and furniture. The service excludes items such as gaming consoles and will look to include cost and energy efficient items
• Credit is not available for grocery products available at The Good Shop, clients will instead pay The Salvation Army via EFTPOS who will act as an agent on their behalf to Countdown. Some clients will be supported over a period of time to get to a place where they are able to do this
Key information about non-bank lending mobile traders:
• A report carried out by the Commerce Commission in 2015 reviewed the damaging effects of mobile traders, finding that the more sizeable enterprises of the 32 identified across New Zealand had a customer base of more than 35,000 customers and made more than $7 million in annual revenue2
• The government is considering changes to the Credit Contracts and Consumer Finance Act following the 2018 review of consumer credit law3
• As a result of the proposed changes mobile traders may need to pass a fit and proper person test, and register on the Financial Service Providers Register. ‘Do not knock’ stickers could become legally enforceable. This aims to lift professionalism in the sector and give consumers more power to refuse to
• Other proposed changes would see lenders required to prove (substantiate) that their fees are reasonable if the Commerce Commission asks them to do so, and to share key loan information with debtors at the start of debt collection activity3
• A draft bill will come before Parliament in early 2020, subject to parliamentary changes
Key information about the partners involved:
• BNZ has provided the funds to purchase the first two Good Shop trucks, it will also provide capital for the Salvation Army’s lending, as well as lending expertise for the programme workers
• The Warehouse Group will offer a range of approved product at RRP. Clients will view items via computer and purchase for delivery once their loan is approved
• Countdown will provide online grocery shopping at RRP to people who find it difficult to access mainstream supermarkets. Countdown will deliver shopping orders the following day at a discounted delivery fee
• The Tindall Foundation has committed financial support
• Nikau Foundation has committed financial support
• Ministry of Social Development has committed financial support