Auckland Action Against Poverty co-ordinator Ricardo Menedez March fears already struggling beneficiaries now facing large repayments back to the Ministry of Social Development will turn to loan sharks.
A 1 NEWS exclusive revealed last night taxpayers are almost $1 billion out of pocket due to overpayments to beneficiaries by the Ministry of Social Development.
The beneficiaries now have to pay back the debt, and in many cases they did not even realise they were racking up.
One of them is struggling Auckland solo mother Kafa Mamaia. The 43-year-old owed Work and Income more than $8000 that she had no idea she wasn't entitled to when she was getting it.
She said the error wasn't hers, but the cost is. But like many people in her situation, she's repaying it out of her benefit at the rate of $23 a week - which would have been $60 a week if it wasn't for the help of Auckland Action Against Poverty (AAAP).
Ms Mamaia, who is also a volunteer advocate at AAAP, talked to TVNZ1's Breakfast this morning about her situation, alongside the group's co-ordinator Ricardo Menedez March.
Mr Menedez March called on the Government to lower the repayment rates, as well as increasing benefit levels to stop debt accumulating.
"We've got a Government with a record surplus but low income families are in record debt and so I think this is where Government needs to step in - lift income levels so families stop being trapped in this endless cycle."
He said the workers at Work and Income had power over determining the rate they they had to pay back, and he feared those who would struggle to make the repayments would turn to loan sharks - predatory lending agencies with extremely high interest rates - for assistance.
"This kind of leaves people with the difficult choice of saving "I can't pay for my rent, maybe I need more debt from Work and Income or I'll go to a loan shark", get into serious trouble and then it just becomes a trap and a cycle that you can't escape."
Mr Menedez March said as of last year there was already 500,000 Kiwis who owed money to MSD.
And Ms Mamaia said she knew her special grants had to be paid back, but had no idea it would climb to the number it did. She only found out about her $8600 debt yesterday.
"They usually do not let us go over $2000.
"I got into debt from asking Work and Income for help because there's no where else to go to to get help," she said, talking about the struggles of bills including school uniforms, stationary and increased living costs like rent, electricity and petrol prices.