A Salvation Army pilot project aiming to disrupt the mobile trading market will be stopping nearly a year earlier than planned because of the financial costs of complying with the Government's upcoming consumer credit regulations.
Salvation Army National Community Finance Coordinator Siobhan Deans said the cost of upgrading the not-for-profit The Good Shop's systems to become compliant and the financial penalties of up to $600,000 for not complying with the regulations were part of the decision.
"We possibly would have made this decision in the next six months to a year anyway because we were only here for a temporary amount of time, we weren't here long-term however this has just forced our hand and we've had to bring this service to a close sooner than we'd hoped," she said.
The Good Shop mobile service will be stopping in Porirua near the end of this month, and in South Auckland some time before the regulations aimed at preventing predatory lending come into force in October.
"We saw a problem in the market, and we wanted to disrupt these predatory lenders that target low-income people, people that are vulnerable and perhaps can't get finance through safe and affordable mainstream services," Ms Deans said.
"And also, to raise awareness and I do believe that we've achieved that to some extent."
"I think it's sad cause this here is helping people not get into situations that I've been into, there's no interest... it is a great thing to have so it's very sad to see it go," Salvation Army volunteer Kerry O'Leary said.
Ms O'Leary's niece Kimberley Linschoten secured an interest-free and fee-free loan through the service to purchase a bed mattress and TV.
"Having a newborn, it was a lot easier to have someone come to your door, there was no interest, so you didn't have to pay all the interest on top," she said.
Staff assess whether a person can afford to make repayments on the loan, work with them to help them reduce their debt first if they can't and provide financial education to all customers.
Ms Linschoten said she felt comfortable using The Good Shop because there were no strings attached and that she was sad it was stopping as there are some people who don't have transport to get to the shops.
In the two years since the service has run, 528 loans have been issued through to mid-June, with the Salvation Army estimating that's saved buyers around $250,000 compared to using other mobile traders.
The Salvation Army didn't raise the impact of the law changes on The Good Shop with the Government during consultation as it 'did not want to distract from the benefits that the broader changes would bring,' the charity said in a statement.
In a statement, Commerce and Consumer Affairs Minister David Clark said he's asked staff to contact the charity about the situation.
The public can still access low or no interest loans through visiting the Salvation Army or over the phone from Good Shepherd NZ, with BNZ as underwriters of the lending.
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