There should not be a need for finance companies to tap into borrowers’ KiwiSaver accounts when they default on a loan, one provider says.
The Commerce Commission has revealed that it has been told finance companies think they can access borrowers’ retirement savings if they fall behind on their loans.
In its latest Consumer Issues report, it said budget advisers had told the commission that some lenders, including finance companies, were considering KiwiSaver balances as a repayment source for consumer debt.
“It is noted that borrowers’ KiwiSaver funds may be withdrawn if the individual can provide evidence that they are suffering significant financial hardship, including inability to meet minimum living expenses,” the commission said.
But an AMP spokesman said it should not be necessary.
“There are already provisions for individual members to access KiwiSaver for the purposes of financial hardship and we would expect these to be satisfactory without any need for third parties to seek access to an individual member’s account, which is not contemplated in the design of the scheme as far as we can see.”
The Commerce Commission oversees the Credit Contracts and Consumer Finance Act, which governs responsible lending.
The commission had one complaint relating to a bank in the 2016/2017 year. Most complaints related to finance companies, payday lenders, car lenders and mobile traders.