As the recession bites, people on low incomes continue to get into financial strife after being lent money they have no chance of repaying, a Dunedin budget adviser says.
Corpac Trust senior adviser Mike Williams would like to see regulation of the industry.
It was generally not banks or big institutions offering the loans, but second and third-tier lenders, who were offering credit to people who had only their household chattels as security.
In some cases the value of the chattels was not enough to cover the loan.
Corpac Trust offers advice to people who have been suffering from mental illness, and Mr Williams said when he challenged organisations about their lending practices their response was they did not know the client had mental health issues.
Their mental health status was not the issue, but the fact that they were being lent money which, if checks were done on their income, it would be clear they could not repay, he said.
The amounts were between $1000 and $10,000.
He accepted that people should have a personal responsibility, but it was also irresponsible of organisations to lend money when they had no chance of getting it back.
Corpac was also seeing an increasing number of people with no previous mental health history who were crushed by debt and were developing psychiatric illness as a consequence.
"Things aren't all that flash at the moment. We're having our busiest year on record."
Families were already under enormous pressure and when the person trying to support the family lost a job, they were in trouble.
Often, people were borrowing money because they were unable to pay their bills and could see no way out.
Ideally, they should seek budget advice if they found themselves in such circumstances, but he accepted this was often a difficult step for people to take.
There had been a big increase in the number of people applying for No Asset Procedures, the alternative to bankruptcy, which lasts a year and applies to those with no realisable assets and total debts (excluding a student loan) of between $1000 and $40,000.
Mr Williams said it was still a form of bankruptcy and carried the stigma that went with that.
