Loan interest

Kiwis in need of legal help stung by interest above mortgage rates

What may surprise some is that most of Brandon’s debt was for legal aid. New Zealand’s legal aid service is supposed to ensure that people with ‘insufficient means’ can access justice, but in about 65% of civil cases it is a loan, not a loan. free legal representation.

Critics of the system say that putting people into debt dissuades people from seeking justice.

Brandon says he’s an “Average Joe” who got ripped off by an employer. He first tried to get his money back by hiring a lawyer, who helped him with a Labor Relations Authority process. He paid the lawyer with $ 10,000, mostly borrowed from family members.

He was successful and the Employment Relations Authority said Brandon’s former employer owed him a significant amount of unpaid wages and benefits.

“That’s about where the fun started,” Brandon said with a weary laugh.

The employer has not paid and the Employment Relations Authority does not have the power to demand payment. To get the money he was owed and repay the money he borrowed from his family, Brandon had to go to court and he needed a lawyer.

The average hourly rate for a lawyer was $ 292.70 and it was beyond Brandon’s reach, so he sought legal aid.

To be eligible for legal aid, applicants must prove that they cannot afford a lawyer. This includes reporting all forms of income, savings and assets.

“They pretty much need to know the value of everything and once it’s all done they warn [legal aid call this a charge] on your property, ”says Brandon. “You kind of feel like a criminal before you start. “

Legal aid repayments can be made on a regular basis, can be taken from settlement money, or taken when someone sells a property, such as their home or car. The Legal Aid Commissioner can order the public sector, third parties or banks to make deductions in order to get his money back.

Unlike student loans, which don’t bear interest unless a beneficiary moves overseas, legal aid debts carry interest six months after a case is finalized. At 5% per annum, the interest rate is higher than the current interest rates for three-year fixed home loans from New Zealand’s four largest banks.

“If we had known what was going to happen, looking back we would never have continued,” says Brandon.

The case dragged on for more than half a decade, and over the years he and his wife questioned whether the continued stress and cost of the case was worth it.

“Even if we pulled over and were $ 10,000 on the trail, we still should have found the $ 10,000 to pay it off. Otherwise, the caveat was hanging over our property. There was a point of no -return.”

He knew his bill had gone up over the years, but when it was posted he was shocked.

“Twenty-three thousand blew us away,” he says.

The New Zealand Legal Aid Debt Bill

People can apply for legal aid debt cancellation, but lawyer Frances Joychild QC says in her experience it’s rare.

“The person must be poor in dogs, living in emergency accommodation with nothing, for it to be written off.”

She has represented many people through the legal aid system and says, in her experience, that most people have to pay off some of their debt.

“It’s so punitive and harsh that now legal aid is a loan,” she says. “They’re pretty brutal. As soon as the case is over, they start taking money from you every week. I’ve seen people who end up having to pay for legal aid for the next three years of their lives, as well as other debts. “

New Zealand’s legal aid debt currently stands at $ 177 million, with 70,605 debts owed, up from a peak of 106,471 debts owed in fiscal year 2020/2021. Each year, about $ 30 million to $ 35 million in new debt is added to the total.

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