Banks should suspend customer payments on all loans
18 March 2020
From Chris Leitch, Leader
The country's banks should suspend customer payments on all loans, overdrafts, and other advances for a minimum of three months commencing 1st of April.
This should include all finance companies owned by or attached to any of the banks.
Interest on unpaid credit card balances should be cut to zero for the same period and reinstated at only 5% for the remainder of the year.
The rest of the country will be enduring significant pain during the Covid-19 crisis and the banks' mainly overseas shareholders should man-up and share in that pain.
The big four Australian banks made $6 billion dollars profit from the New Zealand economy last year, proving that the country's banks can well afford to take a haircut on this year's profit to shoulder their share of the country's recovery.
Bank offers to extend even more credit to their customers at more attractive rates will simply increase bank profits and result in a larger debt mountain for customers to repay.
The effect of these measures will be to extend all loan contracts by three months so the banks will still end up getting paid their expected return on the lending.
Taking this action will help stave off a rash of business failures and home loan foreclosures, which could precipitate a collapse in the housing market.
Banks create the money they lend (about $80 billion every year in total) out of thin air and have only a small portion of that value in customer deposits, so they will be able to continue paying interest to depositors.
If the banks do not voluntarily sign up to such a proposal, the government should pass urgent legislation to compel them to do so.
If it can pass urgent legislation with a minimum of public consultation to force law-abiding gun owners to turn in their guns, then it can pass urgent legislation, without public consultation, to ensure that banks play their part in supporting their customers in this economically challenging time.
Those who wish to continue paying off their loans as normal should be entitled to do so.
The banks have now agreed to payment holidays for up to 6 months for those who apply, but they will be charging penalty interest during the payment holiday period. That will add significantly to the amount people have to pay and will generate lots more profit for the banks. We've now got another petition going calling on the government to stop the banks doing that. You can sign that here.
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