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September 9, 2013 | by  | in News |
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Arrest and Relaxation

Students heading away on their OE may be stung with a surprise at the border, with new legislation poised to stop the worst loan-defaulters at the border.

The Student Loan Scheme Amendment Bill (No 3), which would allow for the arrest of those who have defaulted on student-loan repayments, passed its first reading in Parliament under urgency last week.

The Bill—a product of the 2013 Budget—seeks to achieve the Budget’s primary aim of debt reduction through targeting overseas borrowers and those thinking of heading abroad. The Bill, which passed its first reading 61 votes to 59, would allow IRD to issue arrest warrants for people on the New Zealand border who have refused to repay student-loan debts.

Revenue Minister Todd McClay has compared this to arresting a parent liable for child support payments planning on leaving the country, claiming that the threat of arrest would act as a deterrent for those who are planning on leaving the country with remaining student debt.

“Similar provisions for student loans would send a clear message to all borrowers that non-compliance is unacceptable, and there are real consequences for ignoring repayment responsibilities,” said McClay.

As well as imposing tougher measures on serious student-loan defaulters, the Bill proposes fixed repayment obligations for New Zealanders based overseas, and adds new thresholds that will increase repayment obligations. In order to enforce the new legislation on New Zealanders abroad, the Bill would see increased information-sharing between government departments, whereby contact details for passport applications would be shared with the IRD.

This interdepartmental sharing would allow for greater exchange and sharing of the personal information of any student with a student loan. As the Student Loan Scheme Act 2011 does not allow for the sharing of contact details of borrowers not in default, the Bill contains an amendment enabling the Commissioner of IRD to obtain the contact details of all those who borrow under the scheme.

McClay says that this is to prevent overseas-based borrowers from falling into default, and that, “with accurate contact details, Inland Revenue can educate borrowers about their obligations and put early intervention in place.”

The Bill’s reception has been mixed, with Opposition Spokesperson for Revenue David Cunliffe stating that the Bill is “an erosion of civil liberties”, while Green Party MP Holly Walker labelled the policy “dangerous” and “unnecessarily punitive”.

One student spoken to by Salient, Zac Sanderson-Harris, views IRD issuing arrest warrants as “overboard” and “extreme”.

“It is fair to have to pay it [student loan] off while overseas, but the new legislation could intimidate those with loans from dealing with IRD.”

The Finance and Expenditure Select Committee is now considering the Bill before further legislative progress can be made. Their report, which would affect the over–70 per cent of current tertiary students who have a student loan, is due by 27 February 2014.

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