Critic “Borrows” Story From Salient. Thanks, Suckers.

Concerns from key groups were ignored as the Government introduced their border arrest scheme for student loan defaulters earlier this year, the details of which remain unknown.

Documents obtained by Salient under the Official Information Act show that there was limited consultation with stakeholders before the policy was announced, that Police concerns were not addressed, and that the Inland Revenue Department (IRD) did not believe such a measure was necessary. In addition, a submission from the Legislation Advisory Committee for greater transparency was ignored in favour of secrecy over exactly who would be subject to arrest under the policy.

Border arrests were announced as part of the 2013 Budget in an effort to improve repayments from overseas-based borrowers and “[increase] personal responsibility for debt repayment.” Under the policy, borrowers in “serious default” who returned to New Zealand would not be able to leave the country unless they organised repayments. Failure to do so would result in an arrest warrant being released.

The scheme would affect “a small number” of borrowers, though it is unclear exactly how many this is as the IRD have not made public the criteria for “serious default.” There are 101,095 overseas-based based borrowers, who form the majority of all borrowers with overdue repayments.

The Regulatory Impact Statement (RIS) of 22 March – three months before the announcement – states that the border arrest policy “will have a significant impact on those affected,” could be challenged under the New Zealand Bill of Rights Act (1990) for impeding freedom of movement, and “may discourage overseas-based borrowers from returning to New Zealand.” The IRD also add that “if passport restrictions were to be introduced … this measure might be sufficient,” and border arrests would not be necessary. Despite these concerns with the policy, consultation with stakeholders has not taken place.

“Limited time was available for consultation. We did not consult with sector groups due to the budget-sensitive nature of the proposals,” the RIS reads.

The Police raised a number of concerns, citing negative “operational and reputational impacts” on Police. They suggested that border arrests would make Police look like IRD debt collection agents, and added that border arrests would be too difficult given the nature of airports. Police would have to find the defaulter in busy departure lounges, often with no photo ID supplied, a task that raised further concerns relating to delaying planes and creating undue extra costs on airlines.

“Police note that no cost benefit analysis, including the impact on their parties such as airports, has been concluded,” the statement read, adding that the Police already have 37,000 outstanding arrest warrants and therefore that student loan arrest warrants would not merit a high priority.

The IRD have refused to release the exact threshold for “serious default,” and therefore it remains unclear exactly who will be able to be arrested under the policy. A Policy Report from 26 July reveals IRD fears that borrowers may repay to just below the threshold for arrest, or that people who know they are not going to be arrested will not contact the IRD to arrange repayments.

“To publicise specific criteria would undermine the effectiveness of the border sanctions policy by … enabling borrowers to circumvent the criteria [and] weakening the deterrent effect of the policy,” states the report, released two months after the border arrest policy was announced.

This secrecy persists despite the concerns of the Legislation Advisory Committee (LAC), who requested “more detailed criteria … to provide more certain limits as to who may be caught by the definition” in their submission on the Student Loan Scheme Amendment Bill (No 2). The LAC hold that the current ambiguity does not provide sufficient guidance to Government departments about when it would be acceptable to share personal information about borrowers. The Policy Advice Division of IRD and the Treasury declined the LAC’s request that further information be released.

Under the legislation, failing to respond to the IRD, providing incorrect details to the IRD or continuing to default after contact has been made by the IRD will be grounds for arrest. To get an arrest warrant, intent to not repay debt must be proven. Documents relating to the border arrest scheme suggest that the definition of intent has been broadened from other similar legislation, like the Child Support Act, to make arrest warrants easier to obtain.

The exact cost of the border arrest policy is unclear. It is estimated to cost $600,000 to implement, but this figure excludes the extra costs imposed on Courts and Police, who are responsible for managing the arrest warrants. The expected value of the border arrests policy was listed as “unavailable” in a document circulated just months before the budget.
This article first appeared in Issue 26, 2013.
Posted 4:26pm Sunday 6th October 2013 by Chris MacIntyre.