A record number of New Zealand households are seeking help from financial mentors as the ongoing cost-of-living crisis drives debt levels to unprecedented highs, prompting renewed calls for increased government funding and stronger protections against aggressive debt collection practices.
FinCap’s fourth annual Voices Report paints a sobering picture of financial hardship across Aotearoa, revealing that more than 30,654 cases were recorded through the Client Voices system in the past year — a 57 percent increase since 2021.
The report also found the total debt carried by clients working with financial mentors has risen by 121 percent over the past five years, reaching almost $1 billion. On average, households seeking help are spending $107 for every $100 they earn each week, highlighting the growing gap between income and the cost of essential living expenses.
For many whānau, financial mentoring has become an essential lifeline, helping people negotiate with creditors, access hardship support and develop plans to regain financial stability.
However, FinCap warns the sector itself is under growing pressure.
Despite demand increasing dramatically over recent years, government funding has remained largely unchanged. The organisation says the current $19.5 million provided through the Ministry of Social Development has failed to keep pace with the rapid growth in demand for financial mentoring services.
To address the shortfall, FinCap is calling for an additional $30.5 million annually in sustainable funding.
The proposal includes a $5.5 million increase in direct government investment, alongside a further $25 million generated through levies or voluntary contributions from KiwiSaver providers, banks, lenders, financial service companies, electricity retailers and telecommunications providers.
FinCap argues these industries all benefit from the work financial mentors do by helping vulnerable customers remain connected to essential financial and utility services rather than falling into deeper hardship.
The report also highlights the changing nature of financial mentoring, with advisers increasingly assisting people to navigate KiwiSaver hardship withdrawals.
Since 2015, KiwiSaver hardship withdrawals have increased by 1,046 percent nationwide, with financial mentors now spending an estimated 40 percent of their time helping members understand whether withdrawing retirement savings is the most appropriate option.
The organisation says this reflects the growing number of households exhausting every available avenue simply to meet everyday living costs.
Beyond funding concerns, the report raises alarm over debt collection practices.
According to FinCap, 86 percent of financial mentors surveyed reported seeing debt collectors demand repayment arrangements that would leave clients unable to afford basic necessities such as food, housing and power.
The organisation says current debt collection laws provide insufficient safeguards against coercive behaviour and allow some collectors to pressure financially vulnerable people into unaffordable repayment plans.
To address this, FinCap is again urging the Government to introduce a licensing regime for debt collectors, allowing regulators to monitor industry practices and hold collectors accountable where unacceptable conduct occurs.
The recommendation builds on the organisation’s submission to the Fair Trading Amendment Bill, which argues stronger legal protections are needed to prevent harassment and coercion of households already struggling under mounting financial pressure.
FinCap says better regulation today could prevent years of additional hardship by ensuring debt recovery practices do not compound the financial stress many families are already experiencing.
The findings reinforce the continuing impact of inflation, rising housing costs and increased household expenses on many New Zealanders, particularly low-income whānau who continue to face difficult choices between paying creditors and meeting essential day-to-day living costs.
As financial hardship continues to rise, FinCap warns that investing in financial mentoring now will not only improve outcomes for individuals and whānau but could also reduce longer-term social, health and economic costs across the country.
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