Goudie Sandra: Credit Contracts and Consumer Finance Bill — In Committee 
Goudie Sandra: Credit Contracts and Consumer Finance Bill — In Committee 
[Volume:611;Page:8711] 
SANDRA GOUDIE (NZ National—Coromandel) 
: 
 I want to raise a matter under Part 2 that is completely different from what we have been debating. Members have been talking about required disclosure and disclosure standards. It is clear that the whole point of having disclosure standards is to protect consumers who are entering into credit contracts. Clause 29(1) states: “Disclosure must—(a) be in writing in a disclosure statement; and (b) contain the information required by this Act;”. Further subclause (d) states: “not be likely to deceive or mislead a reasonable person …”. How far do we go in trying to ensure that every person entering into a credit contract is a reasonable person? I have already talked about the concerns expressed by some submitters about trying to protect people to the nth degree from entering into contracts they do not understand. Who defines a reasonable person? Can they then go— 
Hon Judith Tizard 
: The court. 
SANDRA GOUDIE 
: The court. Well I want to follow up on the provision about not deceiving or misleading a reasonable person. I refer members to the comments I made earlier about the Kingdom Resources organisation which recently offered a course “Beat the Budget Blues” attended by a lady who simply did not believe what she was being told about hire purchase agreements. So she went back and checked her agreements. To her amazement she found that the information given at that course was correct. I put it to the Committee that she was a reasonable person but did not understand the credit contract even though she believed that she did. 
Other people out there will believe they are reasonable people and that they understand these things but under the definition of “reasonable person” and if they feel they have been misled they can seek a remedy under the oppressive conduct provisions. The Committee will be debating those provisions later on in other parts of the bill. This is a concern and it should not be a subjective test about who is a reasonable person. 
Hon Lianne Dalziel 
: It’s an objective test. 
SANDRA GOUDIE 
: No it is not. There is no definition covering it. It becomes subjective. Everyone could be deemed a reasonable person and could interpret whether he or she has been misled and then call in the oppressive conduct provisions. We will discuss that issue later and perhaps the Minister in the chair the Hon Lianne Dalziel will take a call and expand on that a little bit more. We would certainly appreciate that from the Minister. 
Hon Lianne Dalziel 
: I’ve already taken a call. 
SANDRA GOUDIE 
: We have not seen the Minister take a call on this provision. 
Hon Tony Ryall 
: Yes she did. She moved a closure. 
SANDRA GOUDIE 
: Is that the best she can do? Perhaps she could give us the benefit of her legal expertise and explain the meaning of “reasonable person”—given the absence of a definition in the bill. 
I would like to talk about compliance costs. They are jolly substantial especially if— 
Government member 
: They’re not. 
SANDRA GOUDIE 
: The member says they are not but that is because the Government does not understand the costs associated with business. Many of the submitters outlined the figures involved. For example the big banks said that costs would run into millions of dollars. They will have to provide new forms modify their procedures make systems changes and train staff. They will probably have to give some sort of outline and assistance to people who seek their services. This bill will not stop loan sharks. They will still be out there. That problem has been referred to in earlier speeches. 
If members look at the business compliance cost statement in the explanatory note of the Consumer Credit Bill as introduced they will be able to answer: “Yes” “Yes” “Yes” to most of the questions raised about where the costs will be incurred. They will see under documentation requirements that there will be compliance costs and they will vary depending on the lender. I put it to the Committee that all lenders who have those forms will have to modify their procedures and as we all know information technology is pretty expensive—certainly for the bigger providers. 
Staff training will be another cost. There will be an increased need in the short term but staff movements will incur ongoing costs in training and retraining. It will not be just a short-term cost as predicted in the business compliance cost statement. The cost statement mentions required calculations for finance rate and total cost of credit. It is estimated those costs will decrease but I put it to the Committee they will not.