Genter Julie Anne: Credit Contracts and Financial Services Law Reform Bill — In CommitteeText is incorporated into the Bound VolumeGenter Julie Anne: Credit Contracts and Financial Services Law Reform Bill — In Committee[Sitting date: 08 May 2014. Volume:698;Page:17717. Text is incorporated into the Bound Volume.]JULIE ANNE GENTER (Green): I rise on behalf of the Green Party to speak on Part 1 of the Credit Contracts and Financial Services Law Reform Bill. I have to start by acknowledging all the incredible work that has gone into this bill particularly from the officials who clearly put many years of work into this legislation and from the other members of the Commerce Committee notably Carol Beaumont who I think is incredibly passionate about protecting vulnerable consumers from predatory lending.The Green Party absolutely welcomes the development of the Responsible Lending Code and the introduction of principles of lender responsibility that will be protecting consumers particularly those who are most vulnerable to third-tier predatory lenders often known as loan sharks. I do not have a whole lot to contribute because we do agree with the vast majority of the bill but I do have to bring up once again—as I have in previous speeches on this legislation—the omission of interest rate caps as a pretty substantial omission. I think it is unfortunate that at least the possibility of testing them or introducing them is not present here in this legislation particularly as New Zealand is now one of the last jurisdictions I think in the world that are not looking at interest rate caps. Certainly they have already been introduced in Australia the United StatesCanada the UK many European countries and Japan. I have not seen any credible convincing evidence that they were going to cause any sorts of problems.One of the two reasons given for not looking at interest rate caps was that firstly it might become a target and therefore everybody would suddenly be choosing the interest rate cap as the standard interest rate. I do not think that is very likely. It certainly does not seem to have been a huge problem in comparable jurisdictions overseas. The other problem which perhaps is more likely is that there would be restricted access to short-term credit. But I have to say that the demand for short-term credit is a symptom of growing inequality. It is true that interest rate caps in and of themselves are not going to be enough to deal with the problems of growing inequality but I think we need to acknowledge that we are in a vicious cycle of inequality and third-tier predatory lenders are part of that vicious cycle.The demand for short-term credit in some of the research that I saw about this bill showed that people were using it to pay for food or rent. It is simply unacceptable that people should have to get short-term loans for basic necessities like food and rent. That problem is only going to get worse if we do not have public policy responses in other areas of this country that are going to address the problem of growing inequality. There is a widening gap between the rich and people who are quite well off and those who simply do not have enough who are struggling to make ends meet from week to week and who are therefore in need of short-term credit. They should not have to turn to predatory third-tier lenders in order to pay rent or to get food on the table and then end up in a spiral of debt.On the one hand the demand for short-term credit is a symptom of growing inequality but it also exacerbates it because the people who are the most vulnerable are at risk of getting themselves into a huge mountain of spiralling debt from which they cannot recover. And so there are other solutions needed not just interest rate caps but I certainly fail to see why that tool was not included in this legislation. We should have at least been able to put it out and try it to see whether it worked. If it did not work there could have been other options. It does not have to be mandated in the legislation itself.I believe there are several Supplementary Order Papers that have been put forward—one by Carol Beaumont and one by Te Ururoa Flavell. The Green Party will be supporting both of those Supplementary Order Papers because they are both different options for at least allowing this tool of interest rate caps to be explored here in New Zealand.I certainly think that given the amount of work that went into this legislation the number of submissions that we heard and the number of years that it has taken for it to get to its Committee stage it is hard to see why if we are still seeing the problem of usury and exorbitant interest rates a year or two down the track there is not going to be a tool to deal with them. I think that is incredibly unfortunate.Although the Green Party is supporting this legislation I just have to reiterate that we regret that there is a lost opportunity to include another tool in our tool kit. I have to say that unfortunately although I commend the National Government and the Minister of Consumer Affairs for bringing this legislation before Parliament and hopefully passing it before the next election—I am sure it will be passed—and it is great to see some movement in the area that is going to crack down on predatory lending which is fantastic ultimately the real underlying causes of inequality are being exacerbated by other policies of this Government.Tax cuts that benefited mainly those on high incomes have cost the country $4 billion already and it is going to be even more. The sale of productive State assets which were earning a good return for all New Zealanders have been sold primarily to overseas owners and to people who were the recipients of the tax cuts—those on higherincomes who had a lot of cash. That is a major transfer of wealth from the people of New Zealand to those who are already earning a lot.I am not sure whether members are aware of this but there is some very interesting economic research that has just been translated into English calledCapital in the Twenty-First Centuryby a French economist called ThomasPiketty—fascinating fascinating research. What it demonstrates is that when interest rates are higher than economic growth rates and the return on capital is higher than economic growth rates there will be a concentration of wealth and growing inequality. What we know fromThe Spirit Level and other really excellent public health research is that when the gap between the rich and the poor is wider everybody is worse off.Ultimately we are going to be facing a problem of sustainability here in New Zealand if we continue to pursue for ideological reasons an approach to deregulation that says we want to see wealth concentrated in the hands of those who already have a lot. The truth is that wealth does not trickle down. The evidence shows that that is not how it works. Although the people who are very well off and have a lot of advantages want to continue to lobby for policy changes that will build in their advantage that is not a recipe for success for the New Zealand economy as a whole. We will continue to see marginalised groups who are struggling to make ends meet who are on low incomes therefore going to short-term credit to predatory lenders in order to make ends meet in order to put food on the table and in order to pay rent. That is simply unacceptable. We can do better than that here in New Zealand. Thank you.