Wall Louisa: Credit Contracts and Consumer Finance Amendment Bill Financial Service Providers (Registration and Dispute Resolution) Amendment Bill — Third ReadingsText is incorporated into the Bound VolumeWall Louisa: Credit Contracts and Consumer Finance Amendment Bill Financial Service Providers (Registration and Dispute Resolution) Amendment Bill — Third Readings[Sitting date: 27 May 2014. Volume:699;Page:18358. Text is incorporated into the Bound Volume.]LOUISA WALL (Labour—Manurewa): Talofa lava Mr Assistant Speaker. It gives me great pleasure to speak on this the third readings of the Credit Contracts and Consumer Finance Amendment Bill and the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill. I acknowledge that this legislation came through the House via the Commerce Committee and I would like to acknowledge the members of the Commerce Committee for the great work that they have done. I would also like to take the opportunity to congratulate Minister Craig Foss who is responsible for consumer affairs and also to acknowledge my colleague Carol Beaumont who is Labour’s spokesperson on consumer affairs.What I would like to highlight is that this issue is one where many vulnerable New Zealanders have been caught within a context of taking out loans and then having to repay those loans at interest rates that have seen both them and their families stuck in this poverty trap. So underlying this legislation is a recognition that something had to be done to stop this vicious poverty trap that has engulfed many of our particularly vulnerable families.I want to recognise that this legislation is the result of work that began in 2007 so there was a review of the Credit Contracts and Consumer Finance Act 2003. It has been interesting as someone who has not been a member of the select committee to look at some of the evidence about what the problem actually is. So for example I know from an article written byCatrionaMacLennan titled “Cap an easy way to protect vulnerable from loan sharks” that between 2006 and 2011 there had been a 60 percent growth in the number of third-tier lending outlets and up to 40 percent of those new outlets were flouting the law by not registering as financial service providers. That meant that therewere 127 new lenders that had entered the market. What is the relevance to the number? Well again it has been interesting looking at some of the articles that have been written as this legislation has progressed.TheDominion Post in March this year published a story titled “Counting the cost of loan sharks”. There was a case study of a woman. Her name isPoea Rangi. She is the mother of five children aged between 7 and 18 years.Poea’s story is I guess a story typical of people who get trapped by these loan sharks.Poea has a net income of $600 per week and from that $600 per week she is paying $200 per week in loan repayments. What does that mean for her family? It means that at the end of the day she has $140 to feed herself and her children to clothe her children to make sure her children have opportunities to participate in sporting events and to fix the car if it gets broken.What happens to people likePoea however is that these lenders systematically target them. One of the quotes in the article fromPoea is that “There is never a day when someone doesn’t knock on your door.” to lend you money. The reality of these third-tier loan providers is that they are very calculating. What they sell is a dream. And do you know what the dream for some of our families is? They are asked “Do you want a TV? Do you want aniPad? Do you want to buy your child a new bike?”. Our vulnerable communities actually get sucked in by this instant gratification. It is almost like Lotto: “We’re going to give you this wonderful prize.” But the problem with this type of Lotto is that in fact a number of our families cannot actually get to a point where they pay off the loan so they are always continually spending quite a significant portion of their weekly income on repaying these loans.There has been quite a bit of commentary about the need for either regulation or a mechanism to identify what the loan cap rate should be. I have had a very interesting conversation with my colleague Carol Beaumont. I said that if we are going to follow the Australians and have a cap of 48 percent then we should just put that in the bill. But I think the issue is that it might not necessarily be 48 percent. Picking up on what Carol shared earlier again I did a little bit of research—The ASSISTANT SPEAKER (H V Ross Robertson): The member’s full name.LOUISA WALL: —sorry—and what I know is that we are now not enacting legislation that is best practice.In July 2013 Australia introduced a capping interest rate of a maximum of 48 percent. In 2013 Finland introduced a law providing that the interest to be paid on 1-month loans of€100 is 4 percent. Five years ago Japan lowered its maximum interest rate for consumer lending to 20 percent. The monthly interest rate for short-term loans in South Africa in 2007 was a maximum of 5 percent. South Carolina has a maximum consumer interest rate of 18 percent. In Washington state it is 25 percent. As we can see around the world many countries actually have introduced a rate a level.I can understand why maybe we do not want to introduce a rate but I would have thought that this bill should have created a mechanism for such a regulation which is what I know that my colleague Carol Beaumont had been advocating for. In fact the most pertinent research from here in New Zealand is from Associate Professor Louise Signal who headed up a study on third-tier lenders for Otago University. Her I guess assessment of this legislation is that without the cap the current legislation is not strong enough to protect the community.I started my contribution with the rationale for why this legislation is being introduced. It is being introduced because we as a Parliament recognise that some of our consumers need protection. I know that some people think that people should just assert personal responsibility and they should understand what they are signing up for but the reality is that—and again it is highlighted in the article asPoea Rangi talked about—some of the people who are targeted have really low literacy levels. They do notunderstand the agreements they are entering into. They need a society and a Parliament that will protect them. The whole thrust of this legislation is to protect our most vulnerable consumers.As somebody who did not sit on the select committee but now has had the privilege of speaking in this third reading of the bill I lament the fact that I believe we have had a lost opportunity to ensure the protection of the most vulnerable the people who get caught within the web of those third-tier lenders and that we did not actually set a cap. I am not going to say what that cap should have been but I am sure that there are people within the industry who could have provided guidance to this House about that. That is all I really wanted to say other than to commend those people who have been fighting hard for the rights of the most vulnerable. I commend the work they have done their advocacy to make sure that the case studies that I highlighted actually did contribute to the discussion that went both through the select committee and the House tonight. Talofa.