Young Jonathan: Credit Contracts and Consumer Finance Amendment Bill Financial Service Providers (Registration and Dispute Resolution) Amendment Bill — Third ReadingsText is incorporated into the Bound VolumeYoung Jonathan: 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:18357. Text is incorporated into the Bound Volume.]JONATHAN YOUNG (National—New Plymouth): I am very pleased to stand in support of the Credit Contracts and Consumer Finance Amendment Bill and the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill in their third readings. I would like to acknowledge the Minister of Consumer Affairs Craig Foss for his work as well as the Minister at the time the legislation was introduced Simon Power and also my colleague Sam Lotu-Iiga who has put considerable effort into this legislation as well.We understand that the availability of credit is a very important thing for our economy both for businesses and for consumers. It is fundamental to the sound operation of a modern economy so credit law is very important. Many goods and services are purchased through consumer transactions that are partly or completely financed by credit. Without credit such purchases would not occur and consumers and businesses would be worse off so getting it right is important.We understand that in the world of credit finance there are three essential tiers of operators. Firstly there are the registered banks; secondly there are lenders including building societies credit unions the Co-operative Bank and now the deposit-taking financial institutions; and thirdly the third-tier of lenders are providers of personal non-mortgage credit that are not banks credit unions building societies deposit-taking institutions or credit card providers. Third-tier lenders include finance companies pay-day lenders and moneylenders. Third-tier lenders operate in a market where it is easier to engage in practices that potentially take advantage of vulnerable consumers because many of the borrowers have lower levels of financial literacy or have low incomes and cannot access affordable credit. Because of this occurrence this legislation has come into being.When people have to work hard to pay their bills put food on the table and provide for their families it is unacceptable that they are taken advantage of by people whom we call loan sharks. If you borrow $1000 but you cannot pay it back the lender says they can take anything in your house to pay the loan including toys beds and even things that do not belong to you. That is wrong. If you get sick you lose your job or your partner and you cannot pay the loan the loan company will not reduce your payments so you face hardship. It is hard hard yakka for many people. Or if your relative is a guarantor for your car loan no one explains that this means that your relative will have to pay back the loan if you do not make the payments.We saw in the Commerce Committee one of the documents of a car purchase from a South Auckland car firm a motor retailer. This vehicle was worth $13000 but added to that were loan fees credit fees insurance interest—and interest that was at a particularly high level because this was a third-tier loan. Then there was a line item in that transaction called a contingent fee for $2000. I wondered what that contingent feewas. That was the fee just in case anything went wrong. You would think that if there was a high-risk loan that of course the work would be done to ensure that the person who was going to borrow the money would be able to afford to pay it back or certainly if it was a high-risk loan that the interest rates would reflect that for the lender. But then to have $2000 added to the transaction just in case seems wrong and we felt as we looked at this legislation that that seems to be an unreasonable fee.So looking at the whole area of fees and reasonable fees was a very important part of this. It was important when National came into Government in 2008 that investor confidence in the financial sector which had been rocked by collapses of the finance companies was shored up. But the other side of the equation in terms of transactions is that credit providers who have mainly been unregulated and have no conduct requirements needed to come into some regulation and enforcement and this legislation certainly does that.One of the things that it does in relation to unreasonable fees which are prohibited under the Credit Contracts and Consumer Finance Act is include more explicit tests for different kinds of credit fees. These fees include establishment repayment default or third-party fees. The legislation also clarifies that the default interest may be charged on only the amount in default and not the entire amount of the loan. There are a number of great provisions right through this legislation that no doubt members of the committee and other members of Parliament will speak on.One of the things it does is it brings a sense of reasonableness to this whole aspect of lending and borrowing money. It restores confidence to that financial sector and that is a very important thing indeed. We want to have lenders acting responsibly and consumers having the information they need to make informed decisions and there are serious consequences for those who breach this legislation. I believe that New Zealand is going to be better off our economy is going to be better off and people who borrow money are going to be better off in terms of what this legislation will offer them. I am very pleased to commend this legislation to the House.