Beaumont Carol: Credit Contracts and Financial Services Law Reform Bill — In CommitteeText is incorporated into the Bound VolumeBeaumont Carol: Credit Contracts and Financial Services Law Reform Bill — In Committee[Sitting date: 08 May 2014. Volume:698;Page:17713. Text is incorporated into the Bound Volume.]CAROL BEAUMONT (Labour): Well I have to say it is a pleasure to rise and speak in support of the Credit Contracts and Financial Services Law Reform Bill in the Committee stage and I am looking forward to working our way through the various parts. I was involved in the select committee process on this bill and each part has some very important matters in it. There is no question that this bill makes significant progress and Labour has supported this bill throughout. I will talk specifically about Part 1 but just by way of introductory comments—and this will be a theme that I will be returning to—it is deeply deeply troubling to the Labour side of this Committee that this bill has taken so long to get to this point. When we look at some of the provisions in here that will actually make a difference we need to ask ourselves why we have waited so long. Lots of the provisions in here are things that people have been calling for for years.As for Part 1 I want to start by saying that it is a very good provision to start this bill with a primary purpose that says the Credit Contracts and Consumer Finance Act is to promote “the interests of consumers in connection with credit contracts consumer leases and buy-back transactions of land;”. It is really important that there is a primary purpose around protecting consumers because many of us from right across this Committee will know that particularly in the consumer credit area there is a great deal of harm being done and a great deal of exploitation. Some of it goes right down to some of our most vulnerable citizens: people with mental health issues for example who are being ripped off by truck shops; people who do not have English as their first language; and people who are struggling to make ends meet who are desperate to get money and who are preyed upon by some pretty dodgy characters out there. So I am glad to see that the primary purpose is to protect the interests of consumers.We need to make sure that those are not just pretty words though and that that is actually matched up by the reality. As my colleague Dr Clark says one of the things is that we need to make sure—and we need some commitments from the Government about this—that there will be sufficient resources put into place to ensure that consumers know what their rights are; to ensure that the changes in this legislation are widely promulgated; and to make sure that Government agencies and particularly the Commerce Commission are monitoring what is going on and the impact of the changes in this bill. One thing is certainly clear. This is a very fast-moving part of the market ifyou like and when you look at the Credit Contracts and Consumer Finance Act it is not that old actually. But very quickly it became clear that there were things that were not being adequately dealt with by that legislation.Some of that may have been about what was in the legislation but some of it was because things were changing out there. Anyone who follows this area will tell you that the number of truck shops and the number of pay-day lenders has increased dramatically over even the last 2 or 3 years. There are constant efforts and constant changes and those fringe lenders are finding new ways to exploit and rip off people in our community. I am holding up a pile of papers here. This is some work that was given to me the other day—some internet research done by someone who was interested in pay-day lenders. There is page after page after page of research done on these pay-day lenders that are out there in the market. So we need to be aware that this primary purpose will need to be resourced but we will also need to monitor what is going on and be ready and able to make changes.As I said it is quite concerning that we have known for some time for some years of the need to make changes in this area to protect consumers to meet this primary purpose and we have failed to do so. When I say “we” I mean those members opposite because actually under the last Labour Government when it became clear that the Credit Contracts and Consumer Finance Act was not adequate a review was undertaken. A review was commenced and when the National Government came into office that review was already under way. There had been a summit people had raised their concerns we went through a process with a discussion document and submissions on all of that and there was plenty of information available to act upon. But in fact the Government deliberately deprioritised that work—absolutely deprioritised that work—in favour of the other piece of consumer legislation.In my mind we should have been able to do both. Certainly when we think of how many thousands of people and how many families have been harmed in the intervening years under this National Government by its failure to act it is quite disgraceful. In fact it is irresponsible when you know that there is a problem you know what needs to be done and you do not do that. So I have to say that this primary purpose now needs to mean something. It needs to mean that we monitor what is going on and that we are willing to update the legislation to stop some of the practices that will no doubt develop quite quickly. We also need to make sure that what we are putting in place here actually makes a difference. I think it is important we do that.As well as that primary purpose outlined in clause 4 there are a number of other purposes that are explained. I want to just comment on a purpose that is not there because there are some important provisions there around how the Act will look at responsible lending; look at disclosure of information; look at rules about interest charges credit fees default fees and payments; and look at what happens in hardship for example. They are all outlined as other “purposes” of this legislation but there is one that is missing. We will talk about that quite a lot as we go through this bill.What I find to be a real shame in what is basically decent legislation with some good provisions in it is that the bill is weakened by the fact that we do not have interest rate controls in it. We do not put in place that tool which if you added them all together would have given us a very strong and robust framework to try to really stamp out some of those really really shocking things that we hear about in our communities. When I spoke on the second reading of this bill and we talked about interest rate caps I asked the question: “How many members in this House think that interest rates of 80 percent 100 percent 200 percent or 700 percent are acceptable and is it right to extract that money from people who can ill afford to pay it?”. I ask that question again. That is what is missing here—some ability to stop those kinds of interest rate charges being made.Often people pay those interest rates. People actually pay the loan and the interest off; very low - income families take the loan and pay it off. Certainly some research around Pacific lending showed that. People do their best. Where is that money coming from when we know that families are struggling to make ends meet? Actually it is probably coming out of the food budget and actually it is probably harming children and families and I do not think it is right. I do not think that that rate of return and those sorts of interest rates can be justified under any circumstances. That is the gap in terms of the “purposes” of this legislation. As I have said we will be raising that as we talk about the various parts of this legislation.I was in Palmerston North last Friday with my good colleague our junior whip Iain Lees-Galloway. He usually sits right here next to where I am standing. He is a very fine member of Parliament. During the course of our visit to Palmerston North we talked to some budget services. They outlined some examples including an interest rate of 552 percent. Another example they gave was of somebody borrowing $15000 and paying back $18000. I do not think that was all the interest rate but none the less. They gave another example of a pay-day loan that when annualised had a 1080 percent interest rate.Those are just three examples from last Friday in Palmerston North and I can tell members opposite that you can get those examples anywhere in this country—just go and talk to your local budget service or your citizens advice bureau and they will tell you. Again I ask members to think about whether you can justify interest rates of that magnitude.