Bradford Sue: Consumer Credit Bill — First Reading 
Bradford Sue: Consumer Credit Bill — First Reading 
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SUE BRADFORD (Green) 
:  
The Green Party welcomes the introduction of this bill to the House. A review of the law covering consumers and credit is well overdue given that there has been no real change in the legislation for over 20 years and that there have been huge changes in our society and our economy during that time. Debt has become a critical issue for ordinary working people and beneficiaries during that period. The levels of indebtedness continue to rise to new heights and most groups working with low-income people acknowledge that crippling debt is in many cases an overwhelming factor in people’s inability to make ends meet on a day-to-day or week-to-week basis.  
Of course the laws around credit are not in themselves the underlying source of the problem. The rise in and entrenchment of structural unemployment in the 1980s and 1990s the pressing down of the comparative value of benefit levels from 1990 to 1991 onwards and low minimum wages have meant that hundreds of thousands of people have been forced into debt as they struggle to provide the bare minima of life for themselves and their families. The fact that people have had to resort to borrowing on an unprecedented scale in recent years has meant that things like extremely high interest rates and deceptively easy access to credit have led people into ever-worsening cycles of poverty and despair in ways that impact on all sorts of aspects of some families’ lives. The recently released Child Poverty Action Group report on the effects of housing transience on school attendance in south Auckland is just one example that highlights the way in which the spiral of debt compounds other problems as families move house constantly in an effort to escape debt.  
For anyone who takes a wander through the streets in places like parts of Manukau City or Otahuhu it is easy to see that alongside the proliferation of pokie parlours and Cash Converters stores there is also an ever-burgeoning number of businesses offering in a variety of languages to lend passers-by cash right now. Moneylending at what I will call the bottom end of the market appears to be a booming part of the economy in those places just like the pokies and I am sure that they are not without links. At the same time I would be the first to agree that lots of the borrowing is not for gambling but for things that most of us see as the necessities of life such as paying the rent or mortgage buying a car to get to work in or simply putting food on the table this week. The fatal contradiction for people borrowing at the bottom end of the market is that all too often the interest rates and other charges are much higher than those paid by better-off people who borrow from mainstream lenders for the very reason that this is fringe lending.  
I will just to give one horrific example of that. A Consumers Institute investigation of loan sharks last year found a case where a woman in Otara had borrowed $600 from a small lender. She had to pay a brokerage fee of $100 a documentation fee of $498 interest at 28.5 percent $30 to make a phone call and $50 to receive a fax. Within 6 months she had paid back the $600 but she still owed $1398. There are other iniquitous practices as well. For example there are places where lenders hang on to borrowers’ automatic teller machine cards and pin numbers so that they can get into borrowers’ accounts at will or there is the Tongan moneylender in Otahuhu who runs a name-and-shame page in the  
Taimi’o Tonga 
 newspaper with photos of the people who are behind with their repayments and a written description in the press of what the loan was for.  
From even just a couple of examples like that it is easy to see why in the years since the introduction of the Credit Contracts Act there has been considerable criticism of that Act. The Act is often seen as too complex and difficult for ordinary people to understand especially with the need to cross-reference it to other legislation. There are problems in ever getting the law enforced because there is no Government agency empowered to enforce the Act. There is perceived unfairness to consumers in some areas such as the exclusion of certain charges from the finance rate and businesses often complain of high compliance costs. The new bill in front of us today is the Government’s attempt to address the issues and is long overdue. The Green Party welcomes its introduction and will be supporting the bill going to the select committee where much of the fine detail can be worked out.  
However we do even at this early stage have several reservations about whether the bill goes far enough in certain areas. Firstly and probably most significantly the Green Party believes there should be a named and fixed limit on interest rate charges. Many low-income people in south Auckland and elsewhere are defaulting on loans that have exceptionally high finance rates. I have been reliably told that rates of 30 to 35 percent are not uncommon and some are even as high as 42 percent. Those loans are being made by moneylenders who are very well aware that it would be just about impossible for a borrower to meet the repayments. When a debtor defaults for example on a car repayment the vehicle is repossessed and the debtor spends years trying to continue to make payments on a car he or she no longer owns or he or she skips out on the debt with all the negative long-term legal and financial consequences that that incurs. Meanwhile the vehicle is resold to someone else on similar terms and the whole vicious cycle is repeated.  
While clause 92 of the new bill does talk about oppressive contracts we do not think that that is enough. There should be a mechanism by which maximum finance rates for consumer credit are regulated. We are also concerned that the definition of an oppressive contract is not sufficient to cover all the types of iniquitous practice to which some borrowers are subjected. I hope that will be tightened up carefully during the select committee process.  
A second reservation that the Green Party has about this bill is in the area of small business. As my colleague in ACT has just said small-business people need protection and disclosure when they borrow just as much as anyone else does and many of them are in the same low-income low-capital bracket as the vulnerable borrowers I have talked about already. The Green Party believes that small-business people should have the same rights and safeguards as personal borrowers and I cannot quite understand why the Labour Government has seen fit to leave that out of this welcome legislation. In its April 2000 discussion document on the review of consumer credit law the Ministry of Consumer Affairs did evidently consider ways and possibilities of allowing small business to fall under the new legislation—for example through defining limits based on the financial size of a business and the number of its employees. However sadly in the time since that review took place the ministry and the Minister seem to have found small business too difficult to deal with in the context of the bill. That is a great pity and I hope the select committee will with the help of submitters and officials find a way to make sure that small business will have access to the benefits of this legislation.  
Despite those reservations and others such as problems around the access to the disputes tribunal I am pleased that this badly needed update is finally before the House. I look forward to hearing what the wider community will have to say about it during the select committee process.