Genter Julie Anne: Credit Contracts and Financial Services Law Reform Bill — Second ReadingText is incorporated into the Bound VolumeGenter Julie Anne: Credit Contracts and Financial Services Law Reform Bill — Second Reading[Sitting date: 10 April 2014. Volume:697;Page:17169. Text is incorporated into the Bound Volume.]JULIE ANNE GENTER (Green):The Green Party is happy to vote in support of the Credit Contracts and Financial Services Law Reform Bill at its second reading. The Green Party has long called for better regulation of third-tier lenders—that is pay-day lenders moneylenders and those who are known as loan sharks. Third-tier lending at extortionate interest rates has been increasing in New Zealand and in other jurisdictions over the past decade. It is both a symptom and a cause of growing inequality. The gap between those who have and those who have not is growing in New Zealand and in other countries and wealth is being concentrated in the hands of fewer people.Post the global financial crisis although the people who arguably caused the global financial crisis—The ASSISTANT SPEAKER (Lindsay Tisch): Order! I am sorry to interrupt the member. There is this banter going across the House. I am trying to hear the member who is speaking.JULIE ANNE GENTER: Thank you Mr Assistant Speaker. Post the global financial crisis a number of people lost their jobs and they found it more difficult to put food on the table and to pay their ever-increasing power bills. Predatory lenders set up precisely in those areas of greatest social and economic deprivation and take advantage of limited financial literacy and a desperate need for cash to make ends meet.It is not enough to improve financial literacy and regulate loan sharks alone. Part of the solution is addressing the underlying causes of this growing inequality and that means taking a hard look at our tax system which currently favours the wealthy few. We need to look after our children 250000 of whom are living in poverty. There are many steps the Government can take to do this thing like raising the minimum wage paying a living wage themselves and working towards a living wage across the country and investing in smart affordable transport and kid-friendly streets. Our Schools at the Heart policy which is focused on our education hubs and on making sure that kids are looked after from the beginning is going to help deal with some of this growing inequality.But the immediate issue of regulating third-tier lenders is finally being addressed in this bill. Even though we do not agree with everything in the bill—there are a few areas where we certainly differed from the Government’s policy and that is expressed in the minority report—we are very happy to finally see the very good work that was done as an outcome of the review of the Credit Contracts and Consumer Finance Act. I have to acknowledge the excellent work of officials in this area and especially the work of my colleague Carol Beaumont on the Commerce Committee. She is really the expert in this area. I am certainly not. I had to look to her expertise. She advocated for really important changes in this bill and I was so happy that she was there to do that.We will see truck shops and other lenders covered by this legislation which is incredibly important. As Carol Beaumont said in her speech earlier this evening one of the biggest disappointments of this legislation is that it does not include any provision for setting a cap on interest rates. What is disappointing is that we did not get any compelling evidence or reasons why this was not being included in the bill. We certainly asked for it. We heard a huge number of submissions and it is fair to say that some submitters were not in favour of interest rate caps—most notably the Bankers’ Association. But there were quite a few submitters who were in favour and there certainly is a lot of evidence that other jurisdictions are using interest rate caps to protect consumers from spiralling out-of-control debt. As Carol Beaumont said New Zealand is one of the last remaining countries not to have a provision for interest rate caps.So although I am certain that the provisions in this bill will go some way to protecting those consumers who are most vulnerable I am concerned that we have not given ourselves even the opportunity to try interest rate caps. The reasons given for not including interest rate caps were simply that there might potentially be a lack of access to short-term credit and that the interest rate cap would become the target and everybody would automatically put up interest rates to whatever the cap was. I have to say these are not really overwhelmingly compelling reasons for not including some sort of provision. I am an empiricist. I very much believe that we cannot know everything before trying it—Simon O’Connor: Did you say an imperialist?JULIE ANNE GENTER: Empiricist.Simon O’Connor: Oh I thought you said imperialist.JULIE ANNE GENTER: No empiricist sorry. So basically I think that when it comes to policy it is very easy to make up reasons for not trying something but actually if most of our trading partners in other comparable jurisdictions are doing something then maybe we should give ourselves the opportunity to at least try it. Seeing as how it took so many years for this legislation to come before the House we are not going to easily have that ability to include a cap in the future. I mean it takes time. We consulted on it. It was certainly spoken about in the submissions process. This was the logical place to at least introduce the possibility of the Government imposing an interest rate cap or allowing the Reserve Bank to set one.Of course if all these hypothetical drawbacks of interest caps did occur and there were no other means of introducing them then we could always roll it back but we should at least try it because it is an important tool. Why would you restrict the number of tools in your tool kit to deal with predatory lenders? As we know it is a growing problem and one that is increasingly affecting the people in New Zealand who are the most vulnerable and the people whom we should be looking out for the most.The lack of access to short-term credit is perhaps something that the Government should be seeking to address so that those who have the least really should not be forced to go out and get a pay-day loan or a short-term loan in order to put food on the table. That should not be a reason. You should not need access to credit to get your kids enough food to eat or to make sure that they have got warm clothes or that you are able to pay your power bill. There are other problems deeper problems that need to be addressed in this country and I think that allowing predatory lenders to go out and charge interest rates of well over 100 percent to people who have potentially—and I have to say that most people are not very good at understanding compounding interest. People who are struggling just to get enough to eat and to put food on the table might not be in the best position to understand the consequences of interest rates that are expressed simply in a daily rate and to understand what that is going to mean as it compounds.So simply put I think the Green Party is happy to see this legislation finally come to its second reading. It is mostly very very good and we are disappointed that the Government for quite ideological reasons seems to have neglected to include an important tool in the tool kit to address the problems we face.The other disappointing thing I think was the last-minute amendments around credit and default fees that were made entirely at the behest of the New Zealand Bankers’ Association—with some scaremongering claims that I am sure it made about the increased costs to it. Again I thought it was disappointing that the amendments came at the last minute. We were not presented with very compelling evidence for the wording changes. I think that although we have to admit that at least the Government did see this legislation come before the House—that is good—and there are some improvements ultimately there are still some ideological policy decisions being made by the National Government that are about “Let’s look after the bankers and let’s ideologically be opposed to caps on interest rates even though they might help those who are the most vulnerable in our society.” Thank you.