Ryall Tony: Credit Contracts and Consumer Finance Bill — In Committee 
Ryall Tony: Credit Contracts and Consumer Finance Bill — In Committee 
[Volume:611;Page:8705] 
Hon TONY RYALL (NZ National—Bay of Plenty) 
: 
 The National Party in Opposition is very concerned about Part 2 because it will increase the cost of borrowing for the people least able to carry that additional cost. The burden and the risk to the value of the debt will be reflected in a higher cost for people to borrow money. The most offensive clauses are the clauses with regard to unforeseen hardship whereby people will be able to go to the court for anything called a “reasonable cause” to have the terms of their loans set aside by the court. What does “reasonable cause” mean? Is culturally insensitive borrowing a reasonable cause? 
Sitting suspended from 6 p.m. to 7.30 p.m. 
Hon TONY RYALL 
: After the Committee rose at 6 o’clock my colleague Mr Connell the MP for Rakaia and I had a brief discussion with the Minister in the Chair Judith Tizard on our concerns about the absence of the coverage of brokers. The Minister’s explanation—and we spent quite some time over the dinner break looking at it—makes us think that the officials have got this wrong. The Minister told us that the meaning of a credit contract is that any payment made out of proceeds to any party has to be declared as part of that credit contract. 
Hon Judith Tizard 
: Not “any” party. 
Hon TONY RYALL 
: That is what you said. 
Hon Judith Tizard 
: No I said “as defined in the Act”. 
Hon TONY RYALL 
: OK but the way the Minister described it to us was that officials had told her that under the meaning of the Credit Contracts Act any payment made to other parties under the contract would make it a credit contract. We have gone through that provision and it refers to interest charges credit fees or both payable under the contract. Obviously a broker’s commission is not an interest charge. The point we are making for the Minister of Commerce is that brokers’ fees are not included in what has to be declared as part of the cost of the credit. 
If we are to accept the officials’ advice a broker’s commission under this bill has to be either an interest charge or a credit fee. It is obviously not an interest charge so I ask whether it is a credit fee. The definition of credit fees in clause 5 is “fees or charges payable by the debtor under a credit contract … or for the benefit of the creditor in connection with a credit contract …”. The operative word in the definition is “creditor”—that the credit fee goes to the creditor. That is the issue. It is for the benefit of the creditor. A broker’s fee is not for the benefit of the creditor; therefore a broker’s commission is not a credit fee. 
The reason I am raising this—and Minister Dalziel should be aware of it—is that the Government is making a big thing of the fact that all key information will be declared so that borrowers know the facts of what their debts and obligations are. We are making the point that brokers’ commissions will not be declared. The Minister says they will because her officials have told her. We are telling the Minister that her officials are wrong. With respect for the officials I say that the Ministry of Consumer Affairs is not one of the senior ministries in the public service. I also say to the Minister that we have been advised by people who have used the best legal advice they can buy in order to tell us that there is a big loophole here and that brokers’ commissions are not included in the bill. 
I do not know what more the Opposition can do to tell the Government that this is a problem because the Government is saying in its very purpose—and we support the intention of the purpose—that people should have disclosure. They should know the full cost of their borrowing. We support that 100 percent. But we say to the Government that it is not working. Brokers’ commissions are not included. We base that on the fact of the wording in the bill. A credit fee is the result of a contract and is to the benefit of the creditor. Members should read the provision. A broker is not the creditor. The broker is not part of the contract. The Government admits that because it refers in another provision to the broker as the person who arranges the contract—not being party to the contract but arranging the contract. 
We are making the point that the purpose of the bill is to declare to the borrower where the money is going. The point is that a broker’s commission has to be declared. If a person went to say Wanganui Finance and borrowed $5000 and if that transaction was organised by a broker then the borrower might find that $500 is taken off that amount and sent to the broker or that $500 is added on to his or her debt. That money does not go to the borrower; it goes to the broker. We say that is key information that should be included in schedule 1 and it should be declared because it tells the person where the money is going. 
The purpose of this bill is to enable a borrower to go to different lenders get their offers look at where the money will go and at the interest rate and work out where the best deal is. Surely knowing how much money will go to the broker is part of making the best deal. I can understand that the Minister has to accept her officials’ advice—and she might be asking for it in writing—but if people read the letter of the bill clause 9(1)(c) say that they are relying on a broker’s commission being a credit fee and then look at what a credit fee is they will find that the two do not match up because the definition of credit fees in clause 5 is that they are “fees or charges payable by the debtor under a credit contract ... to ... the creditor in connection with a credit contract ...”. 
Hon Judith Tizard 
: “or payable by the debtor”. 
Hon TONY RYALL 
: —“or payable by the debtor ... to … the creditor”— 
Hon Judith Tizard 
: “or for”. 
Hon TONY RYALL 
: —“or for the benefit of the creditor”. A broker is not the creditor. 
Hon Judith Tizard 
: No but if you’re using a broker and you’re paying the broker directly—not through the creditor—then you know perfectly well what you’re paying because you’re paying it directly to the broker. 
Hon TONY RYALL 
: But that information is not being required to be declared. That is the point. 
Hon Judith Tizard 
: But you’ve got to write the broker a cheque. 
Hon TONY RYALL 
: The Minister should take a call. The definition in clause 5 states that credit fees “means fees or charges by the debtor under a credit contract or payable by the debtor to or for the benefit of the creditor”. The creditor is the loan company. 
Hon Judith Tizard 
: Yes. 
Hon TONY RYALL 
: I know what the problem is here. The Minister thinks the broker is the loan company. The broker is not the loan company; the broker is— 
Hon Judith Tizard 
: The broker is the person getting business for the loan company. 
Hon TONY RYALL 
: That is right and the legislation is not requiring— 
Hon Harry Duynhoven 
: Is this member meant to be a lawyer? 
Hon Lianne Dalziel 
: He’s an accounts clerk from a bank. 
Hon TONY RYALL 
: That Minister should take another pill. 
Hon Judith Tizard 
: That is absolutely out of order. 
Hon TONY RYALL 
: Look we are trying to help the Government on this bill! I am telling the Minister that the advisers are wrong and that she should get another legal opinion. It is not too late. She can cackle away but the point here is that when the Opposition makes an important point about what is wrong with this bill the Government is not prepared to listen. 
I tell members that this Government is not telling poor people the full cost of their borrowing even though it says it is. There is no way in which brokers’ charges will be declared through this legislation and that is the loophole. I say to the Minister that businesses will rearrange their affairs on the basis of that loophole so that they do not have to declare the cost. What will happen when that occurs? Will the Minister say: “I’ve got a letter from Consumer Affairs saying that was never going to happen.”? Well that is not going to wash. The fact is that the responsibility of Ministers is to weigh the advice they receive and get further advice if necessary. Just because the advice comes from one set of officials does not mean it is right. I have been in the Minister’s position and can tell members that sometimes Ministers have to go and get advice from somewhere else when they know that a valid point has been raised and they want reassurance. 
I tell the Minister that there is no coverage of brokers’ fees in this bill. A broker’s fee is not a credit fee because a broker is not the creditor. The operative word in the definition of credit fee is “creditor”. We accept that they might be able to make a payment but that payment does not have to be declared—and that is what we want. If the Minister had that in schedule 1 “Key information concerning consumer credit contract”—and we would like to support that schedule—then people would declare the broker’s fee if they knew it so they could work out where all the money has gone and make comparisons. At the moment that is not there.