Tremain Chris: Financial Service Providers (Registration and  Dispute Resolution) Bill — Second Reading In Committee 
Text is incorporated into the Bound Volume 
Tremain Chris: Financial Service Providers (Registration and  Dispute Resolution) Bill — Second Reading In Committee 
[Sitting date: 23 September 2008. Volume:650;Page:19026. Text is incorporated into the Bound Volume.] 
CHRIS TREMAIN (National—Napier) 
: 
 I just pick up where my colleague Hone Harawira left off and I say to him that one does not have to be in Kaitaia to experience loan sharks. Electorate offices around this country across the spectrum have constituents coming in to see MPs from both sides of the House with regard to the issues they face with various loan-related difficulties they get themselves into.  
It is interesting to note that it is probably not the loan sharks that Mr Harawira speaks about but more the actions of some of the high-profile companies that have brought about the legislative changes that are being proposed today. We were talking about a number of high-profile businesses that many people around this country have been on the tough end of. They are businesses like Provincial Finance which has gone to the wall with some $300 million outstanding; Bridgecorp at $459 million which I spoke about earlier today; Nathans Finance with $149 million; Capital + Merchant at $187 million; Lombard Finance at $127 million; Geneva at $141 million; and MFS Boston at $319 million.  
These are huge dollars that we are talking about here—some $1.925 billion. I believe that it is not just the poor people of New Zealand who are suffering because of these finance companies but that a lot of people in middle New Zealand have also been in the gun in this respect. I am the first to stand up and say that not all these companies have gone to the wall for fraudulent activities—though some of them have and are still under investigation for matters before the courts in that regard. A number of them have gone to the wall due to the credit crunch and the difficulties they have found as their balance sheets have not been able to handle the run on funds and they have had to close down the funds in the short term to protect other investors’ money.  
The point I make is that there will always be risk in this market place. Business is about taking some risks and investing money is about taking risks. We will not get rid of risk entirely from the business scene nor should we; that would be crazy. If we were to do that then we would put a lid on our economy and we would stop economic growth entirely and without economic growth none of us could stand on the rostrum and say that we will be able to put more money into certain areas. Economic growth is a driver and finance companies are a key part of doing that.  
Hon Darren Hughes 
: You’d borrow for tax cuts. 
CHRIS TREMAIN 
: In fact I have talked to a number of constituents and I was out at Upper Hutt the other day—close to the member’s electorate of Otaki; across the road there. I was speaking to some property developers who have been big developers in Upper Hutt and have been big drivers of the economic growth in the community there. They have borrowed money largely from the banks at about 65 percent and second-tier finance companies at about 30 percent to 35 percent and they have put in maybe 10 percent of their own equity. The second-tier finance company has gone out of the mix now so it is very difficult for these investors to get that second-tier finance. That is why we are seeing quite a slow down in investment in new property investments. That is a major issue for us.  
In talking about the wider finance industry and the suite of bills we have seen before the House I also mention the Reserve Bank of New Zealand Amendment Bill (No 3) which approves the prudential requirements around finance companies making sure that their balance sheets are stronger and not leveraged as high ensuring better control over second-tier non-bank deposit takers and giving the Reserve Bank the authority to get down to that second tier of finance companies as opposed to where it would normally regulate with the banks at the top tier.  
The second part of the suite of financial service bills is the Financial Advisers Bill which we have debated at some length this morning. That has now passed through the House bringing more regulation around those who seek to be financial advisers and lifting the benchmark there and I think that that is definitely a good thing. Thirdly today we stand here now to debate the Financial Service Providers (Registration and Dispute Resolution) Bill. It requires all providers of finance services to be registered and in order to be registered they have to be part of a dispute resolution service.  
The Maori Party asked earlier why the two bills were not merged together. The key thing to note is that this bill has a much wider scope in that it requires a wider section of finance companies and banks to be registered under the public register and to also be registered with a dispute resolution service in order for them to be registered.  
I think that this suite of bills is a good step in the right direction. Once again as my colleague Simon Power has said we know that we will not take the risk out of the equation of investment in New Zealand nor should we. That would be crazy. However we must provide regulation at a level where consumers understand what they are letting themselves in for. We will put a high bar there which is what we must do and I think it is good to provide better consumer protection.  
Bill read a second time.