Hudson BrettBRETT HUDSON (National): Thank you Madam Speaker. I rise to speak—ASSISTANT SPEAKER (Hon Ruth Dyson): Oh sorry—whatever the motion is!BRETT HUDSON: The question is something" isn't it?Hon Michael Woodhouse: The question is that the …ASSISTANT SPEAKER (Hon Ruth Dyson): Ha ha! The question is that the motion be agreed to. Sorry I was so excited at calling the honourable member that I made an error. Thank you.BRETT HUDSON: Thank you Madam Speaker. I rise to speak on the Credit Contracts Legislation Amendment Bill in this its second reading. I too will acknowledge the work of the select committee. I substituted on to the committee for pretty much all of this business.Heading into the first reading when National gave its support to this bill we did so with some reservations but also acknowledged aspects of it which we felt were very positive and would contribute to a far better landscape for borrowers in particular. For instance while we're not generally in favour of new regulation-making powers we agreed that regulation-making power to deem arrangements to also be consumer credit contracts and fall under the auspices of the parent Act—including potentially some of those modern-day lay-by schemes that are referred to such as Afterpay—we felt was a very good measure. We thought the further regulation of mobile traders was a good idea; the fit and proper test for directors and senior managers. But we also flagged a few concerns not around regulation of high-cost lending as such but on what unintended consequences could come of it. We were concerned and wanted to test through the select committee stage things such as tightening up the rules around a total cost of credit or capped cost of credit. What risk was there that borrowers might find themselves unable to get loans they need and what markets might they then be forced into particularly obviously unregulated black markets?We also expressed concern about the greater obligations being placed on all lenders not just high-cost lenders around affordability tests and not simply being able to take the word of borrowers at anything near face value. I would like to point out that these matters were canvassed very robustly throughout the select committee phase. We came to have some greater confidence particularly around those greater obligations on lenders and their responsibilities particularly because officials noted to us that their advice was it would be a very good defence were a case to come about that if a lender could show they had lent in accordance with the lenders' responsibility code then that would be a very good defence to any proceedings of that nature. That gives us quite some confidence that while there are greater responsibilities they're not perhaps as onerous as they may have appeared if they had been lesser defined if you will.The other one of course was around what would happen to people who wouldn't be able to get loans under a capped scheme and the worry there was simply that people go into these arrangements because they have a need and the need doesn't go away if we make it more difficult. The risk is that if they can't get that loan through a regulated scheme they'll have to go elsewhere. Some submissions we received suggested that for instance in the UK an alternative option that was used by close to a third of people who would otherwise be rejected from high-cost loans was family and friends which on the face of it sounded like OK there is a viable alternative option for these people particularly if some lenders exit the market or make it harder to get loans. The problem there—and I tested this with several submitters—is that those family members or friends tend to be in not terribly dissimilar circumstances to the individual that needs a loan and has been declined. So there's a risk there that it simply shifts some of the risk and some of the pain on to other people including fairly close family members. But on balance at the end of those discussions we felt we could continue to support a regime that would limit the total cost of credit that there would be sufficient regulated options for the vast majority of cases but regrettably—there is a risk—not for all.What then transpired was a little bit of a shock to the Finance and Expenditure Committee that the Minister of Commerce and Consumer Affairs announced to the press that although submitters had said they favoured an interest rate cap it was not part of the bill and the official advice in the regulatory impact statement and the documentation prior to the introduction of the bill was that officials didn't support it. They said there was some uncertainty as to what could happen with it what the outcomes—they did not support an interest rate cap. They clearly did support a total cost-of-credit cap. So the Minister and the Prime Minister in fact made the announcement to the public in what we would call the "weak" of delivery where every day the Government had to have something to announce. They announced water reforms that could destroy farming they announced some odd New Zealand First slush fund funding they announced cancer drug money that wasn't actually for cancer drugs and they announced an interest rate cap which came as something of a surprise.So I asked officials what advice they had been asked for and had given following that initial advice on an interest rate cap. Their answer was pretty simple: there was none at all. They hadn't been asked for advice counter to what they'd already been given. They hadn't been instructed even to look into it and provide it. So it's not quite right to say that the committee looked at the design of an interest rate cap or the merits of it. It simply looked at how it could implement a change that officials were blindsided by as was the committee. We have some grave concerns with this somewhat compounded by the fact that just a week—literally a week—before the announcement several committee members reported back from a visit they made to a company called Save My Bacon in Christchurch a high-cost lender. There was the Rt Hon David Carter Dr Duncan Webb and David Seymour. Dr Webb was quite illustrative with his comments because he told us in the committee that he took them apart he looked at what they did—Dr Duncan Webb: I raise a point of order Madam Speaker. I just would not want the record to show that David Seymour was there when he wasn't so I just really wanted to let the member have the opportunity to correct that.ASSISTANT SPEAKER (Hon Ruth Dyson): That's not a point of order.BRETT HUDSON: Thank you for the correction. I understood David Seymour was there but if he wasn't Dr Webb certainly was—ASSISTANT SPEAKER (Hon Ruth Dyson): It's now corrected.BRETT HUDSON: —and he reported back to us how he looked inside this company and what they did and how they went about it. He wasn't endorsing the company in any way that could be considered that but he did comment that they appeared to be somewhat above board in their practices and their processes and his comments were that he could see how they could justify what amounts to about 1.1 to 1.2 percent of interest per day. Regrettably the Minister not only didn't consult with his officials; he didn't consult with his own Government backbencher and instead came up with a rate which is about 30 percent lower than what his backbencher had reported to the committee a week previously. It looked to be in those circumstances a very justifiable rate. So we've ended up with a situation where we have a rate cap that's lower than some members discovered was justifiable on talking to actual businesses that are in the job. That came as a blind side to everyone and quite frankly was just an attempt by the Government to try to show people they were actually doing things. Now that on its own was not going to change our position either but I've got some disturbing news today—which I know the Minister will have seen as well—not only from a business that's claiming it's going to close up its shop and it's not a poor offender by any general market recognition. But one of the points they noted was that officials apparently are already working on the draft regulations under the bill. They're really quite perturbed by this exposure draft they've seen where for instance the regulations require of a lender that they don't put forward a loan that would require the borrower to reduce discretionary expenditure or certainly not all of the recurring discretionary expenditure. Now I don't want to belittle anyone's circumstances but it is not completely unreasonable that someone who is in financial difficulty might have to tighten the belt on some areas at least of discretionary expenditure as part of the actions they are taking to get themselves back on their financial feet with the assistance of a lender who admittedly is charging quite an interest rate but who is still none the less helping them to get out of that situation. Now I haven't seen the details of that because no such draft exposure has come to us but I do find the information that they have passed through to me quite concerning. So the position we will take tonight and on the next sitting day that this comes up is that we will still continue to support this bill through its second reading but I will want to be looking a lot deeper into the allegations and the information I have been given. We may need to see some amendments in the committee of the whole House stage to continue our support but there is certainly some information that has come to hand which is troubling and I would ask the Minister to have a look into that also. I am absolutely certain he's received some of the correspondence at least that I have and I don't believe it's actually his intention to try to undo the good work with regulations which might be of the nature that they are claimed to be. But we will continue our support for now and will seek to continue to work constructively with the Minister and Government on the bill."