Faafoi KrisCREDIT CONTRACTS LEGISLATION AMENDMENT BILLThird ReadingHon KRIS FAAFOI (Minister of Commerce and Consumer Affairs): I move That the Credit Contracts Legislation Amendment Bill be now read a third time. This is an important piece of legislation that amends the law around the provision of credit in New Zealand. Credit is important to almost every New Zealander in some way and at some point in their life. However when provided irresponsibly credit can quickly result in debt spirals and hardship. Under current credit laws consumers are sadly still experiencing harm from predatory lending practices and credit terms and this disproportionately harms our most vulnerable consumers. As a result the Government introduced this bill to better protect New Zealanders from these harms. This bill has been one of my key priorities in my commerce and consumer affairs portfolio and I'm confident that the changes in this bill will help to protect and improve the wellbeing of New Zealanders.The bill introduces a number of changes which will make significant improvements to lending practices. Not only does the bill cap interest and fees on high-cost loans to 100 percent of the principal but it will also cap the rate of charge for interest and fees. Both of these caps will go a long way to limiting the harm that irresponsible high-cost lending causes in our communities.The changes will also improve the implementation and enforceability of rules around responsible lending by allowing for clear minimum standards to be set and strengthening the penalties for breaches. For example lenders will be required to keep records that demonstrate they have made inquiries to ensure their loans are affordable and suitable and where these requirements are breached lenders can be subject to tough financial penalties.The bill also raises the bar for becoming a lender by ensuring that persons at the top levels of creditor companies and mobile traders meet requirements for being a fit and proper person. This will reduce the number of unscrupulous individuals who are operating in lending businesses in our communities.Speaking of mobile traders the bill will now treat mobile traders as creditors under the consumer credit contracts and require them to comply with the Act. This means that they must ensure that the products and the services that they provide are affordable and appropriate and that the right information is disclosed to the purchaser and borrower.Finally the bill improves transparency and access to redress during debt collection. It will make the debt collection process more transparent from the start as well as giving debtors the key information that they need so they can ask for help.At the second reading of the bill I welcomed the changes from the Finance and Expenditure Committee. The most significant of these is the decision to include the Government's proposed rate cap on interest and fees. I proposed this change after I heard the overwhelming number of submissions to the Finance and Expenditure Committee from people who work on the front line with vulnerable borrowers and see the everyday harms and irresponsible high-cost lending damage that can be caused. These submitters said that a rate cap was a critical change that could be made to the law to protect consumers and the rate cap of 0.8 percent per day will complement and strengthen the total cost of credit cap that's already in the bill since its introduction.There's been some concern about this rate cap in that it will serve as a target for lenders. However some lenders currently have interest rates over twice as high as the proposed rate cap. Given the significance of this change it will be important to review the rate cap and the total cost of credit cap after they have been in place for three years which is included in the bill. This will allow us to evaluate how well the current cap level is working.Before I finish up I'd like to thank all those people who have contributed to the bill. This includes those parties that made submissions to the Finance and Expenditure Committee and the members that considered the bill on that committee and also the many officials who have provided advice. I think through this bill we will be helping to contribute to improving the wellbeing to thousands of New Zealanders who have experience of problem debt and I truly believe that as a result of the changes that we are making here today fewer New Zealanders will be given loans that cause or deepen hardship. Problem debt is the source of ongoing mental emotional and financial stress for families and does contribute to lasting health problems and reducing the highest interest rates and irresponsible lending is necessary to support public health and will have significant overall benefits to New Zealanders.Can I also thank those who submitted to the select committee for the passion for their work—[Andrew Bayly waves]—and you too Mr Bayly—as I do believe their passion for this subject made meaningful changes at that stage. I'm very proud to commend this bill to the House for the third time.