Goudie Sandra: Consumer Credit Bill — First Reading 
Goudie Sandra: Consumer Credit Bill — First Reading 
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SANDRA GOUDIE (NZ National—Coromandel) 
: 
 While National is supporting the Consumer Credit Bill going to the select committee we have reservations with regard to some areas of the bill in particular increased compliance costs. It is interesting to note that National instigated a review of the credit contracts law in 1999 and since then there has been some concern expressed about the necessity of a new bill as opposed to amending existing legislation. The need for greater disclosure and enforcement provisions has been recognised by many not least by the creditors themselves. This bill provides for greater disclosure and puts in place enforcement provisions that incidentally include reference in clause 86 to the Privy Council which has not yet fallen to the intractable onslaught of Margaret Wilson. However give it time as she appears determined to establish her Supreme Court and do away with the Privy Council.In the interim it is gratifying to see that it is still with us and it is in clause 86.  
A consumer credit contract is defined in clause 9—that is when a debtor enters into a credit contract primarily for personal domestic or household purposes. I was interested to note that the words “domestic” and “household” have practically the same meaning in the  
Concise Oxford Dictionary 
 so I was left wondering why it was felt necessary to use both words in the context of this bill. Regardless of that given that the consumer credit contract is personal or domestic the business credit contracts are now excluded from the provisions of this bill. While this is welcomed by some businesses it will be interesting to see whether small businesses feel there is some measure of protection necessary for them.  
Clause 11 however provides a presumption whereby if a party to any proceeding for a credit contract claims it is a consumer credit contract then that remains the case until the contrary is established or unless a declaration has been made to the contrary as for clause 12.  
Clause 13 outlines those contracts that do not fall within the consumer contracts provision and subclause (2) deals with disclosure requirements. As stated earlier greater disclosure has been wanted for some time. Disclosure will not however protect consumers who have language or literacy barriers and are unable to understand fully the contract being entered into. This includes those persons who may be drawn into a consumer credit contract as a guarantor as well as the immediate debtor.  
The finance rate disclosure has now been excluded from the disclosure provisions and it is interesting to note that one of the submitters to the review stated that the finance rate was of benefit to borrowers. I note that the finance rate has now been excluded from the disclosure provisions. Many agencies such as citizen advice bureaus and community law centres along with reputable businesses have identified language and literacy as a real problem for some people entering into consumer credit contracts. It was identified that more information needed to be available to broaden the education of people likely to enter into consumer credit contracts whether as debtors or guarantors. However the funding would need to be put aside for that education process to take place because that material could be provided to citizen advice bureaus and the like but they could not afford to produce it themselves. Although greater disclosure is welcomed to address some consumer issues personal responsibility cannot be regulated for and any language or literacy barriers will need to be dealt with in a different context.  
With disclosure come compliance costs and as we all know compliance costs are a significant issue for many businesses and particularly under the current Government. In this bill there is an increased compliance cost. That increased cost comes from not just the additional disclosure provisions but also from the additional staff training necessary to meet the requirements of the bill. Any such training is usually ongoing particularly where there is a relatively high staff turnover rate.  
Compliance costs will also come about from the programmes that lenders undertake for monitoring their compliance with the law. Dealing with complaints by consumers or the third party enforcement agency as a result of the legislation does incur a compliance cost. Given the emphasis on disclosure and enforcement within the bill claims by consumers may increase as a result and thereby compliance costs. Any claims that consumers bring to creditors and lenders will need to be addressed by the creditor or lending agency involved and thereby ensure a compliance cost with that. Because they will have to do some significant work around that.  
It has been asserted in the preface to the bill that compliance costs will be no greater and may be less. I find that an extraordinary assumption. “No less” but if one looks at the preface which identifies the compliance costs report it clearly shows that the emphasis is on increased costs—particularly given the growing indebtedness which some consumers seem oblivious to. To suggest that compliance costs may reduce when a creditor or lessor essentially has to do the following—have a compliance programme whereby employees and agents have to follow procedures and where they do have to implement automated procedures and ensure there are methods in place for systematically identifying deficiencies in the effectiveness of the programme and promptly remedy any deficiency discovered defies belief. How could anyone possibly suggest there is any hint of a reduction in compliance costs after what I have just said? Certainly once one has been made aware of the provisions of the bill one has to be aware of the provisions of the increased compliance costs. 
A matter that was raised by the Accident Compensation Corporation which I have not found referenced in the bill anywhere has been the absence of any reference to the Privacy Act and how that Act might impact on those who extend credit and collect overdue credit and how that in turn will also impact on compliance costs in adhering to privacy principles. I have no doubt that in going through the select committee process these matters of concern will be raised. National has a very strong view about the compliance cost issue because of the pressure that this puts on to business. While we do support this bill going to the select committee we do have those reservations and they are significantly around the increased compliance cost—the effect it may have on the exclusion of small businesses the exclusion of the finance rate the absence of any reference to the Privacy Act the fact there is a regulation that is trying to redress concerns around consumers and how consumers actually enter into credit contracts and their awareness or otherwise of that consumer contract.  
It is to be hoped that disclosure provisions and enforcement provisions within this bill will address those concerns because one cannot regulate for personal responsibility or for people needing to take personal responsibility for their own innumeracy and literacy skills and their language capabilities when they enter into these sorts of credit contracts. So National is happy to support the bill going to the select committee.