Tisch Lindsay: Consumer Credit Bill — Second Reading 
Tisch Lindsay: Consumer Credit Bill — Second Reading 
[Volume:610;Page:8017] 
LINDSAY TISCH (NZ National—Piako) 
: 
 I will take just a brief call on this very important legislation. First I want to refer to the background of this bill and to what was in place before it came into existence. The first page of the explanatory note of the bill takes into account the fact that many of the concepts of the Hire Purchase Act of 1971 and the Credit Contracts Act of 1981 are out of date—and that is fair comment. So what this bill aims to do is to bring them up to speed and to change them. But if we look at the content of the bill and we go back to the original Credit Contracts Act which I want to quote from we see that that Act and what we are talking about today are very very similar. 
 The objectives of the current Credit Contracts Act which this new bill is supposed to replace are: “(a) Prevent oppressive contracts and conduct; (b) Ensure that all the terms of contracts are disclosed to debtors before they become irrevocably committed to them; (c) Ensure that the cost of credit is disclosed on a uniform basis in order to prevent deception and encourage competition; and (d) Prevent misleading credit advertisements;”. So the point I am making is what is different in the new bill that we are talking about today from what is already in the current Credit Contracts Act? 
It is interesting to look at the submissions that came to the select committee. I want first to look at the Law Society’s submission. Dail Jones mentioned the Law Society. When the society analyses these bills it scrutinises them very closely. Some of the points that the society made I think are very important. The bill is designed to repeal the Credit Contracts Act which is outmoded because of technological changes computerisation and financial deregulation. That is fine; we all appreciate that and we can work with that. The bill also adds a modern framework to the way that people will be able to do business. It generally applies to credit contracts entered into by people primarily for personal domestic or household purposes. But the real concern I have is that the bill does not cover business applications. We looked at some of the business submissions that came through and I will pursue those areas further during the Committee stage. 
A lot of people who are sole traders are borrowing money—they are getting credit. But one does not know whether they are borrowing it for personal use or for business use. A huge number—85 percent—of businesses in New Zealand are small businesses and most of them primarily are sole traders or sole proprietors. They are not partnerships or companies. It is very difficult to distinguish whether the money borrowed is for personal purposes or business purposes. That is an area that I want to pursue during the Committee stage. 
Some of the other major reforms include limits on the interest to be charged and clarifying that the debtor has a right to pay out the contract at any time—the full repayment—while allowing the creditor to recover a charge that does not exceed a reasonable estimate of the loss suffered on a full repayment. Those areas have been included in submissions and that is fine. 
One of the other areas that I think is important is the time frame to implement this bill. The original bill was to come into force on receiving the royal assent but this has been extended out. Business people have said—as has the Law Society—that because there will be major changes to the way this bill will be implemented then at least 12 months would be appropriate. In fact the bill achieves that and we are certainly supportive of that. 
I draw the House’s attention to a couple of areas that I want to look at during the Committee stage. The first is the cancellation of a credit contract on return of defective goods. The view has been that the bill should have been amended to provide for the release of debtors from a credit contract under the return of defective goods which comes under the Consumer Guarantees Act. But unfortunately the select committee did not accept that so during the Committee stage I will be pursuing the reason that provision was not accepted. 
The next area that I think is important is clause 13 the definition of credit fees. Credit fees should be and should include all fees or charges that are payable. A lot of people who borrow money will have add-ons. I am not talking only about the interest rate; there are also setting-up costs associated with borrowing money. There may also be insurance charges included. When I borrow money at an interest rate of say 10 percent but there are other charges associated with it then the true rate of borrowing is a lot higher. In fact it could be 30 percent. This bill does not accommodate that. I think that when we are talking about the total costs of what we are in for I will be asking some further questions. 
Another area that I think is significant is what happens with variations of existing contracts. Part of the work that I did in my previous life before coming here involved the restructuring and refinancing of businesses. One of the areas that we looked at very closely was how we could help a proposition. A lot of it revolved around money restructuring and refinancing. With that in mind I looked at variations of existing contracts—variations to lease arrangements maybe or maybe variations to mortgages that somebody had. In my time as a farm appraiser with the Rural Bank we did a lot of variations of existing mortgages. One of the areas that the Law Society said we should look at was that full disclosure should be required if any additional costs are incurred by the debtor through a creditor’s variation of a contract. That is an area that I think needs to be looked at further. The bill does not accommodate that. There is a huge market out there in the area of restructuring that looks at variations of existing leases existing mortgages or whatever. 
Another area that I think needs to be looked at is what happens with leases. There is a huge market now in leasing and there are many types of leases. There are variable leases and full operating leases. Leasing cars spring to mind. Over the years I have always leased a vehicle and huge mileages have been clocked up. I have had the opportunity to run a leased vehicle on a percentage—a monthly payment that included GST. But at the same time I have always had the option of a full operating lease that covers insurance repairs and maintenance registration and the like. So that is an area that needs further looking at. 
Of course there is a huge lease market now and not only for people in business who are looking to lease whether it is vehicles cellphones computers or other equipment; private individuals have moved into the area of leasing. They can lease vehicles for maybe $300 or $400 per month as opposed to buying a new vehicle that may cost them thousands of dollars. So a leasing option becomes increasingly important. National is supporting this bill. During the Committee stage we will put some questions to the Minister to fine-tune it and to get a better understanding of the implications of the bill. 
Bill read a second time. 
Name changed to Credit Contracts and Consumer Finance Bill





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