Ryall Tony: Credit Contracts and Consumer Finance Bill — Third Reading 
Ryall Tony: Credit Contracts and Consumer Finance Bill — Third Reading 
[Volume:612;Page:8887] 
Hon TONY RYALL (NZ National—Bay of Plenty) 
: 
 I would like to report that during the Committee stage the Opposition parties drew to the Committee’s attention a number of flaws in this bill that the Government refused to acknowledge. Not only did we tackle the Government about the inadequacies of the compliance costs statement involved in this bill and not only did we draw to the Government’s attention the unfair and cumbersome administrative burden that would go on New Zealand finance companies in particular but we drew this important notice to the Government. This bill is supposed to be about improving the provision of information to New Zealanders who borrow money from second-tier financial institutions; it is supposed to be about providing those New Zealanders with more information so that they can be more aware of the cost of the credit and the responsibilities that they may have. But this Opposition in a united way pointed out to the Government that its very first goal in this legislation will not be met. The Government said very clearly that this bill was about providing full information on the cost of credit for consumers—but it does not. It does not because it fails to capture the fees and charges of brokers involved in financial transactions. It fails to capture recording the charges of brokers involved in financial transactions. 
I give members the example of the many New Zealanders who may want to consolidate their debt or may need to travel overseas for a funeral or may need money to buy a new car. They go off to “Quickloans Ltd” and borrow for example $5000 to do so. The Government’s bill fully allows for the full cost of that credit to be disclosed in the documentation. But many New Zealanders go and arrange their consumer finance through a broker. There are brokers in New Zealand who charge quite large percentages for their fees but the average charge is 10 percent. A broker will say: “I will arrange a $5000 loan for you and I will take a 10 percent commission.” He or she will advise the finance company of his or her appointment and the finance company will approve the loan and send $4500 to the consumer and $500 to the broker. But all that the documentation shows is that the person borrowed $5000; it does not have to say what the broker’s fee was. In some situations the broker’s fee is added to the actual amount of money that the person wants to borrow. This bill does not capture that charge. 
The Committee stage went on for 6 or 7 hours and the Minister in the chair Judith Tizard took only a handful of calls—virtually amounting to one call—in order to address the concern that Opposition members were raising. The point is that this bill fails to capture that $500 that goes to the broker. It fails to have it declared in the transaction—in the information that is required in the bill. We moved amendments that required that information to be included. The Government says that all of that is caught by the description of fees but the point is the fees relate to the transaction between the finance company and the borrower. The transaction involving the broker is outside that contractual arrangement and therefore does not have to be declared. Therefore the person who is borrowing the money is not fully aware of the costs associated with that borrowing. 
During the Committee stage the united Opposition parties made that point time and time again. Mr Catchpole will agree; he stood up and talked from a south Auckland experience about why it is important to have that money declared. Sandra Goudie from Coromandel made the point to the Government about the need to do something about it as well. Deborah Coddington from ACT also pressed the Government about why brokers’ fees are not being included in the Credit Contracts and Consumer Finance Bill. 
We did that because we do not want Government members going up and down the country trying to convince New Zealanders that they have improved the level of information associated with consumer finance. They have not because there is a huge loophole. The Opposition was told that there are finance companies in New Zealand that are considering changing their entire commercial operations so that all their offices will operate on a brokerage arrangement rather than on an agency arrangement. That is a pretty dramatic step. Those companies know that the brokerage fee does not have to be declared; it does not have to be on the document that is available for consideration of various quotes that a person may be seeking. That is serious. There are a whole lot of people who go to the second-tier lenders who want to be fully informed of all that information and want to know what the full cost of their credit is and that information will be not provided by the Credit Contracts and Consumer Finance Bill. 
That is a major loophole that the Government is inviting finance companies to drive their tractors straight through. Because we told the Government that that would happen it will be culpable for the confusion that happens when brokers’ fees and charges are not included in the borrowing and people say: “But the Government said that this was the full cost of my borrowing and that all the information would be declared on this one piece of paper.” It is not. 
We say that it is disrespectful to Parliament for the Minister Judith Tizard to come to the House and say that this is a bill that will provide full information to borrowers when it does not. We also say that it is disrespectful of the Government to introduce a bill in which the compliance cost statement is woefully inadequate and does not cover the considerable compliance costs associated with upgrading forms and procedures to comply with what is required in the bill. Small businesses are what run these finance companies. We should respect the effort and the service that they provide to the public and the Government should have had the decency to tell Parliament how much this legislation will cost those finance companies because that cost is passed on to consumers. We think it is disrespectful for the Minister to know that she is leaving a huge loophole in the bill and to do absolutely nothing about it. I tell members that we will be back here within 18 months in order to fix that loophole. We have warned the Government what will happen we know that there will be an amendment and I will be the first one to say to Judith Tizard: “We told you so. You should have listened.”