Faafoi Kris: Credit Contracts and Financial Services Law Reform Bill — In CommitteeText is incorporated into the Bound VolumeFaafoi Kris: Credit Contracts and Financial Services Law Reform Bill — In Committee[Sitting date: 13 May 2014. Volume:698;Page:17785. Text is incorporated into the Bound Volume.]KRIS FAAFOI (Labour—Mana): Thank you very much for the opportunity to speak to Part 2 of the Credit Contracts and Financial Services Law Reform Bill. Can I thank the Minister of Consumer Affairs for making a substantial contribution to the debate. Can I also take this opportunity—I did not get the chance during the debate on Part 1—to thank the officials who are in the Chamber tonight. This as the Minister said was—[Interruption] I will get to you soon. Do not worry. You will get your day in the sun.I thank the officials who helped us with this bill because as the Minister did say it is a complex bill but it is a bill that deals with the nitty-gritty of what a lot of our constituents face in our communities when they are dealing with the likes of second and third-tier lenders. So thank you very much because I think we have made some substantial changes that will help many people in communities right around New Zealand. Thank you because you made it into plain English for those who did not understand the legalese of it. There you go Jonathan.To the other members of the Commerce Committee there were a few points of difference around interest rate caps which I will get to in my contribution. But on the whole the length of time that we spent on this bill and the nature of the way in which we worked on it in the select committee meant that we have got a bill that we will support. We do have some concerns about the length of time that it took to get here and some things that have been omitted from the bill but on the whole it is a good piece of legislation that we will support. It will make a difference to people’s lives.The Minister in the chair the Minister of Consumer Affairs did mention the Commerce Commission and certainly during the submissions process in Auckland we sensed some frustration that the Commerce Commission was not doing enough at the business end of the formation of credit contracts in terms of policing what was going on there. Certainly I think the Bankers’ Association in its submission sensed a level of frustration that the Commerce Commission was seen to be not doing enough to keep an eye on some of the behaviour of certainly the third-tier lenders who were giving the whole industry a pretty bad name.I do acknowledge that the Minister said that the Commerce Commission has taken on one employee from Māngere to assist in the understanding of what is going on at the grassroots level in the communities. But I would suggest that that is far from enough. Maybe the Minister could let us know as he has told us what has happened so far whether there are any more plans for the Commerce Commission to extend it well beyond Auckland because this is not just an Auckland issue. It needs to be spread right throughout the country and be resourced properly because this is a big issue and there are two very important Es that need to be considered here: education and enforcement. We need education so that everyone knows exactly what is happening in this bill and the rights that it gives to consumers and we need to make sure there is enforcement.There is no use in our passing this law if no one is going to police what is going on with our second and third-tier lenders.I hope that the Minister gets back on his feet and suggests whether there is a plan for the Commerce Commission to go beyond just the one person it has employed and to employ people right around the country in order to have enough resources to make sure that what we have done in this piece of legislation is effective. As he pointed out just with the financial disputes resolutions system there is not enough awareness of what you can do if you think you are being ripped off. Certainly we would want to make sure that there is enough education and enforcement out there so that this piece of legislation will be effective. It is good to put measures into law but it is another thing to make sure that the legislation is effective so that the families we are worried about the vulnerable families who do not have that information and do not know which avenue to go down can get the help they need. They are people whom this legislation is there to help.My colleague Carol Beaumont pointed to clause 100 in the bill which I think is a good one. It carries on a theme with the Commerce Commission because if through a number of complaints the dispute resolution scheme sees a trend with a particular type of borrower it is able to notify the Commerce Commission. I want to use the example of truck shops which certainly go about with their guerrilla tactics in my area of Mana. If they are out there trading in a way that is against what we have passed here and the dispute resolution scheme notices that trend it is able to pass those issues on to the Commerce Commission. I think that is a good thing. But again we need to make sure that the Commerce Commission moves away from the high-level thinking and enforcement that it does at the moment and gets down to the nitty-gritty of what is actually happening in the communities.I do not think that the likes of the budget support organisations in our communities have the support from the Commerce Commission to be able to enforce what we are passing here today.The people at the grassroots who are helping these families day to day—the likes of the Porirua Budget Service and the Kapiti Family Budgeting Service; we have all got budget advisory services in our communities—would certainly want to know that they have got support from the Commerce Commission to be able to put the kinds of powers and the advantages they get from clause 100 in this bill into practice. They want to be able to make sure that if they do see a trend developing with a particular type of borrower they can certainly crack down on that.The kind of instance I am talking about with the truck shops is the kind of what I would call dodgy behaviour where we have customers incurring a debt—say a credit of around $1000. The customer pays it off and instead of saying: “Your bill is paid.” the truck shop says: “Well you’ve got another $1000. Go for it.” I think that kind of behaviour is encouraging people into even more debt. I would hope that through the code we have in this legislation we will see much more responsible behaviour from the likes of those truck shops because I know that their behaviour has certainly not been responsible to date. That kind of behaviour is off. There are people who are working their guts out. Yes they got themselves into debt but they are working their guts out to make sure they can pay it off and the message they get back from the truck shops is: “Well you can spend up again because you’ve got $1000 because you’re back to zero.” I do not think that kind of behaviour is on. Hopefully that is the kind of thing that we will see the Commerce Commission cracking down on more if as the Minister says it is putting more resource and focus on dealing with grassroots issues that pertain to this bill.My colleague Carol Beaumont also talked about clause 72 in Part 2. In Part 2 we are dealing with amendments to theFinancial Service Providers (Registration and Dispute Resolution) Act. Clause 72 inserts into the principal Act a new section 2A about thepurposes of the Act. If I can take the opportunity to read it: “The purposes of this Act are—(a) to promote the confident and informed participation of businesses investors and consumers in the financial markets; and (b) to promote and facilitate the development of fair efficient and transparent financial markets.” Basically it is marrying up the financial service providers purpose of that Act with the bill we are dealing with tonight.I think that one of the disappointments with Part 1 of the bill now that we have got that Act and this bill married up is that we have not been able to pass Carol Beaumont’s Supplementary Order Paper 430 in terms of interest rate caps. I think that that Supplementary Order Paper would have made a huge difference and sent a message to those third-tier lenders that they cannot get away with offering those ridiculous exorbitant interest rates. This Committee had the opportunity to do that.I know that there are arguments across the Chamber but I think we have missed an opportunity to send a message to those vulnerable families that it is not OK to charge 100 200 or 700 percent interest on loans. That is just outrageous and we needed as a House to take steps to make sure we stop that kind of behaviour. That was a missed opportunity. There was a degree of bipartisanship around this bill but I think that in a political way that side of the House missed an opportunity to help those vulnerable families who are getting absolutely ripped off by those sharks in our community. It was something simple—it was something simple. It was something that would have just capped the interest rates but that side of the House—and unfortunately Peter Dunne who said he would support such a move 3 years ago—decided not to support that and that is a disappointment. Maybe in this part of the debate the Minister in the chair the Minister of Consumer Affairs could explain why that was not taken up.Part 2 does deal with those dispute resolution schemes. On the whole they are good changes. As the Minister said we are preventing overseas organisations from coming over here and joining this to take the good name of our dispute resolution schemes around the world and trade on that. I also think that it is a good change. To make sure that the dispute resolution scheme extends out for everyone is a good thing but again I would hope that the Government would back it up with resources and educated enforcement to make sure that this piece of legislation is not something that is just going to hold the door back but is going to be effective.