Beaumont Carol: Credit Contracts and Financial Services Law Reform Bill — In CommitteeText is incorporated into the Bound VolumeBeaumont Carol: Credit Contracts and Financial Services Law Reform Bill — In Committee[Sitting date: 13 May 2014. Volume:698;Page:17792. Text is incorporated into the Bound Volume.]CAROL BEAUMONT (Labour): Carol.Mr DEPUTY SPEAKER: I am sorry. I keep doing that—my apologies.CAROL BEAUMONT: You do. You are kind of merging us.Mr DEPUTY SPEAKER: You should not sit together! Carol Beaumont my apologies.CAROL BEAUMONT: That is all right. Speaking on the Credit Contracts and Financial Services Law Reform Bill I want to talk about the missed opportunity here—the missed opportunity we had to get cross-party consensus as others have talked about in this Chamber and to put in place a really strong bill that actually would have seriously amended legislation in this area and reformed it properly to give us a full range of tools that we could have used to deal with some of the practices that happen in consumer credit. That is not to say that there are not many good features in this bill and we have worked constructively as the Commerce Committee to improve the bill as introduced into the House—and as others have noted and I noted in earlier contributions with really solid assistance from officials; thank you again for that.We have improved the bill over what was introduced into the House and yet we have failed to make a particularly important addition to this bill. To me that has been driven solely by ideology. In the end right across a number of years now we have had the same tired old reasons trotted out as to why we cannot have interest rate caps: because of potentially unintended consequences because it will drive some of these third-tier lenders out of business potentially and because it will become the target rather than a cap. These are the same tired old reasons trotted out year after year and actually it is not good enough. We have not had a robust analysis of what happens in other jurisdictions where in fact increasingly those jurisdictions are adding interest rate caps. They are saying that this is the only way.The UK is the classic example where the Tory Government there was vehemently opposed to interest rate caps—vehemently opposed—and had to do a U-turn at the end of last year. The Chancellor of the Exchequer I think it was actually said: “We have come to the realisation that this is the only way to deal with the problem of interest rates being charged by pay-day lenders.” Here we think that we can just trot out the same tired old reasons and not put something into this bill alongside the other provisions. Alongside the responsible lending principles; alongside the responsible lending code; alongside the disclosure provisions and the controls of fees or the clarification at least on fees charged; alongside improving the hardship provisions; and alongside all of the other positive elements of this bill we could have put another tool in that toolbox.We are meant to take it as a matter of faith almost from some across the Chamber anyway and from the Minister of Consumer Affairs that interest rates will be dealtwith as a consequence of these other provisions and as a consequence of the responsible lending provisions—that this will suddenly mean that the lenders in this third tier will suddenly realise that the types of abhorrent interest rates the sorts of rates that the community finds offensive are no longer suitable. Actually I think that this is going to be a fallacy. The Minister did not in the last part answer my question about getting information now as a baseline and getting the Commerce Commission to actually measure and then reflect as this legislation comes into effect whether or not interest rates are being reduced.That is what we are being told—that these other provisions will have a downward pressure on interest rates. Well let us actually measure it then. Let us actually put that to the test. Because otherwise what will continue to happen are the sorts of examples that I gave the House in my contribution last week and those were examples that I had got that very week in Palmerston North where we got given examples of interest rates of 552 percent or for a pay-day lender 1080 percent. Those are two real-life examples from Palmerston North a week or so ago. They will continue without actively seeking to reduce them which is what an interest rate cap would have done. So I urge the Minister to say: “OK we will put this to the test. We will look at what’s out there now. We will measure it in a year. We will measure it in 18 months. We will measure it in 2 years and see whether it does make a blind bit of difference to this really serious issue.”The fact of the matter is that if you ask budget services they will tell you that these extremely high interest rates are very commonplace and people are doing their best to pay them back and often do. So it is a question of whether that is fair and reasonable. We talked in Part 2 about the purpose provision around financial services providers registration and disputes resolution schemes and so on and it says in new section 2A that the purpose of the Act is “to promote and facilitate the development of fair efficient and transparent financial markets.” How can interest rates like those I have just given examples of—552 percent or 1080 percent—be claimed by anybody to be fair? They are not fair. We all know that they are not fair. So why as a Committee are we not addressing this issue? Why is it that the Government has been just so ideologically opposed to this question that it has turned down an opportunity for us to pass a piece of legislation that we have all wanted unanimously to see for a very long time? We could have had a piece of legislation passed unanimously. The Government has failed to do that. It seems to me that it would have been a very very strong message indeed to those that behave badly in the consumer credit area if they knew that Parliament was unanimous about dealing to their issues.We are supporting this bill without question because as I said at the start of this contribution there are many good features to it. But it is with a great deal of anger really that we are having to accept that at this stage there will not be interest rate caps put in place when they should be. It is certainly something that Labour has a policy in favour of doing and we would do it because we do not think that those interest rates are fair. We do not think that it is right that the most vulnerable—the families that are struggling the most—should pay excessive interest rates and pay them at the cost to their own families and to the cost of their own children often in terms of other things that they cannot spend that money on.This is a very serious matter and I think that perhaps this legislation should be called something different. Maybe this bill should be the “Credit Contracts (Opposition to Interest Rates) Reform Bill” or the “Credit Contracts (Ideologically Opposed to Interest Rate Caps) Bill” or the “Credit Contracts (New Zealand Obviously Does Not Have a Problem Compared With the Rest of the World) Law Reform Bill”. Why is it—and we have not had this answered and the Minister has not even attempted to address the question—that elsewhere countries have recognised this need and have put in placeprovisions for interest rates caps but here we say: “No we will do all these other things but that’s the thing we’re not going to touch.”? What is different about our markets? Why is it that the Government is so totally opposed to this question? It still does not make any sense to me. It would have been a sensible thing to align all of those different tools in fact and to actually address the various concerns at the same time.I ask the Minister to get up and answer those questions. What is different in this market from overseas jurisdictions? If it had been so bad and if it had become the target rather than a cap why is it that Canada has not repealed its legislation in over 8 years? Why is it that a Tory Government in the UK vehemently opposed to interest rate caps has accepted that it is the only option that it has got to control interest rates? What is different here? I urge the Minister to get up and answer that question. I also remind him of the question I asked in Part 2 around actually taking some baseline measures and effectively putting the Government’s money where its mouth is in terms of actually seeing whether all of the other provisions of this legislation do have the effect that the Government is saying which is that the bill will drive down interest rates through things like the responsible lending provisions. I urge the Minister to get up and address those questions. Thank you.