Foss Craig: Credit Contracts and Financial Services Law Reform Bill — In CommitteeText is incorporated into the Bound VolumeFoss Craig: Credit Contracts and Financial Services Law Reform Bill — In Committee[Sitting date: 08 May 2014. Volume:698;Page:17715. Text is incorporated into the Bound Volume.]Hon CRAIG FOSS (Minister of Consumer Affairs): First of all can I acknowledge the members of the Commerce Committee who have done a lot of very good work on the Credit Contracts and Financial Services Law Reform Bill. That can be evidenced by their commentary in their report which is quite detailed and virtually goes through parts of the parts and the various clusters of clauses. As the previous member has just alluded to a lot of good work has come out of that process from when the bill went to the committee to where it has landed now not too much later. I also acknowledge the work that officials did have done and continue to do not only in the committee but also as we have managed to get this bill and the legislation arising from the Consumer Law Reform Bill—which many of them also worked on earlier in the year—into shape.I note the member Carol Beaumont’s point about it having taken a while since this bill was first thought about or discussed or whatever as part of the review of the Credit Contracts and Consumer Finance Act of 2003. I note that when I got the portfolio of consumer affairs I made it a point to prioritise the two very important deep and wide pieces of consumer legislation that still needed quite a bit of work to have ownership by the sector and to have a relatively smooth passage through the House with draft consultations. And of course this bill was waiting for the Law Commission report on repossession.As the committee notes repossession agents will need to be licensed. There will be a lot of rules around them dealing with a lot of the issues that were in the member Carol Beaumont’s portfolio of letters and examples. We all share those issues. Most of the repossession agents are abhorrent; some of them are appalling. The predatory behaviour by some in our communities towards others in our communities—even within small communities—is quite disgraceful and disgusting and I think the 121 MPs in this House will be pleased that at least this bill will make life an awful lot harder for those repossession agents. I say that the electric fence around the place in which those people operate will have a whole lot more volts through it now and will be a lot tighter.A member asked about the Supplementary Order Papers and yes we put a Supplementary Order Paper on the Table yesterday or the day before. As I noted in my letter to members I acknowledge that the time between that arriving and now has been quite short. By and large they are technical amendments and tidy-ups. That is one of the reasons that this is good legislation. A lot of fine-tooth combs have gone through this bill and will continue to do so to make sure it is correct and fit for purpose and remains flexible.One of the speakers Carol Beaumont earlier raised concerns about whether the bill was able to be appropriate in this fast-changing environment and she pointed out some of the issues that had arisen with the Credit Contract and Consumer Finance Act in 2003. It absolutely is appropriate. That is why this bill brings in lender responsibility principles and the code and why what we call the life of a consumer credit contract is the focus of this bill—it is in order to deal with some of the exact issues the previous member raised.I believe that most of the Committee—I think all of the Committee—is supporting this bill. I think we will differ on only one item which the previous member started to talk about and that is the one about interest rate caps. I am sure members will want to have their say and I will talk a bit more about that one a bit later on. I acknowledge the good parliamentary public policy work by Parliament and MPs who were trying to get to the gist of this issue here whilst not damaging by and large the vast majority of consumer credit contracts that go out every day without any issues whatsoever.There are a couple of other things: there is my Supplementary Order Paper and a couple of other Supplementary Order Papers. Someone asked about the Commerce Commission. Their concerns were not so much about the bill—because it is such a good bill—but whether the Commerce Commission is resourced and ready to help implement and execute it on the ground; and about making sure it will do its job as the administrator of this particular bill when it lands. I can assure that member that yes I have asked exactly the same questions actually of the Commerce Commission not only for this bill but also for other legislation that have recently been passed. I think that those exact issues were also raised when the Commerce Commission was at the select committee recently—a very fair question actually. I have assurance from the Commerce Commission and I am quite confident that its new focus is particularly on an area it has not been too involved in: the retail at the hard and sharp end where so much of this damage is happening and areas of our country particularly areas of south Auckland unfortunately where so much evidence and so many of these terrible stories and circumstances have arisen. I do want to inform our members if they do not already know that the Commerce Commission has already hired a person who has a lot of knowledge in this space from one of the budgetary advisory services within south Auckland—fromMāngere I think; I cannot quite remember which of the services there—who has knowledge on the ground and who knows the community.That is probably one of the weaknesses the Commerce Commission has had in the past. It looks after the Commerce Act and all sorts of things like that but right down at the consumer affairs level—at the hard sharp end where people in the community know what is going on in that shop above the shop over there and where they know that someone is chasing someone down with a machete for repossession or repayment of some very very high burdensome loan—will be a new area of focus and resource for the Commerce Commission. Its monitoring of all these activities will be much much more heightened. I think just the process of this bill the questions the committee has asked and the direction where the bill has ended up actually mean that the Commerce Commission is now very aware of my expectations and the expectations of this Parliament—assuming that Parliament continues to support this bill—in terms of whatwe expect of it in this very unfortunate space where predatory behaviour has been happening whilst at the same time it will allow normal transactions to happen as they should.Just briefly for the record—because I realise we will be discussing interest rate caps and things—I want to talk about the life cycle of a consumer credit transaction. Long before the paper is signed and long before the commitment—in fact it will be 5 days after that contract is signed which is an extension of what we currently have—lenders will have to abide by lender responsibility principles. Let me just briefly list some of those. It will be different from now. Many listeners will probably think lenders do this anyway; by and large to be fair many of them do. Some do not and they are whom we are going after.They must exercise the care diligence and skill of a responsible lender in respect of credit advertising and before and after providing consumer credit. In relation to an agreement with the borrower they must make reasonable inquiries to be satisfied that the credit will meet the needs of the borrower and be repaid without the borrower suffering substantial hardship. Included in hardship is the burden of fees interest rates etc. for reference. They must assist the borrower to make an informed decision about whether they should in fact enter into the agreement. They should assist the borrower to make informed decisions in all subsequent dealings. They should treat borrowers and their property reasonably and in an ethical manner including during any repossession process. They should ensure that the terms of the agreement and the exercise of powers by the creditor are not oppressive. They must meet all their legal obligations to the borrower.The lender responsibility principles in so far as they are relevant are also applicable to guarantees and credit-related insurance products. Lender responsibility principles disclosure and changes in reinforcing and modernising repossession of consumer goods under a consumer credit contract are all dealt with mostly in this first part of the bill. We will talk about the second part in the next session I guess. But they are some of the reasons why—yes—it has taken a bit of time.I thank Parliament for joining pretty much together in our absolute focus on trying to alleviate and eliminate as much of this bad dodgy and predatory behaviour by sadly some in our community. It is not on. It is not the Kiwi way and I for one will be a very proud Minister once this bill hits and has passed its third reading for my role and my colleagues’ roles across the House in doing something to try to address this terrible indictment on some in our community.