Hudson BrettBRETT HUDSON (National): Thank you Madam Chair. I rise as we have to ask the Minister a few questions as we work through this detailed committee stage. I'll just apologise if I start coughing and hacking during the middle of this. I have a wee dose of man flu which is troubling me slightly. Believe me if I start hacking it's hurting me more than it's hurting you.Minister we have supported through the process through the first reading through select committee and through the second reading the core elements of changes in this bill including—if we look at clause 22 which inserts new subpart 6A—elements of total loan cap around high-cost lending.But I have some questions that arise actually from the select committee process that was undertaken. The first of those concerns the fact that submissions that we heard in the Finance and Expenditure Committee raised questions—actually allegations is a better way of putting it—that the Commerce Commission (ComCom) had failed to enforce the current legislation which admittedly is more educative which is about ensuring that borrowers can understand the conditions under which they borrow and the terms under which high-cost lenders can lend but equally also ensuring that high-cost lenders adhere to what they are permitted under law and particularly to the responsible lenders code.So the evidence we heard in submissions—from some submitters at least—was that in their view the Commerce Commission was not proactively seeking to investigate high-cost lenders to determine whether or not they were operating properly in a general sense if not even in some specific instances. So on the basis of that—and no cause to fundamentally query those submitters—one could question why there is a large-scale move to so—I won't say radically—substantially amend the rules around high-cost lending if indeed there's this possibility that the regulator has not been enforcing or exercising their authority under the current legislation to the extent which they possibly could. That relates even more so—if that's a general element—to the very late decision to introduce an interest rate cap. So if we have a situation where some submitters are saying Well ComCom haven't really been doing all they could do under the current legislation so that could raise a question of why there is substantive change." it raises even more of a question of: even if you went that far why would you suddenly in the absence of them potentially not having enforced their responsibilities to the extent they could have add that interest rate cap?This leads on to the second area of questioning—I have four. The second area of question is: why was the interest rate cap introduced so late in the select committee process? There was no hint of an interest rate cap coming in at any point until right at the very end. In fact during a week that the Government I think tried to stylise as a week of delivery—and the Opposition might agree that it was a week of delivery but it was a "W-E-A-K" "weak" of delivery. In that—on day two I think it was—the Minister stood I believe—or the Prime Minister—and said we'll have an interest rate cap thank you very much in this bill.But that flew in the face of official advice. Official advice which was in the regulatory impact statement and confirmed to the select committee by officials was that an interest rate cap was not a good idea—that there was uncertainty about what impact it would have and what consequential impacts it might have. At least at the introduction of the bill the Minister agreed with his officials. He didn't seek to introduce an interest rate cap then and it was only very late as I say in the select committee process that all of a sudden all of a sudden it mysteriously appeared out of nowhere.So my question is fundamentally: why? I then queried the officials and asked them after the Minister had already declared that it was going to happen what additional advice they had given to him about the interest rate cap and whether or not it was a good idea. They confirmed that not only had they not given any advice—further advice—on an interest rate cap beyond that which they had given prior to the introduction of the bill but they weren't asked to give any additional advice either.So Minister my question there is: where does this interest rate cap come from? Why was it suddenly introduced so late in the piece? Why did you not listen Minister? Minister why did you not listen to officials' advice? Why did you not seek further advice from your officials? There's no indication—officials beyond that point were only asked to give advice as to how it would be implemented not whether or not it was a good idea or could even work. So Minister why did you not seek further advice from officials as to the worthiness of the interest rate cap idea?That then moves on to another element which has come up quite recently and I referenced this in my second reading speech. It's something that came through a piece of correspondence from one of the submitters which I believe the Minister has also got a copy of. That submitter claimed that officials were working on regulations that would have a significant bearing in the area of the obligations on the lender of the affordability test. They were about elements of expenditure that the lender had to make room for even though they were discretionary.So the first question in this area for the Minister is: are officials working on such regulations already; and if they are why are they doing so when Parliament has not yet agreed to grant the authority to do so? We're at the committee of the whole House stage; we have a bill that is suggesting certain regulations things that will need to be worked through but as of now Parliament has not agreed that officials can or should and will be able to look at such regulations and make advice to Government to do so through an Order in Council. So are they doing so? And why are they doing so before Parliament has agreed to permit them to do so?This leads us on to that point of the substance of that submission that I think Minister you and I both have received from that submitter. And that is: if they are working on these regulations—at least some of them—will they require lenders to allow or to factor in recurring discretionary expenditure of the potential borrower in establishing affordability? Put another way does the lender have to—can the lender not account for allow or speculate or require that the borrower actually reduce some expenditure somewhere else? And look the example I heard and I think that you know it might be a purely speculative example but the example in the correspondence I think was the like of a monthly Sky subscription for instance. Does the lender have—if those regulations are being worked on and they are promulgated in the sense of how the submitter believes they will be will that require that the lender has to give the headroom in assessing affordability for the borrower to have recurring expenditure which is discretionary and therefore could be curtailed if not cut? And the question if that is the case is: why is that an obligation on the lender?We know in a high-cost loan a borrower or borrowers have already got themselves into a degree of difficulty. That's why they go for the nature of these loans. Are we looking potentially through regulations to place what amounts to—because there is greater responsibility on lenders to make sure that they can establish affordability and there is a responsibility on them greater than is under current law in order to establish the facts around affordability could we end up in a situation where the lender who's obviously looking to run their business—and some of them as we know are a little more thoughtful of their customers than others but let's just take an example of ones that are fundamentally good-faith providers. Are we potentially providing a situation where those lenders have to either turn away a customer who's seeking a loan for a need or have to permit this headroom as I say for discretionary expenditure?If we're in a situation like this isn't it appropriate the lender says "Well actually you've got some expenditure. You can cut it curtail it and therefore the loan might then be affordable."? Now I don't say that as an allegation Minister an attestation of fact. All I know is I've had a submission and I suspect you've had the letter as well from a submitter which suggests that that's what's happening. I'm really keen to understand if officials are working on such a regulation. If so why given we haven't passed the bill? If that is the case is that the nature of where the regulations are headed? If it isn't can we please have some confidence about where that is going so that it doesn't create too much of an issue."