Coddington Deborah: Credit Contracts and Consumer Finance Bill — Third Reading 
Coddington Deborah: Credit Contracts and Consumer Finance Bill — Third Reading 
[Volume:612;Page:8893] 
DEBORAH CODDINGTON (ACT NZ) 
: 
 I rise on behalf of the ACT party to oppose the third reading of this bill. What was the Consumer Credit Bill is now the Credit Contracts and Consumer Finance Bill and the aim as we have heard is to repeal the Credit Contracts Act 1981 and the Hire Purchase Act 1971 and replace them with this new legislation that covers credit contracts and consumer leases. 
I will refer to some of the submissions that have been made on this bill. The Financial Services Federation for instance made some very valid points. It said that the Credit Contracts Act is an extremely well conceived Act. It is settled law and it has generally worked pretty well over a period in which we have seen significant growth especially in the sector of household borrowing. So it does seem a pity to see that Act thrown out. There has been valid criticism of that legislation in that enforcement has been difficult but I argue that that aspect could have been fixed without rewriting the entire Act—a point that has been argued since 1988 but seems to have fallen on deaf ears. It seems to me that we did not need to go down this whole expensive process and come out with legislation that is confusing to say the least. 
I ask members to look at what Simon McArley wrote in the  
National Business Review 
 last year. He is senior lawyer a specialist in commercial law in Auckland. What he stated about the law was that there was a perceived imbalance between borrower and lender and that the existing law does not provide adequate redress for unfair behaviour by lenders. 
There may be some merit in that perception. That may not be the reality but there may be some merit in the perceptions. As we debated this bill during the Committee stage we heard stories about usury schemes. We heard about some of the buy-back nonsense that needs tidying up. But I ask this question of the Minister: if a power imbalance does exist why does it cease to exist simply because the borrower is borrowing for business purposes? 
One of the essential faults of this bill is that it leaves businesses out in the cold. It does not cover business transactions. I know that if the Minister were here she would say that that is in order to reduce compliance costs but that is actually not the case. It is impossible to see how excluding businesses from what is supposed to be simplified statutory procedure actually reduces costs. That is a non sequitur; it does not make sense. 
Let us turn the argument around. If including businesses in this legislation would have increased compliance costs for them then that means the Government is actually quite happy to increase costs for individuals for families who are borrowing for working people and for sole traders. There are many sole traders in this country who pay GST and accident compensation and who have to comply with all the other strangling red tape such as the occupational safety and health legislation. Why should they be subject to the increased costs that this legislation by the Government’s own admission will now deliver to them? 
This bill favours big business. Clearly a large business can use resources to hire lawyers to ferret out unfair terms and wield commercial clout but those businesses comprise less than 20 percent of the New Zealand business community. More than 80 percent of businesses in this country employ fewer than five people and those businesses those owners share the same concerns and needs as the average consumer who is covered by this bill. And why is that? It is because those owners and operators are average consumers. I cannot see why they have been left out of this legislation. 
Let us look at the new protections that the Minister thinks are inappropriate for new businesses. Briefly those protections are simplified disclosure requirements—that is setting out clear and useful information about the transaction so that informed decisions can be made—a 3-day statutory cooling-off period in which to evaluate the disclosure and properly consider borrowing decisions; a prohibition on unfair fees and bank charges; and stronger and more easily enforceable remedies when lenders do not follow the rules. Well all those areas have been the basis of complaints from small businesses in the past but now the Minister is quite happy to cut those small-business voices out of realistic consumer protection and I do not see the fairness in that. 
As my colleagues in the National Party like the honourable Gerry Brownlee have already said there is still much confusion over several clauses in this bill. Once more we are seeing the passing of legislation that will actually be a feast for lawyers and an absolute nightmare for people who are trying to comply with confusing legislation that just raises the uncertainty stakes. For instance if we look at clauses 56 to 58B I think it is which cover the buy-back transactions and the definitions of “occupier” and the disclosure provisions we see that the transferee must ensure that the occupier has independent legal advice and so on. That is fine but if we read on a bit further to the following clauses we see that every transferee must ensure that a copy of the terms is given or sent to every occupier under the transaction. 
We go from dealing with “an occupier” to suddenly “every occupier”. Presumably this is under one transaction therefore one piece of land is being dealt with. Is the transferee liable because he or she did not know or did not try to find out how many occupiers there are for the transaction or inform them about all the terms and conditions? That is not clear. 
There is also the issue of loan sharks. I argue that this bill will not stop loan sharks. In fact it will make it easier for them to operate because credit is going to become more expensive and as I have already said rich people can get lawyers to guide them through the legislation and pay for it. But what about poor people? They also have a need for credit and they will now be driven to the back-door credit agencies and the loan sharks. 
 I predict that we will see more of the underworld area of lending where recovery is gained through a brick through the window; or the other downside of that form of lending which is that the people who cannot afford it and should not be in debt end up in even more debt because they are high risk. They go to the lenders of last resort and to cover the risky situation they are in they end up signing up to the most dreadful terms and conditions and putting on the line even more of what meagre property they have. 
Finally I would just like to address the hardship clause. This really is a farce. It allows people to welsh on their debts and it is telling that creditors who submitted were unanimously opposed to this. Under the current legislation there is nothing to stop creditors from negotiating with lenders if they get behind on payments. In fact most creditors know that it is better and more sensible if there is a hiccup to negotiate through it rather than call in the debt abruptly and put the debtor through and have the chance of getting nothing out of it. 
The legislation is now far too loose. Debtors will be much more able to give creditors the runaround by using illness injury loss of employment or the end of a relationship to have the terms changed. If the creditor does not allow it to be changed then he or she can apply to the court and this could delay it for years. 
This is bad law. It will make credit harder and more expensive for small-business people it will send poor people to loan sharks and the ACT party opposes it.