Cosgrove Clayton: Credit Contracts and Financial Services Law Reform Bill — Second ReadingText is incorporated into the Bound VolumeCosgrove Clayton: Credit Contracts and Financial Services Law Reform Bill — Second Reading[Sitting date: 10 April 2014. Volume:697;Page:17169. Text is incorporated into the Bound Volume.]Hon CLAYTON COSGROVE (Labour):I join with other colleagues in support of the Credit Contract and Financial Services Law Reform Bill. I am particularly pleased by a couple of aspects of it. I will not labour the point but before I get into the guts of the legislation I want to refer members to a particularly pertinent piece in the commentary which is on page 4: “We recommend amending new section 9B(3)(e) to expand on ‘problems’ defining them as situations where a credit contract has been breached or may be breached. We also recommend requiring lenders to treat borrowers ‘in an ethical manner’…”. It is that ethical behaviour that I want to touch on in a wider context in respect of this bill because I note that—Hon Peseta Sam Lotu-Iiga: What page?Hon CLAYTON COSGROVE: —many of the concepts in this bill will amend—for the member’s help it is page 4 second paragraph down beginning: “We recommend …”.Grant Robertson: No pictures sorry.Hon CLAYTON COSGROVE: There are no pictures and a few large words but we will get over it. In terms of corrupt practice I note that when the President of China was appointed to his post one of his pledges if you will to his people was to go after and deal with both unethical behaviour and corrupt practice. I have to say that when we talk about acting in an ethical manner—ethically and responsibly—an example of that could not be used when it comes to the Minister of Justice. I will not labour the point because I want to go on to some other aspects of this bill but I say that where you have a person who is as eminently qualified as a Minister of Justice you would expect that person to act in an ethical way with ethical behaviour and in an ethical manner. Ordinarily you would especially since the chairman of the Commerce Committee talked about those people who should be educated in respect of financial literacy so that they are qualified to make appropriate decisions when it comes to lending. In the same way you would expect a person like Judith Collins—a Minister of Justice a lawyer and a senior member of Parliament—to conduct herself in a way where she could not be accused of unethical behaviour she could not be accused of corrupt practice and her reputation as the leading justice official in this House apart from the Attorney-General could not be besmirched.However when we look at the track record in the proceedings of the House today—The ASSISTANT SPEAKER (Lindsay Tisch): Order!Hon CLAYTON COSGROVE: —that does not fit the definition even in this legislation. Oh they may not like it Mr Assistant Speaker—and it is germane to this legislation—but her conduct today does not fit in any way shape or form the words contained in this bill about acting in an ethical manner. It is not ethical in relation to this bill to attempt to enrich oneself or one’s husband by one’s actions as a member of this House and as a Minister. If it is ethical then that is corrupt practice. I call that behaviour and the Minister of Justice’s behaviour in this House today back-pedalling corrupt practice where she will not name officials—The ASSISTANT SPEAKER (Lindsay Tisch): Order! It is not proper to allege that a member of this House is corrupt. From now on the member will come back to the substance of the bill. We are on a second reading and I refer the member to page 110 of Speakers’ Rulings. We will not have any cause for a member to talk about another member as acting in a corrupt manner.Jonathan Young: Please do not corrupt Standing Orders.Hon CLAYTON COSGROVE: I appreciate your advice. I appreciate it as well.Jonathan Young: Oh how kind of you. Thanks very much.Hon CLAYTON COSGROVE: No no ethical behaviour and ethical standards are very important in this House. The bill talks about treating people with respect and there are a number of disclosure provisions within this legislation. I put it to you that in order to be ethical and not be accused of corrupt practice if you a lender a borrower or any other individual in the community you have to be transparent you have to be ethical you have to tell the truth and you should not change your story every 5 minutes as we have seen in the last few hours in this Chamber—for the record.Moving on one thing I am particularly pleased about in this bill for the benefit of the Minister of Pacific Island Affairs over there if we look at the commentary under “Content of continuing disclosure statement”—and we would love a bit of that when it comes to the Minister of Justice would we not a bit of continuing disclosure—it is the recommendation to insert new clause 13A “to provide for regulations to prescribe a minimum repayment warning on credit card statements.” This is something I am particularly interested in—and I have campaigned in my own way over the years in several committees about this—because as the commentary says this is where “The warning would detail to the debtor the consequences of paying only the minimum monthly payment on credit card debt such as higher interest costs over time.” The Aussies have had this for several years.When we talk about financial literacy it is incumbent on this Parliament to assist those who often cannot—sometimes will not but often as not cannot—assist themselves. I put it to the House that there is no better form of financial literacy than for a bank to do as they do with mortgages where they tell you on your statement what your repayments are what your interest bill is from month to month what your interest bill currently will be on maturity and the total amount of the debt on maturity. You can see it all mapped out and see how many years you have to pay it off.Yet banks in New Zealand for a time have resisted under really the only excuse which is cost. There is a cost to making these changes and I acknowledge that but it is not an earth-shattering one. Their parent companies in Australia were compelled some years ago to disclose to a person who holds a credit card that this is your minimum payment this is the average payment you are making monthly and that if you keep paying it off with this frequency it will take X number of years and you will have paid X amount of money you will have paid the bank a bucketload of interest and it might take you 10 years to pay it off. At that point everything is disclosed to the person who is incurring that debt.I would wager—I hope I am right—that many people once that explicit disclosure is made on the credit card statement will look at it and go: “Heck. I didn’t think if I kept paying at this sort of frequency that I would be paying that amount of interest and that it would take that amount of time and my total bill at the end of this would be a bucketload of cash.” Once that realisation is made I suspect those people will say: “Hey I’m going to remedy this. I’m not going to give the bank a bucketload of money in interest. I’m actually going to shape up in terms of my internal financial processes. I’m going to redo my household budget and I’m going to try to quit this debt or minimise it to a manageable level.”I am quite proud of that. I am pleased and I am grateful to all members of the committee. It was something that I think sprang out from left field for us all. We raised it with the officials. I commend our officials who went away and challenged the banks and the financial institutions and came back with a remedy. Yes it will put a bit of cost on the banks to make the electronic changes that they will have to make. It will not raise interest rates. I would say that I would be very surprised if it is passed on in any major shape or form to the punters to the customers but it will bring our banks in line with their Australian parents. More than many things that have been done around financial literacy to me this is one of the ultimate forms of it because it is completely transparent it hides nothing and it gives a warts and all view to the person who is incurring debt through a credit card.We certainly know that it is relatively easy for credit cards to be made available to people and we know that they are an easy form for all of us who like to make the odd purchase from time to time. They are an easy form that aids our purchasing power. For those who can afford it that is OK. For those who cannot afford it it is troublesome. I am one of those people who can afford to pay the credit card off on time every time. The banks do not particularly like me I suspect because they do not get any interest out of it. I am well remunerated like all members of this House.Hon Simon Bridges: Too well.Hon CLAYTON COSGROVE: But we all have constituents who have been caught in that credit trap—especially the “Minister for Victoria Forest Park” or the “Minister for Geography” over there Mr Bridges. He did not pass School Certificate geography I am told. Even he is well remunerated in this House. But there are many constituents who get caught in that trap. Hopefully this small measure within the totality of this bill will assist them. I wish Judith Collins all the best for question time next week.