Faafoi KrisCREDIT CONTRACTS LEGISLATION AMENDMENT BILLSecond ReadingHon KRIS FAAFOI (Minister of Commerce and Consumer Affairs): I move That the Credit Contracts Legislation Amendment Bill be now read a second time. Throughout the review which led to the changes in this bill and again at the select committee my colleagues and I have heard too many stories of New Zealanders ending up in financial strife as a result of irresponsible and predatory lending. This lending disproportionately harms our most vulnerable and desperate communities. The Credit Contracts Legislation Amendment Bill amends the law which regulates the provision of credit in New Zealand to better protect Kiwis from these harms. First of all some thankyous. First of all thank you to those who submitted on the bill. Your feedback has been a crucial part of this process and I appreciate the many New Zealanders who have taken their time to give their opinions and tell their stories or those of the people who come to them for help. In particular I'd like to acknowledge those who submitted that the bill as it stood when it was referred to the select committee didn't go far enough. You have been heard and your concerns were acknowledged by both the Government and the Finance and Expenditure Committee and an interest rate cap will be implemented within the bill out of the select committee.I would like to thank the committee for their thorough consideration of the bill including on the merits and design of the interest rate cap. In particular I'd like to thank the chair Dr Deborah Russell and Dr Duncan Webb for their care and thoroughness in leading to the consideration of this bill and I'd also like to thank Brett Hudson the Opposition's consumer affairs spokesperson for his attentiveness and diligence throughout the process as with all commerce bills which come through the House.The bill introduces the following changes. It will put an interest and fees cap on high-cost loans of 100 percent of the principal. It will also introduce an interest and fees rate cap of 0.8 percent per day. There will also be clear minimum standards for responsible lending and it will strengthen penalties for irresponsible lending. It will also make enforcement easier by requiring lenders to demonstrate that their loans are affordable and suitable and that their fees are reasonable. It will also raise the bar to becoming a lender by introducing a fit and proper person test for lenders and shop trucks. Finally it will improve transparency and access to redress during debt collection.Last year when the Government reviewed New Zealand's credit legislation the Credit Contracts and Consumer Finance Act 2003 the 2015 amendments introduced lender responsibility principles and changes to the law governing repossession of consumer goods but it is our opinion that those amendments did not go far enough.Borrowing and lending plays an integral role in New Zealand's economy and when provided responsibly credit can help people to smooth out their income and spending. Most people who use credit won't experience any difficulties. However credit when irresponsibly provided can quickly result in vicious and debilitating debt spirals and harm. This has been no clearer than in my electorate where I see continued examples of harm to vulnerable people from the egregious conduct of some lenders.The review found that across the country consumers are still experiencing harm from non-compliance with the law and predatory lending practices and credit terms. Again I would like to thank the members of the Finance and Expenditure Committee and particularly the chair for their diligent work on the bill including the additional consultation with submitters to develop the design of the rate cap. The committee received 173 submissions from interested groups and individuals on the bill as a whole and they also heard oral evidence from 50 submitters at hearings in Auckland and Wellington and additional submissions were made on the design of an interest rate cap. And again I'd like to thank those all who took the time to submit.The vast majority of submitters supported the bill but there were also suggestions for amendments and some of those suggestions have been reflected as changes in the bill as it is reported back to the House and I'd now like to go through some of those changes. The Finance and Expenditure Committee received many submissions saying the bill didn't go far enough to protect consumers and the rate cap of 0.8 percent per day will complement and strengthen the total cost of borrowing cap that was already in the bill at its introduction. Currently some lenders have interest rates twice as high as the rates proposed and this additional cap will ensure that high-cost lenders are incentivised to be more careful about how they lend. This rate cap will better protect against irresponsible lending for people in hardship and for these people high-cost lending should already be off the table because it's unaffordable and unsuitable.I understand that many submitters advocated for a much lower cap which would have effectively prohibited all short-term lending. However I believe that short-term lending should still be an option for consumers who have a genuine financial need and who can afford the repayments. The rate cap and total cost of credit cap will be reviewed after they have been in place for three years and this will include a focus on loans that charge between 30 and 50 percent of interest so that we can evaluate the merits of the level of the cap that it is currently set at.Many submitters noted that there are free confidential help services available to people facing hardship and this includes the Ministry of Social Development's MoneyTalks hotline. The committee has introduced a new requirement to provide contact details for MoneyTalks on high-cost lender websites and in payment reminders. The purpose of this would be to help encourage borrowers to seek advice from trained financial mentors at the earliest possible opportunity including when they're behind on any debt repayments.There was also wide support from submitters for tighter regulation of mobile traders. I've seen the harm that irresponsible mobile traders or truck shops have done in their communities and they have said that enough is enough. The bill as introduced created the ability for mobile traders to be deemed to comply with responsible lending and other requirements in the Act at a later date. However in response to widespread calls from submitters the bill has been amended so that they will be required to comply with the Credit Contracts and Consumer Finance Act from June 2020. This will mean that mobile trucks and mobile traders will have to ensure that any loan they provide is affordable appropriate and that extensive disclosure is carried out. The committee also considered when a loan is likely to be unaffordable and contribute to debt spirals and as a result the bill now also includes prohibitions on high-cost lending when a borrower has a high-cost loan with another lender already or they have had two high-cost loans in the last 90 days.Unmanageable debt is the source of ongoing mental emotional and financial stress for families and contributes to lasting health problems. Protecting consumers from irresponsible and predatory lending is important to this Government especially as we go through our wellbeing frame. I'm proud to commend this bill and its changes to the House and also again thank those who submitted and the select committee. I commend this bill to the House.