Credit Contracts and Consumer Finance Amendment Bill Financial Service Providers (Registration and Dispute Resolution) Amendment Bill — Third ReadingsText is incorporated into the Bound VolumeCredit Contracts and Consumer Finance Amendment Bill Financial Service Providers (Registration and Dispute Resolution) Amendment Bill — Third Readings[Sitting date: 27 May 2014. Volume:699;Page:18353. Text is incorporated into the Bound Volume.]Credit Contracts and Consumer Finance Amendment BillFinancial Service Providers (Registration and Dispute Resolution) Amendment BillThird ReadingsHon CRAIG FOSS (Minister of Consumer Affairs): I moveThat the Credit Contracts and Consumer Finance Amendment Bill and the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill be now read a third time. The legislation sets out significant reforms to the Credit Contracts and Consumer Finance Act more commonly known as the CCCFA; the Financial Service Providers (Registration and Dispute Resolution) Act; the Private Security Personnel and Private Investigators Act; and the Personal Property Securities Act. In addition the legislation repeals the Credit (Repossession) Act and incorporates its content into an expanded Credit Contracts and Consumer Finance Act.I would like to thank the House and the Commerce Committee for the immense support that this legislation has received. This support reflects robust consultation and a shared view on delivering positive outcomes. Thanks are also due to previous Ministers of Consumer Affairs who have guided this work—and there have been one or two—to officials and to the large number of stakeholders who have been involved throughout the credit review and who have made submissions on both the exposure draft and the legislation.The improvements made by this legislation represent the first major change to consumer credit legislation since the enactment of the Credit Contracts and Consumer Finance Act in 2003 and reflect the Government’s commitment to protecting vulnerable consumers and facilitating the fair efficient and transparent operation of consumer credit markets. The three key features of the legislation include the introduction of a responsible lending framework strengthened provisions around disclosure and fees and incorporating and strengthening the rules around credit repossession. The legislation also strengthens registration provisions in the Financial Service Providers (Registration and Dispute Resolution) Act to prevent the misuse of the registrar by overseas-based entities. I would like to take a few moments to elaborate on these features.The responsible lending framework requires lenders to exercise the care diligence and skill of a responsible lender throughout the life of a credit contract. This explicit direction ensures that lenders take responsibility for the likely effect of the credit they provide. A responsible lender is one who meets the specific lender requirements to first make inquiries to be satisfied that the borrower can meet repayments without suffering substantial hardship; second assist borrowers to reach an informed decision when entering into the agreement; and third treat borrowers and their property reasonably and in an ethical manner. A creditor who repeatedly fails to comply with the lender responsibility principles can be banned from the market.The Responsible Lending Code will be important in providing guidance as to how lenders can comply with the lender responsibility principles. I expect that the code will elaborate on important matters including how a responsible lender can assist borrowers to reach an informed decision given the borrower’s circumstances and objectives—for example where the borrower’s first language is not English—and how a responsible lender can comply with the prohibitions on charging unreasonable fees. The legislation improves transparency requirements recognising that consumers make better decisions when they are fully informed. Such improvements include requiring lenders to disclosethe credit terms to the borrower before the contract is entered into—this compares with the current requirement where disclosure can be made up to 5 working days after the contract is entered into—and requiring lenders to provide to consumers free of charge and upon request their standard form contract terms and information on the cost of borrowing. This will allow consumers and others to compare the standard terms and costs of borrowing offered by different creditors in the market and make an informed decision based upon this information.Unreasonable fees have been a key issue for consumers and have contributed to families often finding themselves in unmanageable situations of debt. The legislation clarifies that fees charged by a lender must reflect the costs and losses associated with the credit rather than recovering an element of profit. The cost recovery principle should enable consumers to compare interest rates across the market without worrying about additional hidden and often extortionate fees contributing to the cost. The clarification should assist in making these provisions more enforceable.Other changes worth mentioning include that all creditors must be registered under the Financial Service Providers (Registration and Dispute Resolution) Act and be a member of an approved dispute resolution scheme. Furthermore as part of initial disclosure requirements to borrowers lenders must disclose the dispute resolution scheme of which they are a member. Lenders who do not register as a financial services provider under the Financial Service Providers (Registration and Dispute Resolution) Act will have no legal right to charge interest or fees on credit until they are registered.Some of the current practices relating to credit repossession processes can have significant detrimental impacts upon vulnerable consumers and families. The legislation significantly improves protections in this area by a number of measures such as incorporating the credit repossession provisions in an expanded Credit Contracts and Consumer Finance Act requiring that any item that a creditor wishes to repossess be specifically identified in the contract prohibiting altogether certain essential items like beds and cooking equipment from being repossessed requiring repossession agents to be licensed or to hold a certificate of approval under the Private Security Personnel and Private Investigators Act and providing that the Commerce Commission will be responsible for enforcing the rules relating to credit repossession along with its other functions across the rest of the Credit Contracts and Consumer Finance Act.The legislation also makes changes to financial service provider registration and dispute resolution. In particular it will provide the Financial Markets Authority with the power to prevent offshore financial service providers from registering in New Zealand solely to take advantage of our good standing as a well-regulated jurisdiction. This change will be important in maintaining the international reputation of our regulatory system. Changes to allow the Government to adjust the rules of approved dispute resolution schemes will ensure that the dispute resolution regime continues to be effective and meet consumers’ needs.The Commerce Commission will play an important role in enforcing and taking action against irresponsible practices in the market. In relation to enforcement and deterrents the legislation increases the maximum penalties for breaches to $200000 for an individual and $600000 for a company. The Commerce Commission will also have the ability to issue infringement notices for minor straightforward breaches of the Act. Together with the range of provisions outlined above these should assist in providing the commission with a flexible range of tools to address and target behaviour of concern in these markets.In conclusion overall the amendments in the legislation will support effective fair and transparent markets while also providing adequate protections to vulnerable consumers and families. I commend these bills to the House.CAROL BEAUMONT (Labour): Talofa lava Mr Assistant Speaker. Today people will be taking out loans at interest rates of 50 percent. Today some people will be taking out loans at interest rates of over 1000 percent. These interest rates are unacceptable and are not going to be dealt with by the passage of this legislation the Credit Contracts and Consumer Finance Amendment Bill and the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill. I think that people should think hard about that because I know that nobody in this House would try to justify those kinds of interest rates. And yet here we are. I could go through a list of examples including one of particularly high interest rates from when I went to Palmerston North most recently with my colleague Iain Lees-Galloway. I know that people in this House know that those interest rates exist out there and I think it is wrong that we are passing legislation without dealing with that issue.I stand to speak in favour of this legislation. Labour has supported the passage of these bills throughout as the Minister of Consumer Affairs has noted because we want to see change in the area of consumer credit. Why is it that people take out loans one might ask? Why is it that loans with interest rates like the sort that I have talked about are being taken out? Well the fact of the matter is that lots and lots of New Zealanders are struggling to make ends meet. It is interesting that in Samoan Language Week we are talking about this legislation. In fact today is the day thatThis is Home: An Update on the State of Pasifika People in New Zealand was officially launched by the Salvation Army. I just want to note that in that report it talks about Pacific people continuing to receive the lowest median weekly income of any ethnic group and this has remained unchanged for the past 5 years or so. The Pasifika community has an unemployment rate of 13 percent compared with 6.2 percent of the overall unemployment rate.You might be asking why I am talking about this when we are talking about the Credit Contracts and Consumer Finance Amendment Bill and the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill. Well part of the reason that people take out loans is that they cannot make ends meet. Something happens and they need some money. The car breaks down or whatever and they go for a loan. There are too many unscrupulous operators—fringe lenders loan sharks third-tier lenders whatever way you want to describe them—who are there to provide credit. They have in fact thrived in tough economic times. They have thrived where there is high unemployment and low wages as is the case in this country. So that is partly why. But of course they can get away with it because there is no limit on what they can charge and there will not be after the passing of this legislation. Clearly there are other reasons why people are taking out loans at that interest rate. Some of the other credit providers I am sure need to step up to the plate a little better. Our credit unions for example are an alternative to loan sharks as are social lending provisions which Labour has promoted for some considerable time now and the Government recently announced some work in there. There are some other options around credit. And there is a need for financial literacy—no question about that.But what are the consequences of interest rates like the sort that I have talked about? The consequences are that usually people pay them. The research shows that people work very very hard to pay off the loans they take out including the interest rates that are on them. What does that mean? Well it means that actually they are taking money away from the needs in their own family. It is a struggle often to pay these loans back. For those who do not make it there is a cycle of debt and despair that has developed. There is no question about it. Just ask our budgeting services; they will tell you. Everybudgeting service no matter where in New Zealand can illustrate the consequences of this. So I just ask whether any member in this House would consider the sorts of interest rates I have talked about as acceptable or ethical. I am certain that the answer would be no they do not. But here we are 4 months from a general election passing legislation that will no doubt make improvements to the consumer credit market but it will not deal with extortionate interest rates that are out there in our communities. It will not deal with them despite the obvious need to do so despite community abhorrence of those types of interest rates and despite what other countries have accepted as a reality—that there is a need to take a very direct response to excessive interest rates.We have heard over the course of considering this legislation of a lengthy list of countries around the world. Just for the record they include: Australia the United States most European jurisdictions the United Kingdom Japan Singapore most countries in Africa Canada Mexico and most of South America. Right throughout the world Governments have realised that to actually deal with this issue requires very specific action to control interest rates. Why are we so different here? What is different in New Zealand? Well it is really unclear because the opportunity we had was not taken to really look into the issue of interest rate controls as part of the work on this legislation. We just had the same old tired clichés put out there about it having unintended consequences driving loan sharks underground and becoming the target rather than a cap. Well OK how do we know that? And why has that not been the case elsewhere? Why if that is the case has Canada not repealed its legislation that it has had in place for 8 years? Why are we so different here? That is still the question that people ask me. Why are we not doing it? To be honest I cannot answer that question.Can I say that the behaviour of fringe predatory lenders loan sharks is unacceptable and is hurting our most vulnerable families and that the extortionate interest rates that they charge are a significant element of that. But it is not the only thing; I absolutely accept that. They have thrived over recent years. In 2007 Labour commenced a review. Labour started with financial summits in South Auckland. As the Minister has outlined the Credit Contracts and Consumer Finance Act was seen to not be adequate to deal with some of what we were seeing in this consumer credit area.Unfortunately one of my other concerns about this legislation is that it has taken far too long to get here. The work was deprioritised by the incoming National Government. A member’s bill in my name was voted down. It had responsible lending and interest rate controls in it. Cynically it seemed to me the then Minister Simon Power announced immediately prior to the 2011 election that National was going to get tough on loan sharks. Well that was prior to the 2011 election and here we are now about to complete the third reading of this legislation. So it has taken 6 years to get to the point we are at now. I ask the question: how many thousands of families have suffered as a result of this Government’s inaction?There are many good features in this legislation and I have articulated them at the various stages of it. I think that the responsible lending principles the code which of course is yet to be developed and the fact that we have finally sorted out the hardship provisions are positives. I think that the fact that financial service providers will not be able to charge interest if they are not registered is very positive. Guarantors are being covered by the Responsible Lending Code. There are a number of very positive provisions in this legislation. They are good features and I look forward to them being implemented.There are as I say some negatives. The negative around not controlling interest rate caps is the outstanding one. The watering down during the Commerce Committee of the provision around the clarification of fees was another thing that I think is not a positive outcome. And I do ask the question—and I asked the Minister throughout the debate onthis legislation—about adequate resourcing. We need adequate resourcing to ensure that we put real effort into making sure that people understand what their rights are under this legislation but also adequate resourcing for enforcing this legislation. We do have better penalties which is a good provision of this legislation as well but how are we going to make sure that it is enforced? We would all know if we were honest that the sorts of people who are taking loans from some of our third-tier lenders are not necessarily going to be the best place to enforce this legislation. One new person as I understand it has been taken on by the Commerce Commission—not sufficient.I want to end up by acknowledging some people: budget services and citizens advice bureaus for the work that they do the submitters on this legislation and the officials who worked so hard. I also want to acknowledge a man called AndrewShann who has really been passionate about this issue over many years. We will bring interest rate caps in when we are in Government. Thank you.JONATHAN YOUNG (National—New Plymouth): I am very pleased to stand in support of the Credit Contracts and Consumer Finance Amendment Bill and the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill in their third readings. I would like to acknowledge the Minister of Consumer Affairs Craig Foss for his work as well as the Minister at the time the legislation was introduced Simon Power and also my colleague Sam Lotu-Iiga who has put considerable effort into this legislation as well.We understand that the availability of credit is a very important thing for our economy both for businesses and for consumers. It is fundamental to the sound operation of a modern economy so credit law is very important. Many goods and services are purchased through consumer transactions that are partly or completely financed by credit. Without credit such purchases would not occur and consumers and businesses would be worse off so getting it right is important.We understand that in the world of credit finance there are three essential tiers of operators. Firstly there are the registered banks; secondly there are lenders including building societies credit unions the Co-operative Bank and now the deposit-taking financial institutions; and thirdly the third-tier of lenders are providers of personal non-mortgage credit that are not banks credit unions building societies deposit-taking institutions or credit card providers. Third-tier lenders include finance companies pay-day lenders and moneylenders. Third-tier lenders operate in a market where it is easier to engage in practices that potentially take advantage of vulnerable consumers because many of the borrowers have lower levels of financial literacy or have low incomes and cannot access affordable credit. Because of this occurrence this legislation has come into being.When people have to work hard to pay their bills put food on the table and provide for their families it is unacceptable that they are taken advantage of by people whom we call loan sharks. If you borrow $1000 but you cannot pay it back the lender says they can take anything in your house to pay the loan including toys beds and even things that do not belong to you. That is wrong. If you get sick you lose your job or your partner and you cannot pay the loan the loan company will not reduce your payments so you face hardship. It is hard hard yakka for many people. Or if your relative is a guarantor for your car loan no one explains that this means that your relative will have to pay back the loan if you do not make the payments.We saw in the Commerce Committee one of the documents of a car purchase from a South Auckland car firm a motor retailer. This vehicle was worth $13000 but added to that were loan fees credit fees insurance interest—and interest that was at a particularly high level because this was a third-tier loan. Then there was a line item in that transaction called a contingent fee for $2000. I wondered what that contingent feewas. That was the fee just in case anything went wrong. You would think that if there was a high-risk loan that of course the work would be done to ensure that the person who was going to borrow the money would be able to afford to pay it back or certainly if it was a high-risk loan that the interest rates would reflect that for the lender. But then to have $2000 added to the transaction just in case seems wrong and we felt as we looked at this legislation that that seems to be an unreasonable fee.So looking at the whole area of fees and reasonable fees was a very important part of this. It was important when National came into Government in 2008 that investor confidence in the financial sector which had been rocked by collapses of the finance companies was shored up. But the other side of the equation in terms of transactions is that credit providers who have mainly been unregulated and have no conduct requirements needed to come into some regulation and enforcement and this legislation certainly does that.One of the things that it does in relation to unreasonable fees which are prohibited under the Credit Contracts and Consumer Finance Act is include more explicit tests for different kinds of credit fees. These fees include establishment repayment default or third-party fees. The legislation also clarifies that the default interest may be charged on only the amount in default and not the entire amount of the loan. There are a number of great provisions right through this legislation that no doubt members of the committee and other members of Parliament will speak on.One of the things it does is it brings a sense of reasonableness to this whole aspect of lending and borrowing money. It restores confidence to that financial sector and that is a very important thing indeed. We want to have lenders acting responsibly and consumers having the information they need to make informed decisions and there are serious consequences for those who breach this legislation. I believe that New Zealand is going to be better off our economy is going to be better off and people who borrow money are going to be better off in terms of what this legislation will offer them. I am very pleased to commend this legislation to the House.LOUISA WALL (Labour—Manurewa): Talofa lava Mr Assistant Speaker. It gives me great pleasure to speak on this the third readings of the Credit Contracts and Consumer Finance Amendment Bill and the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill. I acknowledge that this legislation came through the House via the Commerce Committee and I would like to acknowledge the members of the Commerce Committee for the great work that they have done. I would also like to take the opportunity to congratulate Minister Craig Foss who is responsible for consumer affairs and also to acknowledge my colleague Carol Beaumont who is Labour’s spokesperson on consumer affairs.What I would like to highlight is that this issue is one where many vulnerable New Zealanders have been caught within a context of taking out loans and then having to repay those loans at interest rates that have seen both them and their families stuck in this poverty trap. So underlying this legislation is a recognition that something had to be done to stop this vicious poverty trap that has engulfed many of our particularly vulnerable families.I want to recognise that this legislation is the result of work that began in 2007 so there was a review of the Credit Contracts and Consumer Finance Act 2003. It has been interesting as someone who has not been a member of the select committee to look at some of the evidence about what the problem actually is. So for example I know from an article written byCatrionaMacLennan titled “Cap an easy way to protect vulnerable from loan sharks” that between 2006 and 2011 there had been a 60 percent growth in the number of third-tier lending outlets and up to 40 percent of those new outlets were flouting the law by not registering as financial service providers. That meant that therewere 127 new lenders that had entered the market. What is the relevance to the number? Well again it has been interesting looking at some of the articles that have been written as this legislation has progressed.TheDominion Post in March this year published a story titled “Counting the cost of loan sharks”. There was a case study of a woman. Her name isPoea Rangi. She is the mother of five children aged between 7 and 18 years.Poea’s story is I guess a story typical of people who get trapped by these loan sharks.Poea has a net income of $600 per week and from that $600 per week she is paying $200 per week in loan repayments. What does that mean for her family? It means that at the end of the day she has $140 to feed herself and her children to clothe her children to make sure her children have opportunities to participate in sporting events and to fix the car if it gets broken.What happens to people likePoea however is that these lenders systematically target them. One of the quotes in the article fromPoea is that “There is never a day when someone doesn’t knock on your door.” to lend you money. The reality of these third-tier loan providers is that they are very calculating. What they sell is a dream. And do you know what the dream for some of our families is? They are asked “Do you want a TV? Do you want aniPad? Do you want to buy your child a new bike?”. Our vulnerable communities actually get sucked in by this instant gratification. It is almost like Lotto: “We’re going to give you this wonderful prize.” But the problem with this type of Lotto is that in fact a number of our families cannot actually get to a point where they pay off the loan so they are always continually spending quite a significant portion of their weekly income on repaying these loans.There has been quite a bit of commentary about the need for either regulation or a mechanism to identify what the loan cap rate should be. I have had a very interesting conversation with my colleague Carol Beaumont. I said that if we are going to follow the Australians and have a cap of 48 percent then we should just put that in the bill. But I think the issue is that it might not necessarily be 48 percent. Picking up on what Carol shared earlier again I did a little bit of research—The ASSISTANT SPEAKER (H V Ross Robertson): The member’s full name.LOUISA WALL: —sorry—and what I know is that we are now not enacting legislation that is best practice.In July 2013 Australia introduced a capping interest rate of a maximum of 48 percent. In 2013 Finland introduced a law providing that the interest to be paid on 1-month loans of€100 is 4 percent. Five years ago Japan lowered its maximum interest rate for consumer lending to 20 percent. The monthly interest rate for short-term loans in South Africa in 2007 was a maximum of 5 percent. South Carolina has a maximum consumer interest rate of 18 percent. In Washington state it is 25 percent. As we can see around the world many countries actually have introduced a rate a level.I can understand why maybe we do not want to introduce a rate but I would have thought that this bill should have created a mechanism for such a regulation which is what I know that my colleague Carol Beaumont had been advocating for. In fact the most pertinent research from here in New Zealand is from Associate Professor Louise Signal who headed up a study on third-tier lenders for Otago University. Her I guess assessment of this legislation is that without the cap the current legislation is not strong enough to protect the community.I started my contribution with the rationale for why this legislation is being introduced. It is being introduced because we as a Parliament recognise that some of our consumers need protection. I know that some people think that people should just assert personal responsibility and they should understand what they are signing up for but the reality is that—and again it is highlighted in the article asPoea Rangi talked about—some of the people who are targeted have really low literacy levels. They do notunderstand the agreements they are entering into. They need a society and a Parliament that will protect them. The whole thrust of this legislation is to protect our most vulnerable consumers.As somebody who did not sit on the select committee but now has had the privilege of speaking in this third reading of the bill I lament the fact that I believe we have had a lost opportunity to ensure the protection of the most vulnerable the people who get caught within the web of those third-tier lenders and that we did not actually set a cap. I am not going to say what that cap should have been but I am sure that there are people within the industry who could have provided guidance to this House about that. That is all I really wanted to say other than to commend those people who have been fighting hard for the rights of the most vulnerable. I commend the work they have done their advocacy to make sure that the case studies that I highlighted actually did contribute to the discussion that went both through the select committee and the House tonight. Talofa.JULIE ANNE GENTER (Green): Tēnā koe Mr Assistant Speaker. Tēnā koutou e te Whare. I rise on the third reading of the legislation arising from the Credit Contracts and Financial Services Law Reform Bill to give a contribution from the Green Party. The Green Party is working towards a smarter greener economy to support all New Zealanders. What we really want is a fairer New Zealand and one where everyone has a chance and has a fair go.At the moment unfortunately New Zealand like many other rich countries is seeing an increasing concentration of wealth amongst a small group of people and things are becoming more and more difficult for those at the lower end of the spectrum those who are on a lower income. The minimum wage is not really high enough to meet all of the needs for people to raise a family and that is unacceptable. It is within this context of inequality and worsening inequality that this legislation has come before the House to deal with the problem of third-tier lenders or loan sharks. It is only when you have people having a difficult time making ends meet that suddenly there are the right conditions for people to set up shop and start ripping them off as loan sharks do. So we know that we have a serious problem.We have increasingly seen a proliferation of third-tier lenders or loan sharks in areas like South Auckland and Porirua—those communities where people have been struggling and where there has been a loss of jobs and increasing power prices and house prices. It is for that reason that people very understandably are susceptible to the idea of a short-term loan. Third-tier lenders are able to prey upon the fact that people are not as financially literate as the lenders may be and do not fully understand the implications of compounding interest. It is for that reason that this legislation has come before the House.I have to congratulate the officials whom I do believe were working very hard on this for very many years. It did take many years for this to finally come through the House. I know that they are working with the affected communities and are out there trying to address this problem. I have to especially congratulate the hard work of Carol Beaumont my colleague on the Commerce Committee who I feel really led the charge and is incredibly passionate about this issue. The Green Party supported her Supplementary Order Paper 430 which would have introduced interest rate caps.I think that the biggest regret I have about the legislation that is going to be passed in the House tonight is that it does not introduce a mechanism by which we could have put in place interest rate caps. Of course interest rate caps have been introduced in recent years in many comparable jurisdictions: in Australia the United Kingdom Canada the United States Japan and Finland. Most other rich countries that have the problem of third-tier lenders have responded with interest rate caps. Unfortunately the argumentsthat we heard at the select committee were quite spurious. The two arguments that were mounted against interest rate caps were that firstly the interest rate cap would become a target and therefore all lenders would suddenly raise their interest rates up to the level of the cap. Of course that certainly has not been the case in other jurisdictions. There is no reason to think that that would be the case now.The second reason was that interest rate caps would reduce access to short-term credit. This is where I come back to the problem of inequality and the problem of a lack of a living wage in this country. People should not have to access short-term credit to put food on the table. They should not have to access short-term credit to pay the power bills or to pay the rent or to make sure that their kids have shoes to go to school in. If these households do not have the means for the basics then that is the fundamental problem that we need to address. Not putting in interest rate caps means ultimately we are going to continue having the problem of spiralling out-of-control debt which is not good for our economy and it is not good for our people. That is what will happen. It is entirely possible.I would like to believe that the principles and the framework that has been set out in this legislation will be enough to address the problem—I hope that it is—but in the case that it is not how many years are we going to have to wait for a real solution? It took several years for this to come before the House. That is what would have to happen again if after several years we find that this simply was not enough. We should have at least put in place the possibility of introducing an interest rate cap—let it be completely independent from the Government let it be the Reserve Bank or someone else who decides. At least you would have the framework in place and you could try it and see what happens see if it works see if it does not work. Unfortunately it could take years. If this is not enough it could take years for us to actually address the problem.I think that the problems that we need to address are not simply interest rate caps; they are ensuring that families in New Zealand have what they need so that their kids can go to school and not be hungry so that they can learn and get a great education and have every opportunity that other kids have kids whose parents have higher incomes. They should all have the same opportunities. That is why the Green Party has introduced a number of positive solutions like our school hubs plan which would look after kids—Hon Simon Bridges: No that’s not on topic.JULIE ANNE GENTER: We would be continuing to roll out the home insulation programme which the Minister is quite happy to cut short. The Minister is not interested in extending the home insulation programme even though it has been very successful and it has achieved great health outcomes economic outcomes and job creation benefits. We would like to see that extended in Christchurch in particular because it is going to be a very cold winter for the people in Christchurch. So the Green Party has a number of positive solutions that would help address inequality in this country.We would also like to see further improvements in looking out for those communities that are the worst off the most vulnerable communities. This legislation goes some of the way but it does not go all the way. So the Green Party will be working towards a smarter greener economy and a fairer New Zealand for all New Zealanders not just those at the top. Thank you.KANWALJIT SINGH BAKSHI (National): Satsriakaal Mr Assistant Speaker. Talofa lava. This is Samoan Language Week so I want to greet you in the Samoan language.The ASSISTANT SPEAKER (H V Ross Robertson): O a maioe? That’s got you!KANWALJIT SINGH BAKSHI: Never mind—next time I will learn a little bit more and come back with a reply. It is my privilege to stand and speak in the third reading of this legislation the Credit Contracts and Consumer Finance Amendment Bill and the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill. It is crucial reform legislation to keep up with the times. The Government is well aware of the hardship that the public is undergoing having to deal with unscrupulous moneylenders. Some lenders are irresponsible in their lending practices and some consumers make mistakes and poor decisions. This contributes to cases of spiralling debt and financial hardship among vulnerable consumers.This legislation protects borrowers from dubious finance companies and dealers. It is important that members of the public are well informed before they make critical financial decisions that will impact upon their lives. This legislation seeks to do just that. The legislation is the biggest overhaul of consumer law in a decade and encompasses wide-ranging changes to the consumer credit and repossession laws.I would like to acknowledge the Hon Craig Foss for introducing this bill and would also like to acknowledge the chair of the Commerce Committee Jonathan Young and the hard-working member of Parliament for Rodney Mark Mitchell for his contribution. I would also like to acknowledge the Hon Peseta Sam Lotu-Iiga who is very passionate about this legislation. With these words I commend this legislation to the House.ANDREW WILLIAMS (NZ First): It is a great pleasure to take a call on behalf of New Zealand First following those lovely comments from the previous National speaker Kanwaljit Singh Bakshi about all his colleagues—and there are a few more you could have thanked as well who are sitting over there.But we will move on to the real subject tonight which is loan sharks. It is not all about thanking other National Party people for their contributions at the Commerce Committee and not about doing all that sort of backslapping. At the end of the day you can have all the fine print about what the moneylenders and the loan sharks will be required to do but the fine print is so small that it can hardly be read and hardly be seen. Many of the people affected by these bills the Credit Contracts and Consumer Finance Amendment Bill and the Financial Services Providers (Registration and Dispute Resolution) Amendment Bill do not speak English or have very limited understanding of English. They will simply be still taken for a ride as vulnerable people in our society who are borrowing money from unscrupulous loan sharks and moneylenders.In that respect there is one party in this House that has been consistent on this and that is New Zealand First. We have been consistent in saying that in terms of this legislation the Government is badly falling short. It is not recognising the fact that that last essential element of putting caps on interest rates would have been the ultimate determinant in this legislation that would have really made all the difference. So you can have all the fine print you like and you can have all the assurances you like but rest assured that the unscrupulous lenders will still find ways around it and will still find people who will sign up to things but cannot afford to borrow the money and will end up paying exorbitant interest rates.We cannot understand the rationale of this National Government in turning its back on other jurisdictions such as the United Kingdom the United States Canada Australia South Africa and Finland and most of the countries in Europe. The National Government here in New Zealand says it knows better—far better than all these other countries—and it will not put caps on interest rates and yet these other countries will. We have heard other speakers tonight mention some of the caps that are in place in some of these countries—the likes of 4 percent or 5 percent per month that sort of thing—to keep things realistic to keep things in single figures to keep things inperspective to what people may realistically be able to afford to then pay back. But we have not heard from the National Government how it is going to address interest rates that are into double digits—skyrocketing accumulative interest rates that end up in triple digits in some cases where people simply have no way of repaying the loans.Families end up suffering. At the end of the day it is the children who end up suffering in many cases. The children go without because simply the family is having to repay such huge amounts of interest to the loan sharks and the moneylenders. It is very sad that the National Government once again shows its lack of respect for social justice and its lack of empathy for those who are in most need of being protected and who are the most vulnerable in our society. Once again it is probably because the National members all come from backgrounds where this does not apply to them. It does not affect them. They are not affected they probably do not have people in their families affected by it and therefore it is out of sight out of mind. They do not care—too bad hard luck ain’t going to go there. Quite frankly it is very saddening that the National Government cannot recognise the fact that we as a Parliament and as the House of Representatives have a duty of care and a duty of responsibility to the people of New Zealand to protect those who are most at risk and those who are most vulnerable.It is also interesting that Carol Beaumont brought in Supplementary Order Paper 430 to put a cap on interest rates which was a follow-on from a member’s bill a couple of years ago the Credit Reforms (Responsible Lending) Bill which Charles Chauvel originally drew up. When it was a member’s bill it was put through with the support of the Hon Peter Dunne in those days—3 years ago. Peter Dunne is on record—in fact he wrote to one of his constituents—saying that he was pleased to be supporting that particular piece of legislation which included caps on interest rates and he would look forward to its being successful in the future. It is interesting that a couple of years later the Hon Peter Dunne then the Minister of Revenue and a lackey to the National Government went back on all those former assurances to support caps on interest rates and voted against it.A couple of weeks ago when this legislation was in Committee and when that amendment was put to the Committee to bring in a cap on interest rates it was lost by one vote. Again whose vote was it lost on? You do not have to guess. It was Peter Dunne’s. Once again Peter Dunne was the casting vote to ensure that caps were not brought in on interest rates. Talk about as the Rt Hon Winston Peters has said in the past double-crossing the bridge when he comes to it. That is Peter Dunne for you. He certainly double-crossed the bridge and double-crossed the people of New Zealand in terms of this bill to ensure that interest rates had caps put on them.Just in conclusion I am not going to labour the point but in some future Government that New Zealand First has a role in and where we have influence we will certainly ensure that the people of New Zealand the vulnerable people of New Zealand are protected in a greater manner and that interest rate caps are brought in. We believe that it is in the interests of all New Zealanders to have that. We believe that we should be no different from many of the other major countries that I mentioned earlier and that as a result of that New Zealand would be a far better place. We do not want to see the moneylenders and the loan sharks ripping off good hard-working Kiwi families and good hard-working Kiwi workers. We want to protect them. New Zealand First will stand up for them and ensure that that is the case.Dr JIAN YANG (National): Nihao. I am happy to rise to take a short call on the Credit Contracts and Consumer Finance Amendment Bill and the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill at their third readings. This is comprehensive legislation. It reforms the entire suite of legislation that governsconsumer credit contracts from before their inception until their termination or enforcement. The legislation covers different areas including responsible lending disclosure fees repossession enforcement etc. This legislation is the biggest overhaul of all consumer law in a decade and it encompasses wide-ranging changes to consumer credit and repossession laws.Under this legislation lenders must act responsibly and consumers must have the information they need to make informed decisions and there are serious consequences for those who breach the law. Some lenders have irresponsible lending practices and some consumers make poor decisions. This contributes to cases of spiralling debt and financial hardship among vulnerable consumers. We are fully aware of that. That is why the Government is going to pilot a microfinance scheme to help low-income people avoid debt traps.This legislation is part of the Business Growth Agenda and will contribute to aligning business law between New Zealand and Australia. I commend the legislation to the House. Thank you.CLARE CURRAN (Labour—Dunedin South): Talofa lava Mr Assistant Speaker. Labour stands for opportunity for all New Zealanders. It stands for everybody having a decent job with a decent wage with a house that they can afford to live in where their children can grow up and have opportunities and not live in poverty unlike the 285000 New Zealand children who are currently living in poverty. Sadly this is the country we are living in at the moment and this is the country in which this legislation the Credit Contracts and Consumer Finance Amendment Bill and the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill is badly needed even though it remains flawed.Last night the co-authors ofThe Spirit Level Professors Richard Wilkinson and Kate Pickett spoke at a lecture at the university in Dunedin about how health and social ills are linked to economic inequality. They spoke about—it is not rocket science—how the more equal countries consistently fare better in life expectancy imprisonment infant mortality addictions social mobility obesity literacy and other measures. As would be expected their research shows that New Zealand has high levels of both economic inequality and social problems.Sadly I could not be at that lecture last night. Why was that? Because I was meeting with a group that is trying to become the voice for one of the poorest and most unequal parts of our country—that is South Dunedin. Just on the other side of town from where that lecture was being given is one of the poorest parts of our country. If you do not believe me—but I am sure you do believe me Mr Assistant Speaker—the most recent New Zealand deprivation index was released just recently which clearly showed that the area of South Dunedin is one of the poorest parts of our country. It is one of the areas that has the highest density and the lowest income. Certainly it is not the only area like that but it is the area within which I live it is where my office is situated and it is literally minutes away from where I actually live. It is an area that has growing numbers of third-tier lenders popping up and it is an area where we have more debt management services also emerging in that community.We have this legislation before the House today 11 years—11 years—since a review was first done as to what needed to be the next steps around credit management in this country. It has taken 11 years to get to this point where we have got legislation coming before the House that almost all of the House supports. We know that it is flawed but we also know that we need it and it has taken 11 years for it to get before this House.Last week I attended the announcement of a new debt management service in the South Dunedin area. It is called Christians Against Poverty. It is a service that is clearly a Christian-related service and it is offering a whole range of management services thatare already currently being provided in the city but the fact that there is a new service popping up in one of the poorest parts of the city indicates the depth of the issues related to poverty. We heard stories at this announcement last week of people who hide at night when there is a knock at the door or when the telephone rings because either it will be someone trying to sell them something or it will be one of the debt management people coming round to collect the money or to take away their possessions. This is an absolutely unacceptable situation in my city of Dunedin it is an unacceptable situation in New Zealand and we have to address it.This legislation goes some of the way towards addressing this issue. It does not address the whole issue but it goes some of the way towards doing it. It goes some of the way because it introduces the Responsible Lending Code which is an instrument that sets out detailed guidance for lenders to comply with responsible lending principles. This is actually a very important part of this legislation. It is the part of this legislation that we really do support. There was a lot of work put into it and I am sure that we have heard a lot about that tonight.The legislation also recognises unforeseen hardship which means that borrowers can apply to a creditor to change their loan term or to reduce or postpone payments on the grounds of unforeseen hardship. That is also a really important part of the legislation. Again it does not go far enough but it is an important part.I would also like to acknowledge tonight that after concerns were raised in the Commerce Committee by my colleague Clayton Cosgrove the select committee agreed to add a provision requiring credit card statements to include a prescribed warning about minimum repayments. That also seems like a simple thing but it actually is really quite important. That was added due to the hard work being done by members on this side of the House to make provisions that would actually be more effective.Labour also raised concerns at the select committee about those truck shop lenders. As a result the definition of “business premises” was expanded under clause 9 of the Credit Contracts and Consumer Finance Amendment Bill to include “a vehicle stand or stall from which goods are offered or exposed for sale or from which goods may be ordered if those goods may be sold under a credit sale.”Those measures are really important but as we have heard tonight the big gap in this legislation is the failure to include interest rate caps for third-tier lenders. If we had been able to include that in this legislation we would have made a huge difference in this country tonight to those communities throughout New Zealand that are really struggling and where there is extreme poverty. Unfortunately we could not go that far because on the Government side of the House for whatever ideological reason—or for the reason that those members were captured by some group—we could not actually manage it.I have said in this House previously when speaking on this legislation that I predict we will be back in this House within 2 years and we will be making changes to include interest rate caps. I stand here tonight giving that commitment because I know that we will do whatever we can to get this legislation changed to include a provision that has interest rate caps on it. Just as so many other countries in the world have such a provision we must have that provision in order for this legislation to be truly effective.Tonight I want to acknowledge the work done by Carol Beaumont my colleague on this bill. Without her hard work we would not have the legislation here in the state that it is in tonight. I know that the officials worked very hard. I am very pleased to commend this bill to the House.Hon CHRIS TREMAIN (National—Napier): Talofa lava and good evening. It is a pleasure to rise as the last speaker in the third reading of this credit contracts legislation. I just want to start by taking the opportunity to thank a range of people who havecontributed to this legislation no less than the Minister of Consumer Affairs Craig Foss who has been successful in bringing this legislation to this point. It has been long in its gestation. I am the first to admit that. I was one of the Ministers who shepherded it through for a period of time when I was the Minister of Consumer Affairs. So I understand deeply the issues that surround this legislation. I also want to thank Jonathan Young and the deputy chair of the Commerce Committee Clayton Cosgrove who have shepherded this legislation through the select committee and all members of the select committee for their contribution to this legislation. Most important I want to thank the House and those members of the House who are supporting this legislation tonight.Often members of the public see this House I guess through rose-tinted glasses or the view from the 6 o’clock news which often pits us at each others’ throats from across the Chamber. Actually 65 to 70 percent of the legislation that passes through this House is supported by the two main parties. If you asked the general public about that particular statistic they would probably shake their heads and say: “No surely that can’t be the case.” Well without having the exact statistics I would suggest that it is around that level. This legislation is supported across the House so we thank the Labour Party for its support on this.I also want to thank Sam Lotu-Iiga who has been a stalwart from this side. I know that the Opposition mentioned Carol Beaumont but on this side of the House Sam and Alfred members of our Polynesian community have been stalwarts in supporting this legislation. They have been at the centre of the communities that have suffered from irresponsible lending. They know first hand the impacts that it has on families and the difficulties that transpire as a result of irresponsible lending. So I just want to acknowledge those members of our caucus who have championed this legislation and got it to this point.In a nutshell this does change the legislation from start to finish. In my opinion even though it has had a long gestation period it does improve the situation and it does improve the position of those who are faced with difficult lending decisions often in the lower socio-economic demographic communities in New Zealand. I think it is a huge step forward. I acknowledge the Minister for his progress and those Ministers before him who have taken this path and I commend the legislation to the House. Thank you.The ASSISTANT SPEAKER (H V Ross Robertson): I call the honourable member Iain Lees-Galloway and ask whether this is a split call.Iain Lees-Galloway: That is a very good question. Is this a split call? It appears to be a split call.The ASSISTANT SPEAKER (H V Ross Robertson): Thank you. In that case the member will get a bell with 1 minute to go.IAIN LEES-GALLOWAY (Labour—Palmerston North): Labour is happy to support the Credit Contracts and Consumer Finance Amendment Bill and the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill. It is legislation that goes a small way towards achieving some of the improvements to credit finance law that my colleague Carol Beaumont has been calling for for some time. Although we can all pat each other on the back this evening and can be pleased with a job reasonably well done this legislation is a pale imitation of what Carol Beaumont has been calling for and what Labour thinks needs to be achieved.What we are really disappointed in is just how long it has actually taken for the Government to take this issue seriously and to progress this legislation through the House. Chris Tremain mentioned that for a period of time he was in charge of this legislation as the Minister of Consumer Affairs. I do not know how many Ministers have held the consumer affairs portfolio whilst this legislation has crawled through the House.Hon Maryan Street: Lost count.IAIN LEES-GALLOWAY: Well we have lost count actually but what we know is that this has not been a significant enough priority for this National Government because the people whom we are talking about here the people who suffer from this kind of predatory lending are the most vulnerable in society and they have never been a priority for that party on the other side of the House.Instead of supporting the Credit Reforms (Responsible Lending) Bill that Carol Beaumont brought to the House the National members voted against it. At the time National said that it was going to bring in comprehensive legislation. That was its reason for voting against Carol Beaumont’s bill—because it was going to do the same thing and it was going to do it much more comprehensively than what Labour was proposing. That was close to the beginning of the last term of Parliament. What we saw instead was a focus on a whole range of other things that have made life more difficult for the most vulnerable in society whilst this type of legislation has languished on the Order Paper for far too long.Many vulnerable consumers and many vulnerable citizens of New Zealand get trapped in cycles of debt and despair. A lot of people have been trapped in those cycles for far too long whilst this type of legislation has stayed on the backburner for the National Party. What we are seeing is that people who are on low incomes people whose real wages have gone backwards under this Government are unable now to afford what many of us take for granted as basics in life. Those things have become luxuries for a number of people and the only option available for them to enjoy those luxuries is often to go to a loan shark or to purchase from one of those awful things which I get an absolutely visceral reaction to every time I see them—Andrew Little: What Chris Finlayson?IAIN LEES-GALLOWAY: No no—the house trucks. I see them prowling around our most vulnerable communities. They are prowling around seeking out the most vulnerable consumers and offering them a pipe dream that really seems too good to be true. Frankly what they offer is too good to be true. This legislation goes the tiniest little way towards reigning in some of those predatory practices but it is not enough. When Labour is in Government we will be addressing this issue properly. We will be dealing with these issues because we do care about our vulnerable communities. We do care about vulnerable families. We care about children growing up in poverty in families that are trapped in never-ending cycles of debt. We will make it a priority unlike the party opposite.JAN LOGIE (Green): Talofa lava Mr Assistant Speaker. It is with pleasure that I rise to take a call on these the third readings ofthe Credit Contracts and Consumer Finance Amendment Bill and the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill which the Green Party is also pleased to be supporting. We recognise and share the concern at how long it has taken for this legislation to get to the House. We notice that the review of the Credit Contracts and Consumer Finance Act commenced in 2008 and that this legislation has had an incredibly long gestation. While we have been waiting and the Government has been moving ever so slowly people have been getting trapped into debt and further entrenched into poverty. As we know these delays have caused real harm. So it is a pleasure to at least have this in front of us tonight to be able to pass it and to move into that next stage of ensuring some protection for New Zealanders.I do need to speak to some of the reasons why we have to have this legislation and what drives people to need to borrow money. Those drivers are things that we believe should be addressed. It is not enough just to restrict ourselves to this kind of secondary measure of preventing the worst of the harm after people have been driven into poverty.We have a duty in this country I believe and the Green Party believes to actually eliminate poverty. We have enough wealth in this country to be able to distribute it in a way that we do not have poverty.I just really want to say that we have heard this evening some people talking about people being caught in these terrible contracts because of a lack of literacy or a lack of financial literacy. Also it is really important to actually just put on record that desperation I believe is probably the main driver for people getting into these agreements. Say you have got the opportunity for a job but it requires a car and you do not have one and you want to get yourself and your family out of poverty. If you do not have access to that cash then the only way you are going to enable that to happen—previously—is to get into this kind of arrangement. The people who have preyed on that desperation are worthy of our contempt not just our regulation.In front of the Commerce Committee some contracts from a company were shown that were from door-to-door sales. I do want to point out as well that I live in one of those communities that is targeted by these people. I have been a renter in Wellington for many years and moved around between communities where that has not been the case. I have never before moving to the community I now live in had people coming to my door to sell me things. That is now quite a normal reality in my community because it is a target community because it is a low-income community.Māngere Budgeting Services Trust in its submission to the select community gave an example from a door-to-door sales situation where a family had been sold a vacuum cleaner. It was available on TradeMe for about $400 but that family did not have that money up front. They ended up getting into this contract arrangement where they ended up paying over $5000 for a vacuum cleaner to be able to provide a clean house for themselves.It is pleasing that this legislation will go some way towards preventing that degree of exploitation but without the interest rate cap it is not going to fully protect these families who are going to continue to be preyed on by these companies. We know that it is not uncommon for the annual percentage interest rates to be over 50 percent 100 percent or even higher. People are paying well over 100 percent of the cost of the actual item. That deserves our contempt. This is one step towards changing that exploitation.Hon Peseta SAM LOTU-IIGA (Minister of Pacific Island Affairs): Talofa lava. It is a pleasure to take this the final call on these loan sharks bills the Credit Contracts and Consumer Finance Amendment Billand the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill. This is legislation that clamps down on nasty loan sharks. This is legislation that protects our most vulnerable families from these predators. This is legislation that fulfils the Government’s promise to deliver justice and equity for all New Zealanders.We have listened to the people who have said that this was a problem—the problem of loan sharks taking advantage of people who for various reasons are unable to repay loans on moneys advanced which as a result creates misery hardship and a vicious cycle of debt and poverty. The bill deals with this mainly through a responsible lending code and better disclosure of loan terms. It also complements the work that we have done in Budget 2014 where $22 million was delivered to budgeting services to help families make more informed decisions on spending. We have invested $10 million into a community finance partnership. This provides low-interest loans so that borrowing is more affordable.I have championed this issue with my comprehensive member’s bill. I am glad that this legislation takes up many of the provisions that I advanced in that bill particularly around the licensing of repossession agents and employees as well as limiting the assets that may be repossessed by those agents. This is one of my proudest days in thisParliament—a day where this Government again delivers on the issues for the people of Maungakiekie and everyday New Zealanders. I commend these bills to the House.A party vote was called for on the questionThat the Credit Contracts and Consumer Finance Amendment Bill be now read a third time.Ayes113New Zealand National 59; New Zealand Labour 34; Green Party 14; Māori Party 3; ACT New Zealand 1; Mana 1; United Future 1.Noes7New Zealand First 7.Bill read a third time.A party vote was called for on the questionThat the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill be now read a third time.Ayes113New Zealand National 59; New Zealand Labour 34; Green Party 14; Māori Party 3; ACT New Zealand 1; Mana 1; United Future 1.Noes7New Zealand First 7.Bill read a third time.