Ryall Tony: Credit Contracts and Consumer Finance Bill — In Committee 
Ryall Tony: Credit Contracts and Consumer Finance Bill — In Committee 
[Volume:611;Page:8697] 
Hon TONY RYALL (NZ National—Bay of Plenty) 
: 
 This part is very important and we will seek to take a number of calls on it because we have quite a lot of substance to cover in this part. 
We have moved some amendments in respect of the commencement date. It is clear from the submissions from business that it is concerned about the additional compliance costs associated with the bill. This bill will require financial institutions to get new contracts drawn up to put new procedures in place to train their staff and to seek additional legal advice about how they deal with the fact that people can now make a claim to the court to set aside a credit contract if there is some sort of ground to do so. There is a phrase in the bill about “some other reasonable cause” for people to do that. So there needs to be a significant amount of time to allow that work by the financial institutions to happen. The Government has almost accepted that that is a valid point because in the amendments to the bill—and the Minister may want to take a call on this—the provisions in respect of the new credit contract procedures are split out and clause 2 states that they can be brought in at a later date. 
The National Party believes that Parliament should set—I will wait until the Minister has finished conversing with the Chair—a date for that provision to come into force. We have moved an amendment stating that it should not happen until 2 years after the bill obtains the royal assent because we believe that is an appropriate time in which to allow business to get its procedures up to speed. We have talked to a lot of business people and they say 18 months would do it but we think 2 years would play it safe. We know the Government accepts that something needs to happen and we agree with immediate action on buy-back schemes. But this is an arrangement that will affect every finance company in New Zealand. We think that we should state in the law what the time line is so we have moved an amendment on that. 
We have also moved a number of other amendments to this part. The most important amendments which I want to draw to the Minister’s attention relate to clause 5. Declaring the fees associated with a credit contract is fundamental to this bill because it is premised on disclosure. The Minister wants to disclose as much as possible. Yet the bill does not disclose the fees that brokers charge for their involvement in a financial arrangement. So for example if a person borrows $5000 from Easy Loans or somewhere like that every charge that Easy Loans makes will be declarable. But if a person goes to a broker—who may want 10 percent of the charge—that charge is not included in the disclosure regime. Nowhere in the bill does a broker’s charge have to be disclosed. 
National Party members think that is a big loophole because we have been advised that most finance companies in New Zealand that deal with consumer finance will consider moving to broker arrangements rather than keeping their branch offices. That is because the broker’s fee does not have to be included—it is not part of the credit arrangement. But we say it should be. The broker is not party to the contract but the broker’s 10 percent fee is a cost of the credit and its disclosure is not included in the bill. So if what we are trying to show people is the full cost of their borrowing—and that is what we are trying to do—we should have a requirement that when a finance company knows about a broker’s fee it should be included in the classification. 
We know that finance companies are getting ready. I spoke to someone today and I was told that within 48 hours the finance companies could change the whole way in which they run their business in order to have everybody become a broker. When people line up for financial arrangements and look at the official documentation that the Minister is proposing on disclosure the broker’s fee is not included. Some brokers’ fees are taken without the finance companies being aware of it but some companies are aware of those fees. We have put up an amendment that will mean that if a financial institution is aware of a broker’s fee that should be a credit fee that is disclosed because it is part of the overall cost of borrowing the money. Some financial institutions tell me that 90 percent of their business comes through brokers; others have hardly any of that business. 
We think that if the Government seriously wants to deal with its purpose of disclosure it needs to make amendments to this bill. We are prepared to have this debate suspended for a day so that correct amendments can be drawn up. I say to the Minister that I have noticed the officials nodding the whole way through my point about that.