Coddington Deborah: Consumer Credit Bill — First Reading 
Coddington Deborah: Consumer Credit Bill — First Reading 
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DEBORAH CODDINGTON (ACT NZ) 
: 
 I rise on behalf of the ACT party to oppose this bill which we see as another knee-jerk ossification of an Act that there is no need to rewrite. There were some problems with the old Act where this bill purports to improve the situation. But as part of this Government’s cringing sycophancy to Australian regulations— 
Hon Judith Tizard 
: Ha ha! 
DEBORAH CODDINGTON 
: The Minister might laugh but as she goes through the bill she will see that it has been drafted and modelled exactly on the old Act and that there is very little in the bill that is new at all. The Government has allowed the former Acting Minister of Consumer Affairs to issue strident press releases about what this bill will do but in reality the bill just pays lip service to consumers. Once more under this Government small business will be the loser under this bill.  
The bill is supposed to address a power imbalance and that is ideologically very telling. If we look at what this Government means by a power imbalance we see it usually means that nanny State does not have enough power to push people around. The bill aims to provide the so-called vulnerable with more clout. Well who are the vulnerable here? Who are we talking about? The bill actually excludes those who borrow for business purposes. So under this bill business borrowers will be left to fend for themselves. If we look at the power imbalance can we see who has the power here? I would say that it is the consumers. The finance companies are practically begging customers to come to them; they are throwing money and incentives at people. It is a highly competitive market and this bill will just make it more regulated—and I will talk more about the heavy cost of that regulation further on in my speech.  
New Zealand is heavily indebted. Recent figures that came out over the Christmas period show that the country is far too indebted but the way to fix that is not to make credit harder to get and tighter; it is to reduce taxes overall especially for those people whom this Government would call vulnerable. If those people were allowed to keep more of their own money they would immediately be protected because they would not need to go into debt to purchase the household goods and personal items that this bill covers.  
Some 80 percent of New Zealand businesses are said to employ fewer than five people. I do not believe that the concerns and needs of those businesses are any different from those of the average consumer. Small businesses are operated by mums and dads around the country—self-employed people. Why are those people as consumers vulnerable when they borrow to buy a personal computer for their children or for themselves to use at home—probably they have to use a computer at home in order to comply with all the regulations and tax laws that this Government continues to insist on passing—but not as vulnerable when they are borrowing to buy a similar computer for their office? Nothing in this legislation indicates those people will be protected in their business activities.  
What of the small-business person’s spouse who probably does need protection? The courts have recognised in the past that those spouses need protection because they are often pushed into the position of having to incur a personal liability for a business debt. Often those people are completely innocent of the workings of that business but because of the high taxes and high compliance costs they are being forced more and more to incur a personal liability. They are not offered any protection by this bill at all. I am not concerned about large businesses with regard to this bill. They have the ability to employ lawyers who can ferret out unfair terms and they can wield commercial leverage. It is the small business in reality that is in no stronger position than the average consumer.  
I will read out parts of the Hon Lianne Dalziel’s press release about this bill in September last year. She said that lenders of last resort or loan sharks regularly breach the law yet few people take credit cases to court or to the disputes tribunal because the law is seen as too complex the process too costly or because they feel intimidated. Lianne Dalziel has supplied no evidence for the claim that lenders of last resort or loan sharks regularly breach the law. We hear about a few such cases as the member highlighted earlier in this debate. The fact that the cases are reported in the newspapers indicates to me that they are very few and far between. The last part of the member’s press release stated: “It will not apply to commercial credit and it will reduce red tape and compliance costs compared with the status quo.” That is absolutely not true. This legislation will increase red tape and compliance costs.  
By making it tougher on lenders this Government believes it is helping consumers. But in fact tightening the regulations will as I said increase compliance costs. In a survey by Business New Zealand those costs are already estimated to have gone up on average by more than $30000 a year since this Government came into power. That is at least enough to pay one person who could have been employed. That is shrinking our economic growth. If the Government makes it harder to lend money and harder to collect a loan then in such a competitive market the costs of that will inevitably be reflected in the cost to anyone who manages to get credit. If credit is too tough then the sensible cautious prudent people who are hurt will just give up and go away. The need for credit will not change. This bill will do absolutely nothing to change the need for people to borrow money; there will always be a need for people to borrow money.  
This Government assisted by United Future which seems to want to protect people from themselves is in effect telling some people that they are too stupid to borrow money that they are getting caught up with three terms when that should be two terms and that they cannot be responsible for their actions. So the Government is to make it too tough for those people to get credit by legitimate means and is to excuse them when they do not read the fine print. How can the Government say on the one hand that the legislation will reduce compliance costs and on the other hand that there will be ongoing disclosure regulations? That just does not stack up.  
The poor will still borrow money for things they cannot afford. That is their right. People have a right to make mistakes and they have a right to be wrong. The Government does not have a right to push people around and to tell them what they can and cannot do if they are not hurting anyone else. The onus should be on lenders to make sure that they have adequate security when they lend money and obviously if they do not do that the responsibility is then on them when they lose the money. The people who will be shut out from legitimate credit markets by this bill will end up going to the informal markets. I predict that we will see a growth in the lender of last resort industry—in the so-called loan shark industry. If the people who borrow from loan sharks renege on a loan then repayment will not be enforced by the multiple hoops that this legislation will put lenders through. Instead repayment will be enforced by sending the gangs or the heavies around to seize the borrower’s car or to biff a rock through a window. We will see more people in desperate situations going to even crueller loan sharks if that is the term we want to use in order to borrow from Peter to pay back Paul.  
The Minister has put forward a bill that will make no difference at all to the middle class except to push up costs. The rich in general are lenders not borrowers. They can afford to pay lawyers to make sure that they do not make mistakes. This bill will put up the price of legitimate credit put it out of the reach of the poor expand the business of the loan sharks and add to the compliance costs of and burdens on small business.