Cosgrove Clayton: Credit Contracts and Financial Services Law Reform Bill — First ReadingText is incorporated into the Bound VolumeCosgrove Clayton: Credit Contracts and Financial Services Law Reform Bill — First Reading[Sitting date: 17 September 2013. Volume:693;Page:13410. Text is incorporated into the Bound Volume.]Hon CLAYTON COSGROVE (Labour): One of the responsibilities that a Government has—and I think the Minister of Commerce used the term—is to protect the citizenry with decent consumer affairs law. The Minister talked about informed borrowers and responsible lenders and the last speaker Mr Young talked about financial literacy. It is a critical factor and Mr Young is right. Many New Zealanders through lack of education educational opportunity or whatever are not as financially literate as those of us who have either been in business or been exposed to certainlearnings and who can understand many complicated things in terms of our own personal financial affairs. But I see not a lot if anything in this bill the Credit Contracts and Financial Services Law Reform Bill that deals with that key point.It is good that there is extra disclosure—that terms and conditions will have to be put on websites and that they will have to be disclosed up front which I believe is one of the provisions in this bill. But that does not link and solve the problem of the person who has to wade through a whole lot of legalese and fine print and maybe even does not understand for whatever reason—I mean no disrespect—the implications and the terms and conditions. It does not matter how much disclosure you have if they do not get that and they cannot understand that then they are liable to make amisjudgment or a bad judgment.The other thing I would say to this Government is that I would wager that there is a link. You do not have to be a rocket scientist to work out that there is probably a link between those on low incomes and what I would call desperation borrowing. Those on low incomes may take great risks a bank will not look at them and they need the money—not necessarily to go to the boozer or to play the pokies or whatever; not necessarily to use the money for irresponsible purposes. But they have a need to use the money to perhaps say look after the family or feed the kids or get the school shoes or whatever. I say to this crowd over here—and I do not hear anything in their speeches about this—that I would wager and I would say most people would agree with me that there is a link between low incomes vulnerability and desperation borrowing. These sharks go around and prey on the most vulnerable.I have got to say that it is interesting. My colleague Carol Beaumont talked about the delays. She also noted that in 2010 I think a bill was put up by herself and other colleagues to deal with some of these issues and it was voted down by the Government. There is a pattern here. There was another bill that dealt with consumer protection that I was a steward of as an Associate Minister of Justice when we were in Government. At that point it was not loan sharks; it was land sharks—similar issues. There were vulnerable people who were dealing with some—and I say “some”—in the real estate industry who preyed on them like vipers. I draw that note because in that case these folks now in Government voted against that and that was huge—as big as this issue—consumer affairs and protection legislation where vulnerable folks again were being put in invidious and awful situations and were being preyed upon and fraud was committed upon them. They are the same principles whether it be loan sharks or land sharks.But National voted against that bill and it voted against Carol Beaumont’s bill in 2010. For 5 long years—5 long years—nothing happened and for 5 long years the most vulnerable whether they be financially literate or not have been exposed to this and to bad judgments and to these sharks. And this was such a priority that it was left to languish. I have got to say that you have got to walk the talk. These folks this National Party in Opposition voted against consumer affairs legislation. They voted against it in Government through Ms Beaumont’s bill and now they come into the House and to be fair to them it is not a bad hit but it is 5 years too late.What I say to Mr Young because he is right—again I come back—is that he makes a good point about financial literacy. You can pass all the legislation you like. You canwrap everybody up in legalese transparency accountability whatever you want to do. That is fine. But if people are not equipped with the skills and they are not provided with the advice and by the way if they are scratching out an existence with their bare hands and they desperately need the dough then simply passing a piece of legislation of itself will not solve the problem. It will not solve the problem. You can wrap these sharks up in all sorts of legal requirements but if people do not know what they are getting into and people are desperate people will do desperate things. The market for this sort of skulduggery the market where these folks—the most vulnerable—are preyed upon will still exist and will be perpetuated as my colleague said.Although I say we are supporting this bill and although I say that we support consumer protection legislation I just say to the National Government that you have missed a few bits and pieces out of the jigsaw. No one over there talks about the vulnerability of folks. If folks have got decent incomes and decent livelihoods and decent job opportunities then they are liable to go to places called banks—and by the way I do not mean John Banks—and those banks are likely to look at them as a responsible borrower on a decent living income who can pay back a conventional loan at a conventional interest rate with all the protections that are enveloped around the banking system.The Minister mentioned Sir John Anderson. Sir John Anderson is a great man. Sir John Anderson started as I think a board member of the National Bank and he was a promoter of the independent Banking Ombudsman which has its problems today but I have got to say it was groundbreaking at the time it was put in place to deal with disputes around conventional banking. I can understand why Sir John Anderson in—when was it—2011 at this great summit that was called by the Government called for legislation along with others. I can understand that because Sir John Anderson understands these issues extremely well and has had a track record and a history of dealing with issues in the conventional banking world and dealing with them I say pretty well. But then we move on 24 months and nothing happens and we get to this.I say to the National Government that there are some good reforms in the bill. There are some good safeguards in the bill. What I would question—and it will be interesting at the select committee to ask submitters—is will this in practical terms work? Will this in practical terms deter the sharks? Will this in practical terms do anything to assist people to be extremely wary of those who would prey upon them showering them with money and capturing them and exposing them to horrendous interest rates? I note for instance that members talked about Australia and bringing this in line with Australia. Australia enacted similar legislation in 2009. So we are bringing it in line with Australia but we are well over a day late and well over a dollar short. We are 3 or 4 years behind Australia. The interesting thing that is missing from this bill which I understand the Minister is inviting people to comment on is the issue surrounding interest rate caps to stop people exploiting those who are most vulnerable.I say to the National Government that this is a good attempt. It is not a bad piece of legislation. There is some good stuff in here. But I think even Maurice Williamson who in his time has dealt with the odd consumer affairs issue I think would agree with me that simply passing a set of rules in and of itself does not solve the problem. Maurice Williamson and I are members of a unique alumni called the ex—or in his case current—“Ministers of Building Issues”. Both of us over our time—the place is littered with ex-Ministers—have had to deal with some of the issues around consumer affairs protection in that portfolio. We know that simply passing a set of rules in and of itself does not solve the problem.I say to this Government that if it is not prepared to lift people’s incomes and get the most desperate on to wages that are liveable so that they can feed their families thenthere will always be the problem of desperate people seeking desperate remedies and putting themselves in hock up to their eyeballs in order to get the basics for their families. It is not a truism to say that only those who act irresponsibly and spend their money at the local boozer or the pokies are the ones who are exposed to this. So I look forward to the select committee process. I look forward to hearing from the Minister and Government members about how this in practical terms will deal with the problem of the most vulnerable.