Curran Clare: Insolvency Amendment Bill — Second Reading 
Curran Clare: Insolvency Amendment Bill — Second Reading 
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CLARE CURRAN (Labour—Dunedin South) 
: 
 I rise to talk to the second reading of the Insolvency Amendment Bill. This bill as we have heard tonight amends the Insolvency Act 2006 to address a small number of issues that have arisen since its enactment. The bill preserves the integrity of the new no-asset procedure by preventing the discharge of fraudulent debts and the integrity of bankruptcy by restoring the official assignee’s ability to recover gifts made by a person prior to bankruptcy. The bill also amends the public register provisions to better enable creditors to make informed lending decisions by ensuring that a public record of people who have been discharged from the no-asset procedure is available for an appropriate period and by providing for permanent public records where a person has had multiple insolvency events. 
We have heard a number of speakers talk about the provisions of the Act. Essentially they are about preventing the discharge of fraudulent debts under the no-asset procedure allowing the official assignee to extend the amount of time that a person is under the no-asset procedure allowing a no-asset procedure debtor’s information to be kept on the public register for 5 years from the date of entry to the no-asset procedure and reinstating permanently a debtor’s details on the public register when the debtor subsequently enters a bankruptcy process. 
Members have heard from this side of the House that we consider this to be a good bill. Generally we support it but ultimately we have some concerns which have been noted in the select committee report that I will refer to in a minute. We also believe that it would be better to prevent more insolvency in New Zealand not just to tidy up the small number of issues that have arisen since the Insolvency Act 2006 was introduced. 
As has been noted by a couple of the previous speakers there was very good support from the Commerce Committee for this bill as it needed to go through the committee quite quickly. The committee members worked hard and quickly to get the bill through the committee. There were also a number of very good submissions and I will read to the House from one of those submissions in a minute. 
Labour has been very supportive of most of these issues but we are concerned that the length of time the debtor remains on the public insolvency register is being extended. That amendment extends the time the debtor remains on the register from 1 year to 5 years in the case of a no-asset procedure and from 7 years to indefinitely in the case of people with multiple insolvencies. 
The committee heard that lengthening the time a no-asset procedure debtor remains on the public register would dilute the important distinction between bankruptcy provisions and the no-asset procedure. The procedure was introduced to provide a one-off opportunity for financially distressed individuals to avoid the stigma of bankruptcy and to rebuild their lives. It is the view of the Privacy Commissioner—as we have also heard tonight—that a total of 3 years on the public register for a no-asset procedure debtor would be more consistent with the purposes of the procedure and more proportionate to the period for which individuals are publicly listed following bankruptcy. The majority of the select committee members however accepted the advice that it is a matter of balancing the interests of debtors who seek—understandably—to move on with their lives and the interests of creditors who require reliable information about a debtor’s history on which to make informed business decisions. 
Labour members consider that the approach proposed in the bill strikes a reasonable balance between these interests. The diversity of reasons for financial distress means that the length of time the information remains on the public registers will inevitably be more appropriate for some debtors than for others no matter what time period is chosen. But there is no international consensus on this in overseas jurisdictions and the Labour members believe that there should be further consultation on this part of the bill before we proceed to make significant changes to the public register provisions. We note that these provisions were not an essential component of this bill. They were described by the Hon Lianne Dalziel as being tacked on the end of the bill. We note that they were not an essential component and were designed to deal with fraudulent debts and as a result had a shorter report-back requirement than would normally be expected. It is the view of Labour members that there has not been sufficient consultation with key stakeholders and that view is reinforced by the concerns raised by the Office of the Privacy Commissioner. We would prefer that the public register provisions be separated from the rest of the bill. 
Just to highlight our position I will read to the House two case studies from one of the submissions that my colleague the Hon Lianne Dalziel referred to. The submission came from Citizens Advice Bureaux. The first case study was of a single professional woman with an income of $50000 who had to go on an invalids benefit because her illness which had been controlled for 10 years flared up. She was in debt to the bank and to a finance company but had insurance cover on both loans that specified the illness. The bank paid out on the insurance; the finance company did not. Within 3 months of the change in circumstances she was “tormented by them”. Her only solution was to apply for the no-asset procedure with $29000 of debt; the only creditor was the finance company. This woman had been very responsible in getting insurance to ensure that she could pay off her debts should her illness flare up again. Through no fault of her own but through the finance company’s refusal to pay out the insurance—putting her under pressure to pay—she was faced with insolvency so she entered the no-asset procedure which enabled her to get out of that situation. 
The second case study was of a young couple with three children aged under 8 years. They had credit contracts on cars a TV etc. and they rented their home. The man’s income was $36000 gross and they were receiving Working for Families payments. They were encouraged by the bank to consolidate their finances which they did with a personal loan. The woman got a part-time job to help with high rent costs high power costs and high medical costs for two of the children. They got into further debt and the bank refinanced them by putting all of their debt including that which was included in the personal loan on to a credit card. The couple subsequently separated. The woman went on to the domestic purposes benefit and received an accommodation supplement and family support. The credit card was in the male’s name only as he was the income earner. Because of the increased expenses caused by their separation such as rent living expenses and child support this man was unable to cope with the credit card payments and he was accepted into the no-asset procedure. I think the point here is that this couple’s situation was made significantly worse by the bank putting all their debt on to a credit card with a much higher interest rate than they had been charged for the personal loan. The no-asset procedure allowed him to regain his place in society. 
Labour does support this bill in its second reading but it has noted its concerns which are highlighted by these two case studies. The point is that in those cases and in many others like them that Citizens Advice Bureaux and a number of other submitters put before the Commerce Committee the people were in those circumstances really through no fault of their own and they were able to use the no-asset procedure to regain their place in society. Should they be penalised for using the no-asset procedure by being put on a register for a lot longer period of time as a result? That is why the Labour members of the committee believe that there should be more time taken and there should be more consultation before this part of the bill goes through.