Connell Brian: Credit Contracts and Consumer Finance Bill — In Committee 
Connell Brian: Credit Contracts and Consumer Finance Bill — In Committee 
[Volume:611;Page:8727] 
BRIAN CONNELL (NZ National—Rakaia) 
: 
 I would like to start by making a comment on the amendment that Mr Adams has put forward. One year hardly seems enough and I question why we would bother. We know that this Government is soft on crime. I do not think a sentence of 1 year which would mean that people would be out in 2 months—if they even get to jail; they would probably be on home detention along with Mr McDonald—would keep those types of people awake at nights. If Mr Adams is to do it he should do it seriously and I suggest he talks to his colleague Mr Alexander about what a real sentence means. 
The issues I want to raise are contained in clause 59 “Compliance programmes”. In particular there is a misconception that the compliance costs will be something that organisations carry easily. Most finance companies that I have experience of whether they are big or small businesses have structured themselves to get economies of scale. Most often they have combined their resources and established back-office functions. Those functions are essentially all those functions that used to be done in the branches or at the back of the shop. They have now been put into a centralised site and are highly automated. I am concerned if we go down this track that there will be a huge amount of reprinting of forms that new systems will have to be created and that once those systems and forms are in place there will have to be training of staff. Because most of those programmes are automated there is no human input. Once people have restructured and have had to print new forms and create new systems there will have to be training of staff. The compliance costs associated with employing more staff and training them are extremely clear. Then there will have to be a new audit process to satisfy consumers and those who administer the law that those things are in order. 
Establishing back-office functions is not something that is done easily. In most cases they are multimillion dollar sites. Most of the major banks in this country operate out of one site and work collectively. It is not just one site per bank but one site for many banks. 
Hon Chris Carter 
: He should get a life. 
BRIAN CONNELL 
: It is an issue that Mr Carter does not understand and will never understand but it is a real issue for those organisations. Of course what will happen to consumers is that the cost of this compliance will be priced into the loan. The compliance costs will be passed on to consumers and I fear that the very people we are trying to protect will be priced out of the marketplace. 
The other issue that concerns me is the hardship provisions. Of course the compliance costs that run with those are enormous. Banks price for risk but where there is uncertainty—and this will lead to uncertainty because security will be eroded—price will be factored into the loan and the consumer will be the worse for wear. Some people will not get finance. Banks finance companies and consumer credit companies will simply become risk adverse and they will take the easy option of telling consumers that they are not worth banking not worth lending to; they will tell consumers that they cannot take the risk and will say no. That is exactly what will happen. 
The next thing I want to raise is legal recourse. The bill calls for jurisdiction of the district court and of the High Court. That is all very commendable but the reality is that it is good in theory not in practice. The very people who will be seeking redress—the very people who will be ripped off by the loan sharks that we are seeking to deal to—will be the people who (a) are too frightened to go near a lawyer (b) do not have the money in the first place and (c) do not have the aspiration.