Lotu-Iiga Sam: Credit Contracts and Financial Services Law Reform Bill — Second ReadingText is incorporated into the Bound VolumeLotu-Iiga Sam: Credit Contracts and Financial Services Law Reform Bill — Second Reading[Sitting date: 10 April 2014. Volume:697;Page:17169. Text is incorporated into the Bound Volume.]Hon Peseta SAM LOTU-IIGA (Minister of Pacific Island Affairs):It is a pleasure to speak on this the second reading of the Credit Contracts and Financial Services Law Reform Bill. This bill will make a difference and it will make a real difference to people up and down this country who have fallen prey to predatory moneylenders. Many of my colleagues and members opposite have referred to this. Part of this bill is about protecting the most vulnerable in our communities in what is sometimes the most desperate of times. The bill is a result of many hours of consultation. I want to thank the officials as well. I also want to thank the Ministers both the present Minister of Consumer Affairs Craig Foss and past Ministers of Consumer Affairs—Simon Bridges who is in the House and Simon Power—and many others who have brought this bill to this stage. I also just want to say that the bill has taken some of the clauses from my own member’s bill which I launched 3 years ago—I am quite happy to tell my friends opposite—especially around credit repossession agents. It is a bill that is going to make a difference to our lives and the lives of many New Zealanders.We campaigned on this bill in 2011. It is now seeing some real results and I am glad that members opposite have chosen to support it. What they have not spoken about is the responsible lending guidelines that will be part of this bill.Carol Beaumont: I did actually mention that.Hon Peseta SAM LOTU-IIGA: No they have talked a lot about interest rate caps and I will come to that soon. The guidelines are about the duty on responsible lenders to their borrowers and customers. They cannot be indifferent to the needs of those borrowers. They cannot be indifferent to the circumstances of those borrowers. They cannot be indifferent to the borrowers who have situations where the transaction may lead to distress. This bill will fundamentally change the way that lending is done in this country and it will skew the power if you like back to protecting consumers particularly those vulnerable borrowers whom I referred to. I have seen them in my electorate office and I have had family members who sadly have been fleeced by these loan sharks. This bill is only part of the overall thrust of our Government to assist those borrowers. It is about education it is about having freephone lines so that they can access help and it is about the Commerce Commission playing its role in enforcing and prosecuting these lenders. That is what it will be about in the future. Responsible lending guidelines are going to be a critical part of this bill.I just want to touch on interest rate caps which members opposite have been referring to. As I asked in a member’s bill that advocated for interest rate caps—and they still do not get it across the aisle—what happens when you cap interest rates and fees get out of control? What happens when default fees get out of control? What they should be advocating—and I do not hear it—is a cost of finance cap not an interest rate cap. If you understand the fundamental difference between fees and interest rates then you would not be advocating the latter. What I am saying to members opposite is that interest rate caps do not work. In the jurisdictions that have implemented them you still have predatory lending. It is a blunt instrument that does not work.This bill has a lot of solutions. We are glad members opposite are supporting the measures within this bill because it is going to make a real difference to New Zealanders out there that finally a Government—not the Labour Government but the National Government—is putting in place these measures.