Beaumont Carol: Financial Markets (Regulators and KiwiSaver) Bill — In Committee 
Beaumont Carol: Financial Markets (Regulators and KiwiSaver) Bill — In Committee 
[Volume:671;Page:17695] 
CAROL BEAUMONT (Labour) 
: 
 I rise to speak to Part 2 of the Financial Markets (Regulators and KiwiSaver) Bill. Part 2 is particularly about the Financial Markets Authority and its objectives and functions and the like. I note that Labour supports this provision and this bill. We all in this Chamber probably agree wholeheartedly on the purpose of the bill which is to restore investor confidence in New Zealand’s financial markets because clearly those markets have been very sorely tested indeed. It is important to note that we all have a really important interest in getting this legislation right. 
We support the bill because we believe that this new authority the Financial Markets Authority by consolidating a range of different regulatory functions in one single agency makes some sense. We also recognise that the officers of the Financial Markets Authority will be playing a significant and important role and therefore their processes must be fully transparent. They must be beyond reproach. This issue is an example of the importance of having a very robust range of public servants in our country. 
Of course the reform of financial markets was a process established by Labour and we are pleased to see the Government continuing our good work. In particular in looking at Part 2 first of all we see the objective and functions of the Financial Markets Authority. There is an objective of promoting “fair efficient and transparent financial markets.” The issue of fairness is a really important one and it is a core Labour value. It is one we think of as an underlying principle. I have to say that at the moment we live in a very unfair society and one that is getting less fair every single day. I ask why people actually need to use finance companies. Why do people have to engage with finance companies? I will particularly focus on the bottom end of this market if you like. I will focus probably not surprisingly to members opposite on what one might call the fringe end of the market—the loan sharks the finance companies on our streets the national companies that advertise on television right through to sole traders in a little one-office company on a street in Onehunga Panmure Otara or Mangere that lend people money. There certainly is a need for more robust regulation to ensure that they operate in a fair efficient and transparent manner. 
Why do people have to go to those sorts of places? Obviously it is about accessing credit. Usually people who go to that end of the market have very little choice. They are under enormous financial pressure they cannot necessarily access credit from mainstream agencies like banks so they end up using those agencies which charge very high rates of interest and lend irresponsibly. One of the very important things for the role of the Financial Markets Authority is to be very clear about looking at that part of the market. I note under clause 9 of Part 2 that the Financial Markets Authority’s functions include the collecting and disseminating of information or research about any matter relating to those markets—that is the financial markets. One of the things I say is that we need to make sure we look across the range of providers in financial markets and continue to put some light on this end of the market the fringe end of the market. 
So the first question I ask the Minister Wayne Mapp to answer is whether the Government is committed in this area. I have to say that it was very disappointing when the member’s bill I put up and worked hard on with Charles Chauvel was defeated by National and ACT voting against it despite it being a genuine attempt to deal with a part of our financial market. I suggest we look at and give the Financial Markets Authority some responsibility to look at how we might control excessive interest rates. I think that the Financial Markets Authority should have some responsibility to look at questions like how we can control excessive interest rates and what regulations there should be. Members opposite voted down provisions on setting interest rate caps for whatever reasons they had. What are their alternatives? What are they doing to deal with the facts? I think the Financial Markets Authority if we are talking about promoting fair efficient and transparent financial markets needs to look at that question. 
The second area is the issue of responsible lending. What will the Financial Markets Authority’s work be in that regard? I suggest that in looking at the point in clause 9 about “issuing warnings reports or guidelines or making comments about any matter relating to those markets or financial markets participants or other persons engaged in conduct” relating to those markets one of the very real things that need to be done is to look at what responsible lending looks like. What should the requirements be in lending money that people cannot afford to borrow? What are the rights of people who are struggling to make ends meet who are forced into a situation of having to borrow money—for example to pay for food or to purchase school uniforms for their children—at excessive interest rates in a situation where they cannot afford to pay back that money? I think we really need to look at that end of financial markets as a matter of some urgency. 
I support the work that my colleague Lianne Dalziel did in relation to putting up an amendment in relation to this part. She is really looking at how we can have a code of conduct that would apply and make sure that the operation was done in a useful and acceptable way. I think that is a very sensible idea. Members on this side of the Chamber urge members across the Chamber to seriously consider the amendment of Lianne Dalziel. 
I will touch on the issue of financial literacy. I absolutely think that financial literacy should be a core function of the Financial Markets Authority. It should have a core responsibility to educate. When I did a lot of work on the issue of loan sharks and fringe lending a lot of people said to me that we need to improve financial literacy. In fact members opposite waxed lyrical about how it is a matter of financial literacy and that one of the ways we can deal with those people at that end of the market is to make sure that consumers know what they are getting into their rights what is unacceptable and things like how interest rates and compounding interest rates work and all the rest of it. Well here is the time people to really look at sitting up there and doing something to improve the work in relation to an educational function for the Financial Markets Authority. 
It is certainly true that the Retirement Commissioner does a lot of very good work in a very principled manner on the issue of financial literacy and that work targets right across the board. The Retirement Commissioner looks at financial literacy from schools to entrance into the workplace through to senior citizens and everybody in between because obviously the needs are different at different stages of one’s life. But a lot of that work and a lot of the resources developed by the Retirement Commissioner have not rolled out as significantly as they should do due to a lack of funding. So there is a really important role for the Financial Markets Authority in ensuring that good-quality independent financial literacy work that targets people at different life stages is rolled out monitored and developed. That will make a difference to consumers’ experiences of dealing with financial markets. That is an area that we need to beef up. We need to make sure that the responsibility is much more strengthened than it currently is in Part 2 of the bill. 
In summary although we support the bill and the development of the Financial Markets Authority I think it is important that we get some commitments about ensuring that that authority looks at what is going on at the fringe end or the loan shark end or however one wants to describe it of financial markets.