Clendon David: Credit Reforms (Responsible Lending) Bill — First Reading 
Text is incorporated into the Bound Volume 
Clendon David: Credit Reforms (Responsible Lending) Bill — First Reading 
[Sitting date: 21 July 2010. Volume:665;Page:12585. Text is incorporated into the Bound Volume.] 
DAVID CLENDON (Green) 
: 
 I am pleased to stand on behalf of the Greens to support this Credit Reforms (Responsible Lending) Bill tonight. It is a bill intending to require lenders to have reasonable expectations that money lent will be paid back—that the borrowers have the capacity to pay it back—and to prevent excessive rates of interest being charged on those loans. 
The bill will require lenders to seriously consider the ability of prospective borrowers to repay a loan. That is something one would wish; that in an even somewhat imperfect world people who lend money would do as a matter of course. But sadly we know that that is not the case. Even lenders who are operating more or less within the law are able to charge their customers excessively and to put people into extraordinarily poor financial positions. 
Credit and the access to debt seem to be something of a national disease. Even quite legitimate lenders in recent times have been guilty of encouraging and actively selling debt. I recently spoke to a banker a fellow who was the first of three generations of bankers in his family. The grandfather was the first of the generations. In his day to borrow money was a serious matter and banks required significant references credentials and a very close examination before they would lend money. His son operated in a somewhat looser environment. The grandfather was horrified to discover that his granddaughter who was also a banker was being actively encouraged to sell debt and was being rewarded for selling debt to people. She was selling credit cards and selling loans and that is a reflection of our culture. Of course the loan sharks that this bill endeavours to drive out or at least to put some controls on are the extreme reflection of that culture. 
Why do borrowers engage with these clearly unscrupulous and cheating lenders? To some extent it is to do with naivety a lack of financial literacy or sometimes just sheer desperation. People need money to repair a car or to make a car warrantable to enable people to get to work. People need to pay bills and to repair appliances so that a family might continue to function. There are cultural demands for travel or to meet other family obligations such as weddings funerals or whatever else it might be. There is a temptation to purchase toys be they cars large televisions or expensive telephones. That is driven by the relentless consumer advertising that we are all constantly exposed to. Often the least well off the most vulnerable are the most vulnerable to that consumer advertising. 
A very wide and diverse range of organisations has spoken out in support of the proposal in this bill including the New Zealand Federation of Family Budgeting Services which said that over 30000 new client families walk through its doors around the country every year many of them hopelessly indebted to loan sharks. Loan sharks are in the business of making money off those vulnerable people those vulnerable communities and they deliberately target those groups by their store locations and presentations. 
I currently live in Avondale which is a low-decile suburb if we could describe it that way. Just off the top of my head I can think of four or five outlets in the main street of Avondale where one can walk in and just about be guaranteed to walk out with often quite substantial sums of money with very little reference to one’s ability to repay that money. FinSec the bank workers union came out in support of this legislation and as has been pointed out noted that the Prime Minister criticised charging a rate of interest on credit cards of 22 percent which hardly compares with the rates that are being charged by the worst of these loan sharks. 
The point is already made that we are actually out of step and it is made again by FinSec that we are seriously out of step internationally with other developed countries. Restrictions apply in Japan in many countries in Europe in South America and even in Africa. Caps have been implemented or proposed in most of Australia Canada the USA and the UK but we seem to struggle with the very notion of applying these limits and controls on unscrupulous lenders. 
I will quote from a speech made on a similar topic: “Firstly and probably most significantly the Green Party believes there should be a named and fixed limit on interest rates charges. Many low-income people in south Auckland and elsewhere are defaulting on loans that have exceptionally high finance rates … Those loans are being made by moneylenders who are very well aware that it would be just about impossible for a borrower to meet the repayments.” That quote was from a speech made in 2003 in this House by Sue Bradford at a time when what was then called the Consumer Credit Bill had its first reading debate in this House. Seven years ago the Greens and Sue Bradford were advocating for exactly the sort of mechanism that we are now again endeavouring to bring back to this House.