Dalziel Lianne: Insolvency Amendment Bill — First Reading 
Dalziel Lianne: Insolvency Amendment Bill — First Reading 
[Volume:652;Page:1955] 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I am happy to follow the Minister in speaking on the Insolvency Amendment Bill and to confirm to him that the Opposition will be supporting the referral of this bill to a select committee. But I cannot give an assurance beyond the referral to the select committee. This is not because of the first three items that the Minister identified in respect of this bill but because of the fourth. I will run through them. I downloaded the Cabinet paper off the Internet before I came to the House just to make sure that I had got it right in terms of the nature of these amendments in the bill. 
The first amendment is the provisions that were identified in the Cabinet paper as preventing the discharge of fraudulent debts under the no-asset procedure and we are very happy to see that addressed in the bill. The second amendment is to allow the official assignee to extend the no-asset procedure period when an objection is received just prior to a debtor’s expected date of discharge from the no-asset procedure. There is no problem with that. It is a very good strengthening of the existing law. The third amendment protects the interests of creditors of bankrupts by strengthening the ability of the official assignee to void gifts made by a debtor in the 5 years leading up to his or her bankruptcy. Again I am very happy with this. 
It is a strengthening of the provisions in the legislation. These all obviously have come from the Ministry of Economic Development. The ministry obviously has provided advice to the Minister stating that these matters need to be addressed. I can see that the first provision needs to be addressed as a matter of urgency which is why the Government has taken the position that it will apply from the day that the bill was introduced to the House which was as I understand it on Monday or Tuesday of this week. In that way it will stop fraudulent debts from being discharged from this day forward. 
But what I am concerned about though is the fourth provision. It is described in the Cabinet paper in a positive way without highlighting the negative potential of it and that is what disturbs me. The fourth provision is to provide improved access to the public register on the no-asset procedure and bankruptcy in order to enable informed lending decisions to be made. That provision cannot have been generated off the concern that the ministry had in relation to the implementation of the legislation because this issue was debated at some length when we introduced the Insolvency Act. The no-asset procedure was probably the most debated part of the legislation being a very new procedure. The issue was whether we should have a strong separation between the bankruptcy provisions and the no-asset procedure to make it very clear that the no-asset procedure was a one-off once-in-a-lifetime opportunity for somebody who had otherwise acted in good faith had come across a very poor set of circumstances and hardship in his or her life and was able to get a fresh start. That fresh start included the ability to carry on a business and the ability to travel overseas which are prohibited under the bankruptcy provisions. 
The third amendment was not to have this on the record as it were for any longer than the no-asset procedure. The public register’s relation to bankruptcy has been 7 years for many years now and that was not adjusted when we looked at the Insolvency Law Reform Bill. So the 7 years remains for bankruptcy. But the suggestion that we now increase the time for having the no-asset procedure on the record not for the 1 year that the no-asset procedure is in place but for 5 years creates a real concern. I am deeply concerned about the way that it has been publicly released by the Government. It is almost as if this has been added as an extra measure to a technical bill that Labour would have supported completely—100 percent. For the first three items alone we would have said there was no problem. We could whisk the legislation through the committee—it is a very good committee—and get the legislation back to the House well within the time frame as proposed by the Minister. But this inclusion of another item that is clearly coming from the credit agencies not from the Ministry of Economic Development worries me. Nowhere in the entire Cabinet paper could I find out where anyone in the credit industry had been consulted yet the suggestion has obviously come from there. The fact that the credit industry had been consulted was not mentioned. 
The other people who had not been consulted were those in the budget advisory services. I have seen Raewyn Fox’s comments in the media in response to this bill saying there are concerns about people coming into budget advice services and asking for assistance to fill out the forms for a no-asset procedure. That is not what budget advisers do. Budget advisers do not help people just to fill out forms for a no-asset procedure. On the ground they have been using the fact that there is a no-asset procedure to approach the creditors of people in dire straits and working through arrangements that are outside the summary instalment order regime and outside the no-asset procedure so some commitment is made to repaying what is owed under the circumstances. I think the no-asset procedure has ended up being quite a useful tool. It is one that did not exist before in terms of providing a realistic bargaining tool with a number of creditors in order for them to accept less than the full 100 percent return. 
When we change the provisions around the no-asset procedure it will change the number of people who want to contemplate that as an option. Will that change then weaken its ability to be used by budget advisers as a negotiating tool? I think it could and that is the sort of thing I want to spend some time on at the select committee. Quite frankly if we do not get the opportunity to seriously consider this issue then I think the bill itself will become an abuse of process. I would much rather carve out this provision if we are not able to deal with it within the time frame. As a responsible chair I will do what I can but I also want very much to have on the record our concern about the way this has been included in the bill which will mean that we have to take some serious consideration over it. In many respects it is a bit unfortunate because if this provision had not been included in the bill we could have made an absolute assurance about getting the bill back to the House in the time frame concerned. 
The regulatory impact analysis is perfectly legitimate under the circumstances because secrecy had to be afforded to one of the provisions in the legislation and that is preventing the discharge of fraudulent debts under the no-asset procedure. I quote from the Cabinet paper where it says: “Any publicity at this stage would unnecessarily draw attention to the loophole that allows fraudulent debts to be cancelled under the NAP process which has the possibility to reward individuals for their dishonesty. This may encourage such dishonesty therefore I am proposing that no publicity be given to this matter until a bill is introduced to Parliament.” That is perfectly appropriate for that provision but not for the fourth one. The fourth one needs to be properly consulted. The Privacy Commissioner has raised serious concerns about the inclusion of this provision in the bill. I think we are going to have to talk to the commissioner and get a very clear steer on a matter that I know she is currently undertaking a review of. I have a real concern about that fourth element being included but I am confident that we are able to address all of the other matters that are contained within the bill. 
I will close by expressing my disappointment at the inclusion of that element which clearly was not driven by a Ministry of Economic Development expectation but by the interests of those in the credit lending business.