Hague Kevin: Insolvency Amendment Bill — Second Reading 
Hague Kevin: Insolvency Amendment Bill — Second Reading 
[Volume:655;Page:5001] 
KEVIN HAGUE (Green) 
: 
 I rise to again conditionally support the Insolvency Amendment Bill and to make a short contribution in this second reading. In 2007 the Reserve Bank undertook a study that indicated “that New Zealanders are aware of some of the financial issues that they face but they are ill-equipped to make financial decisions. They do not effectively understand basic financial terms or instruments or more worryingly the concept of risk and return. Furthermore they do not use existing financial disclosures or credit ratings in a manner that would enhance their understanding of financial exposures.” For example the results of the survey showed that more than 50 percent of New Zealanders did not understand compound interest and that 80 percent either were not aware of mandatory disclosures or did not use them for financial decision-making. The point I make is that the level of financial literacy amongst New Zealanders is appallingly low. The concept of financial education in our schools is quite a new one and the no-asset procedure is one that meets the needs of a very large number of people. 
The Green Party is very pleased that the Government is closing some of the loopholes in the Insolvency Act 2006—the existing law—but the provision to extend the term for which someone sits on the insolvency register does not fit the description of closing a loophole; it is a new kind of provision as Lianne Dalziel has drawn the House’s attention to. The Green Party remains opposed to it partly because one of the principal effects of that extension will be to make this group of vulnerable New Zealanders more prey to the predatory tactics of some finance companies. 
The point of the no-asset procedure is to provide a clean slate-type of approach to people who as Katrina Shanks pointed out due to unfortunate circumstances such as broken relationships or ill health find themselves in debt that they cannot pay. It is not a provision that exists for serious or business fraudsters. Often the people to whom these provisions apply are young people whose maturity in decision-making around financial matters is still developing. Nearly half the people who were admitted to the no-asset procedure were beneficiaries and I compare that proportion with the 48 percent that Katrina Shanks has drawn the House’s attention to who were living beyond their means. Perhaps that says something about the level of benefits. The mean indebtedness of people who were admitted to the register and qualified for the no-asset procedure was $10600 which is not a lot of money. 
The evidence is that the law as it stands is working well and I am pleased that both Lianne Dalziel and Charles Chauvel have drawn the House’s attention to the view of the Privacy Commissioner that the 3-year term on the register is more in accordance with the intent of the law than the 5-year term that is proposed in this bill. The extension to 5 years would have a number of effects. Firstly it would have a disproportionate effect on a young person. As I said many of those who are admitted to the no-asset procedure are indeed young people. The consequence of the extended term on the register will be disproportionate for that group of people. Secondly and this is a point I made in the first reading debate on this bill the extension to 5 years will remove the incentive for debtors to deal with their debts before they reach $40000. In other words the extension of the term on the register may exacerbate the problem faced by those who are extending credit rather than relieving that problem. Perhaps most important from the Green Party’s point of view the extended time on the register will serve to reduce the access of people who have been admitted via the no-asset procedure to reliable and genuine sources of credit. That will mean that if they require credit or capital of any sort they will be desperate and may well be forced into the hands of loan sharks and finance companies which this House this evening has been debating the tactics of. I do not think that anyone is well served by that consequence of the bill. 
The Green Party supports the majority of the provisions of the bill. It seems to me that there is pretty much consensus in the House on the measures in the bill that are genuinely intended to close off loopholes but we oppose the extension to 5 years of the term on the insolvency register. We will vote for the second reading of this bill but if that problem with the bill is not addressed in the Committee stage then we will not support it at the third reading.