Seymour DavidDAVID SEYMOUR (Leader—ACT): I rise on a specific matter as we should in this Committee stage—that is Supplementary Order Paper 276 an amendment I have on the Table in my name. It is an amendment to an Act that is not otherwise amended in this Regulatory Systems (Commercial Matters) Amendment Bill—the Credit Contracts and Consumer Finance Act. If you will just indulge me I will give a little bit of background as to how this particular amendment came to be before the House. We have a number of growing companies in the peer-to-peer lending space. They include Citizens Brokerage Ltd Lending Crowd LendMe PledgeMe Southern Cross partners Harmoney—all of which seek to connect lenders and borrowers through a peer-to-peer platform online.This is quite an exciting development. Around the world companies such as RateSetter and Lending Crowd are doing billions of dollars in loans in a growing industry that is allowing borrowers to access cheaper capital and lenders to get better rates of return than they might otherwise. The interesting thing is that at this stage the industry is quite Balkanised around the world and that is because there are different financial market regulations in different parts of the world and that results in different indigenous competitors dominating their home markets. It is not so different from the scenario we had with other types of peer-to-peer trading such as we see with eBay and TradeMe. Inevitably there will be global consolidation of peer-to-peer finance. However in the short to medium term there is the opportunity for a home-grown competitor to establish itself in the New Zealand market. The example that is most famous in New Zealand is actually TradeMe.So the question that the New Zealand First members might like to ask themselves first and foremost is: do they want an indigenous home-grown New Zealand company to eventually dominate the peer-to-peer lending market in New Zealand or would they prefer that we eventually become colonised by a company that has grown offshore and does business in the New Zealand market? That is at a very high level what is at stake here for members.That gets you down to the technicalities and the difficulties that such companies are facing. One company in particular Harmoney which is probably the largest at present—although I would not be quoted on that—finds itself in an unenviable position due to provisions in the Credit Contracts and Consumer Finance Act 2003 a bill that was written long before peer-to-peer lending on the internet might have been anticipated. The simple problem is that they find themselves unable to charge any kind of credit fee to a borrower other than the reasonable costs of arranging a loan. The problem with that is that if you are in the peer-to-peer lending business your goal is to get transaction costs down to zero. In other words you cannot collect revenue for the thing that you do which is arranging or facilitating peer-to-peer loans. Because you are not engaged in lending any moneys of your own you do not have anything else on which to make money. You cannot make a return on capital because you do not have any; you are just a facilitator.So that leaves these companies such as Harmoney and PledgeMe in a position where they have no way of funding their core business. It actually is impossible for this industry to exist under current legislation. To date they have tried several workarounds. They have tried charging fees only to the lender which is not forbidden under the Credit Contracts and Consumer Finance Act but that of course leaves them in an uncompetitive position because unlike any other deposit taker you have to put all of the fees on to the lender; the borrower cannot pay any. This has left these organisations uncompetitive or less competitive than they would have been if only they had been able to spread the costs symmetrically across lenders and borrowers and recoup their revenue that way.One way of remedying the problem that has been floated by people in the sector is to return to an annual percentage rate. Returning to an annual percentage rate would mean that you would have transparency for the consumer and it would allow consumers to take an apple-to-apple comparison of the total cost of capital as well as the cost of fees in one annualised rate. However that is far too bold an initiative to introduce across the financial sector in the Committee stage of a regulatory systems bill. The purpose of a regulatory systems bill is to allow for changes to be made to our regulatory system that are small and technical in nature and that may not have been foreseen in previous times when the laws we are amending were passed by this House.Turning to my Supplementary Order Paper—and I thank you Mr Chair for your indulgence in letting me set out that background—what my Supplementary Order Paper would do is very simple: it changes the Interpretation" section of the Credit Contracts and Consumer Finance Act 2003 and in particular it adds the following words to a list of four definitions of what a credit fee can be: "fees and charges payable to a person who is licensed to provide a peer-to-peer lending service (within the meaning set out in regulation 185 of the Financial Markets Conduct Regulations 2014) for or in connection with facilitating and establishing the credit contract through the peer-to-peer lending service and who has no beneficial interest in the credit contract". In other words this is an exceedingly narrow amendment. It applies only to those organisations that are registered as peer-to-peer lenders by the Financial Markets Authority Act under the Financial Markets Conduct Act 2013 and it allows them to collect revenue on moneys only when they have no interest in the actual capital being loaned and borrowed.This is an amendment that makes an incredibly minor technical change to add something to a 2003 Act that was allowed by a 2013 Act. The Financial Markets Conduct Act allowed peer-to-peer lending. It explicitly provides for peer-to-peer lenders to be registered. However this particular amendment will make up for the fact that in 2003 peer-to-peer lending on the internet was not anticipated. This is something we can fix right now to have a better regulatory environment than the Australians who are currently about to eat our lunch in terms of basing peer-to-peer lenders there rather than here.This amendment is so narrow and so simple and so welcomed by the industry it affects. There are no good reasons that this Committee should not pass it. It is a pity that the Government has indicated to me that it will not support it—and by the Government I mean the National Party. However every other party at this point with the exception of United Future has said either that they will support it or that they are considering supporting it. There exists in this Committee the numbers to pass this amendment and ensure that we will have a better regulatory environment to build world-beating peer-to-peer lending companies and financial technology right here in New Zealand if only members around this side of the Chamber can see that this is sufficiently narrow in scope to fit into a regulatory systems bill that the benefits are suitable and that they will enable the type of industry that so many in this House always say they wish to flourish. I hope that I will be given further opportunities to answer any questions that members around the Committee may have about this particular amendment. Thank you."