Beaumont Carol: Credit Contracts and Financial Services Law Reform Bill — In CommitteeText is incorporated into the Bound VolumeBeaumont Carol: Credit Contracts and Financial Services Law Reform Bill — In Committee[Sitting date: 13 May 2014. Volume:698;Page:17782. Text is incorporated into the Bound Volume.]CAROL BEAUMONT (Labour): As the Chair has said we are in Part 2 of the Credit Contracts and Financial Services Law Reform Bill. This is probably the smaller part of this bill. Part 1 included all of the new provisions around repossession enforcement and penalties as well as the responsible lending provisions and other changes that we support. This particular part includes provisions around the Financial Services Providers (Registration and Dispute Resolution) Act and requires that financial service providers including people providing credit under a credit contract be registered.Sitting suspended from 6 p.m. to 7.30 p.m.CAROL BEAUMONT: We are speaking now on Part 2 of the Credit Contracts and Financial Services Law Reform Bill. This part is the amendments to the Financial Service Providers (Registration and Dispute Resolution) Act. I am going to just talk specifically about the provisions in this part. I also note that in Part 1 there is a provision now around requiring registration so if a person is not registered as a financial service provider then they will be unable to collect fees or interest. That will potentially and hopefully improve the current situation where the level of registration is—and it certainly was in 2011 when people started looking into this—actually potentially pretty low particularly in the third-tier or fringe lending market that many of us are so concerned about.This part focuses really on the provisions around the reserve scheme. It removes the requirement for a Government-sponsored reserve scheme. Also and probably most significant in this part it also has clause 98 which provides for the jurisdiction of dispute resolution schemes to be increased so that they can deal with all of the matters under the legislation. Potentially if we had informed consumers that would mean that a number of the matters that are raised in the more substantive parts of this bill could be matters that are dealt with by the dispute resolution scheme which would be an improvement on the current situation. But of course like the other provisions in this bill my concern is that many consumers will still be unaware of their rights even though under responsible lending and all of the disclosure provisions they will potentially be aware of the dispute resolution scheme.We have got I think some way to go before we see fully informed consumers who will be willing and able to take up matters and there will no doubt be many many matters still left to take up because none of us I think would think that the passing of this bill by itself is actually in the short term and possibly even in the medium term going to change some of those dodgy practices that are out there. Of course when consumers have to enforce or take action themselves then it is necessary for that person to know their rights to have the confidence to take actions.I guess one of the things that would be very good to hear from the Minister of Consumer Affairs is that once this bill is passed and comes into effect—and there is a staggered process there which we will talk about later this evening—the Government will invest some money in ensuring that the legislation is understood and that there ismore information and support for consumers put in place. We all know—and I am sure many of us in this Chamber will have experienced directly—of the sorts of rip-offs and the shoddy treatment of many of our particularly vulnerable consumers by many dodgy lenders out there. So I do hope that the dispute resolution schemes are used well. It is good that they can cover the full range of issues in the legislation.Another area that is quite positive in this part is clause 100 where it is now a requirement for the dispute resolution schemes to communicate with the Commerce Commission if they are aware of a series of complaints about a particular creditor or type of creditor. I read that to mean that if there is a company called x y and z that comes to their attention on numerous occasions—or indeed if the whole category of say pay-day lenders truck shops or some of those other delightful creatures that are out there does—they can then pass on that information and in fact will be required to tell the Commerce Commission. This is where I think the rubber will really hit the road in some regards: whether the Commerce Commission itself is going to be resourced to really keep an eye on what is going on and to ensure that provisions that have been passed in this bill are in fact utilised effectively. I would like to see—and again I would like to ask the Minister about this—some sort of baseline if you like. In the very delayed passing of this legislation we should make sure that we have our baseline of how things look at the moment and that we actually do actively seek Commerce Commission monitoring of what happens out there. I think that also needs to include interest rates.The reason I say that is that the one area that this bill is particularly deficient in is the failure to cap interest rates and the failure to stop people lending money with really extremely high interest rates often in the hundreds and sometimes the thousands of percent. We know that most people try to pay back the loans that they take out including that interest. That is money they can ill afford to pay and yet that was not dealt with in this bill. So in having the dispute resolution schemes being required to inform the Commerce Commission my view is that the Commerce Commission should actually start with some baselines.To all of those who have argued including members opposite that the other provisions in this bill—the responsible lending requirements and the disclosure requirements—will start to drive down interest rates I say let us get our baseline now and let us actually measure that because that will be where we really see whether or not this is effective. It is a great disappointment that amendments that were put up to bring in interest rate caps and add them to the tool box of tools to try to control some of the things that go on in our consumer credit area particularly in that third tier have not been done. So I think that it is fair to say that the purpose clause for financial service providers inserted by clause 72 in this part new section 2A includes the requirement “to promote and facilitate the development of fair efficient and transparent financial markets.” I want to know what people think fair efficient and transparent financial markets are. I challenge anybody to stand up and say that interest rates of 50 percent 70 percent 100 percent or 200 percent are actually fair. They are not fair.I think that there is a real need and there is still an opportunity potentially for the Government to say that it wants the Commerce Commission to measure the whole playing field as we start down this track to particularly look at whether or not interest rates are affected by this legislation’s other provisions and if they are not to actually do something about it. We should have done it now; we have not. But there is still an opportunity for the Minister to say that he would expect that that is something that the Commerce Commission informed by the dispute resolution schemes could still do. Although it would not make us as happy as actually having interest rate caps in the legislation it would at least show some willingness on the part of the Government toactually deal with what we all know to be a real issue out there. So I hope the Minister will get to his feet. I hope the Minister will deal with those questions around how we are going to inform consumers and how we are going to make sure that the Commerce Commission is adequately funded to be actively out there looking at what is going on.