Franks Stephen: Credit Contracts and Consumer Finance Bill — In Committee 
Franks Stephen: Credit Contracts and Consumer Finance Bill — In Committee 
[Volume:611;Page:8843] 
STEPHEN FRANKS (ACT NZ) 
: 
 I would like the opportunity to explain the effect of the amendment I have proposed which is that clause 109 be amended to in effect reinstate in this bill the provision of the Credit Contracts Act that allows the parties’ choice-of-law clause to prevail. I am unaware of any case where that has been exploited or been a problem. The Commerce Committee in its report imagined the possibility that people might use a choice of law clause as a way of avoiding the protection that the committee hoped to improve in this bill. 
I guess that is a theoretical possibility but the effect of the change—which having talked to people involved I do not think was contemplated by the committee—is to shut down a much more likely possibility. For example there is the possibility of Australian retailers selling into New Zealand—using a term sale or credit arrangement that would be deemed to be a consumer credit contract under our law and their law—but having to try to comply with New Zealand’s provisions. As I understand it if the Queensland code is applied a consumer in New South Wales can contract on the Queensland form and there will be a mutual recognition. I am not certain of that but that is what I understood to be the effect of the mutual recognition arrangement a few years ago. I suggest that our clause 109 would permit something similar in New Zealand because the Australian contract will say which state’s law governs—whether it is Queensland or any other state. 
Accordingly I urge that members vote for this amendment. It will permit the trans-Tasman market that is so important not only in terms of the simple freedom of people to contract and take advantage of opportunities but also to keep competitive pressure on New Zealand. It might be that at some later stage an efficient form of direct consumer credit from banks in Australia will be a constraint on pricing in the New Zealand market for credit alone. But more important in the short term I believe that reinstating in this bill the law that has caused no problems since 1981 will allow Australian retailers and providers of services on credit to continue to operate in New Zealand without the compliance costs of having to change their contract forms get legal advice and work in the unfamiliar code that our code would be for them. The consequence probably would be that if their offers were price-sensitive they simply would not bother to extend them to New Zealand. 
So I urge the adoption of my amendment. It is not a hazardous one it does not take people into strange territory and it would simply maintain the position as it currently is under the Credit Contracts Act and extend it to this bill. It is not like the normal last-minute change at the Committee stage where it is a matter of stepping into the dark; this is a change the Government could easily support. I recognise that it is hard for a Government to move very quickly on something like this clause but it should be able to decide that by initiating it the select committee was making what was probably a well-meant flight of ambition. As I understand it the officials had not proposed it and if it closes down part of the retail market and excludes people from Australia who would otherwise be making credit sales in New Zealand it is a change that might have much wider implications than anyone anticipated. 
The question was put that the following amendment in the name of Stephen Franks to clause 109 be agreed to: 
to omit from paragraph (a) all the words after the words “New Zealand”.