Credit Contracts and Consumer Finance Bill

The National Party in Opposition is very concerned about Part 2, because it will increase the cost of borrowing for the people least able to carry that additional cost. The burden and the risk to the value of the debt will be reflected in a higher cost for people to borrow money. The most offensive clauses are the clauses with regard to unforeseen hardship, whereby people will be able to go to the court for anything called a “reasonable cause” to have the terms of their loans set aside by the court. What does “reasonable cause” mean? Is culturally insensitive borrowing a reasonable cause?

Sitting suspended from 6 p.m. to 7.30 p.m.

After the Committee rose at 6 o’clock, my colleague Mr Connell, the MP for Rakaia, and I had a brief discussion with the Minister in the Chair, Judith Tizard, on our concerns about the absence of the coverage of brokers. The Minister’s explanation—and we spent quite some time over the dinner break looking at it—makes us think that the officials have got this wrong. The Minister told us that the meaning of a credit contract is that any payment made out of proceeds to any party has to be declared as part of that credit contract.

💬 Hon Judith Tizard: Not “any” party.

That is what you said.

💬 Hon Judith Tizard: No, I said “as defined in the Act”.

OK, but the way the Minister described it to us was that officials had told her that, under the meaning of the Credit Contracts Act, any payment made to other parties under the contract would make it a credit contract. We have gone through that provision, and it refers to interest charges, credit fees, or both, payable under the contract. Obviously, a broker’s commission is not an interest charge. The point we are making for the Minister of Commerce is that brokers’ fees are not included in what has to be declared as part of the cost of the credit.

If we are to accept the officials’ advice, a broker’s commission under this bill has to be either an interest charge or a credit fee. It is obviously not an interest charge, so I ask whether it is a credit fee. The definition of credit fees in clause 5 is “fees or charges payable by the debtor under a credit contract … or for the benefit of, the creditor in connection with a credit contract …”. The operative word in the definition is “creditor”—that the credit fee goes to the creditor. That is the issue. It is for the benefit of the creditor. A broker’s fee is not for the benefit of the creditor; therefore, a broker’s commission is not a credit fee.

The reason I am raising this—and Minister Dalziel should be aware of it—is that the Government is making a big thing of the fact that all key information will be declared so that borrowers know the facts of what their debts and obligations are. We are making the point that brokers’ commissions will not be declared. The Minister says they will, because her officials have told her. We are telling the Minister that her officials are wrong. With respect for the officials, I say that the Ministry of Consumer Affairs is not one of the senior ministries in the public service. I also say to the Minister that we have been advised by people who have used the best legal advice they can buy in order to tell us that there is a big loophole here, and that brokers’ commissions are not included in the bill.

I do not know what more the Opposition can do to tell the Government that this is a problem, because the Government is saying in its very purpose—and we support the intention of the purpose—that people should have disclosure. They should know the full cost of their borrowing. We support that 100 percent. But we say to the Government that it is not working. Brokers’ commissions are not included. We base that on the fact of the wording in the bill. A credit fee is the result of a contract and is to the benefit of the creditor. Members should read the provision. A broker is not the creditor. The broker is not part of the contract. The Government admits that, because it refers in another provision to the broker as the person who arranges the contract—not being party to the contract, but arranging the contract.

We are making the point that the purpose of the bill is to declare to the borrower where the money is going. The point is that a broker’s commission has to be declared. If a person went to, say, Wanganui Finance and borrowed $5,000, and if that transaction was organised by a broker, then the borrower might find that $500 is taken off that amount and sent to the broker, or that $500 is added on to his or her debt. That money does not go to the borrower; it goes to the broker. We say that is key information that should be included in schedule 1, and it should be declared, because it tells the person where the money is going.

The purpose of this bill is to enable a borrower to go to different lenders, get their offers, look at where the money will go and at the interest rate, and work out where the best deal is. Surely, knowing how much money will go to the broker is part of making the best deal. I can understand that the Minister has to accept her officials’ advice—and she might be asking for it in writing—but if people read the letter of the bill, clause 9(1)(c), say that they are relying on a broker’s commission being a credit fee, and then look at what a credit fee is, they will find that the two do not match up, because the definition of credit fees in clause 5 is that they are “fees or charges payable by the debtor under a credit contract ... to ... the creditor in connection with a credit contract ...”.

💬 Hon Judith Tizard: “or payable by the debtor”.

—“or payable by the debtor ... to … the creditor”—

💬 Hon Judith Tizard: “or for”.

—“or for the benefit of, the creditor”. A broker is not the creditor.

💬 Hon Judith Tizard: No, but if you’re using a broker, and you’re paying the broker directly—not through the creditor—then you know perfectly well what you’re paying, because you’re paying it directly to the broker.

But that information is not being required to be declared. That is the point.

💬 Hon Judith Tizard: But you’ve got to write the broker a cheque.

The Minister should take a call. The definition in clause 5 states that credit fees “means fees or charges by the debtor under a credit contract, or payable by the debtor to, or for the benefit of, the creditor”. The creditor is the loan company.

💬 Hon Judith Tizard: Yes.

I know what the problem is here. The Minister thinks the broker is the loan company. The broker is not the loan company; the broker is—

💬 Hon Judith Tizard: The broker is the person getting business for the loan company.

That is right, and the legislation is not requiring—

💬 Hon Harry Duynhoven: Is this member meant to be a lawyer?

💬 Hon Lianne Dalziel: He’s an accounts clerk from a bank.

That Minister should take another pill.

💬 Hon Judith Tizard: That is absolutely out of order.

Look, we are trying to help the Government on this bill! I am telling the Minister that the advisers are wrong, and that she should get another legal opinion. It is not too late. She can cackle away, but the point here is that when the Opposition makes an important point about what is wrong with this bill, the Government is not prepared to listen.

I tell members that this Government is not telling poor people the full cost of their borrowing, even though it says it is. There is no way in which brokers’ charges will be declared through this legislation, and that is the loophole. I say to the Minister that businesses will rearrange their affairs on the basis of that loophole so that they do not have to declare the cost. What will happen when that occurs? Will the Minister say: “I’ve got a letter from Consumer Affairs saying that was never going to happen.”? Well, that is not going to wash. The fact is that the responsibility of Ministers is to weigh the advice they receive and get further advice, if necessary. Just because the advice comes from one set of officials does not mean it is right. I have been in the Minister’s position and can tell members that sometimes Ministers have to go and get advice from somewhere else, when they know that a valid point has been raised and they want reassurance.

I tell the Minister that there is no coverage of brokers’ fees in this bill. A broker’s fee is not a credit fee, because a broker is not the creditor. The operative word in the definition of credit fee is “creditor”. We accept that they might be able to make a payment, but that payment does not have to be declared—and that is what we want. If the Minister had that in schedule 1, “Key information concerning consumer credit contract”—and we would like to support that schedule—then people would declare the broker’s fee, if they knew it, so they could work out where all the money has gone, and make comparisons. At the moment, that is not there.

I think the member is trying to be helpful, but I also think he is not reading the bill very carefully. I do understand that he was not on the Commerce Committee. I need to point out to the Committee that this bill does not require disclosure of any commissions. Brokerage fees are included in the definition of credit fees, and are required to be disclosed if they are payable under the credit contract and are payable to the creditor or payable for the benefit of the creditor. If those conditions do not apply, the creditor does not necessarily have a way of knowing the brokerage fee, because the debtor has gone to the broker. The debtor would find it out directly from the broker, because that would be part of the service.

💬 Hon Tony Ryall: Brokers often pay the commission because they have a letter of engagement, and if they’ve got knowledge, they should have to declare it.

I am happy to accept the officials’ advice that, obviously, if those conditions do not apply, the creditor has no way of knowing the brokerage fee. We do have a provision in the bill under which extra disclosures can be required by regulation if necessary, and I am very happy, since we do have a long run-up on this, for those extra disclosures to be required. But the point of this bill is that commissions are not included in the disclosure.

💬 Hon Tony Ryall: Well, they should be. The importance of—

Perhaps the member should have brought that up at the select committee. It is a fairly fundamental issue. I thank the Committee for its assistance.

I rise to address Part 2 of the Credit Contracts and Consumer Finance Bill. In particular, I want to speak to clause 9, “Meaning of consumer credit contract”, which states: “(1) A credit contract is a consumer credit contract if—(a) the debtor is a natural person;”. That is the provision that excludes businesses from the bill. As Simon McArley, a senior partner in KPMG Legal, wrote in the National Business Review in October last year: “Small business appears to be the loser in this review of credit legislation.” That is a really important point, because we have heard a lot of talk about compliance costs. The Minister in the chair, Judith Tizard, will say that small business was left out of the provisions in order to reduce compliance costs, but that is simply not the case. After six discussion papers, we still cannot get this legislation right.

The Government sees that there is a power imbalance between lenders and borrowers, and it wants to redress that so-called imbalance and provide the vulnerable with more clout. Of course there is a power imbalance between lenders and borrowers. Lenders should always be in the more powerful position when they lend money. Often it is not their money. It often belongs to a bank or a finance institution and is money that people have invested. Often those people are mum and dad investors who are investing money for their retirements, something that this Government is deemed to be encouraging and which other parties in the Chamber say they are encouraging. When money is lent, there is always a lender of that money. There is never a borrower without a lender. The lender should always be in the more powerful position.

I go back to my point that this bill excludes those who borrow for business purposes. They are left to fend for themselves. It is often said that New Zealand is a country of small businesses. Some 80 percent of businesses in this country employ fewer than five people. Those businesses share the same concerns and problems as the average consumer in New Zealand. What is so different about the concerns of the average consumer from small businesses? Most small-business people borrow money as a consumer in order to support their businesses. What about the small-business person’s spouse? As Simon McArley wrote: “Ignorant of the inside workings of the business, [they are] asked to incur personal liability for the business debt.” The courts have long recognised that those guaranteeing spouses required special protection, but that is not provided by this legislation. Perversely, even the limited guaranteed disclosure provided by the Credit Contracts Act will be taken away, as Simon McArley noted.

As I said earlier in the debate on this bill, the bill protects big business, as they have the resources to hire hard-nosed lawyers and engage them to ferret out unfair terms and wield commercial leverage, but I say that the reality is that mini-businesses—80 percent, the vast majority of businesses in this country—are in no stronger position than the average consumer, and this legislation leaves them to fend for themselves. It does not reduce compliance costs. It is difficult to see how leaving small business out in the cold is a consequence of making big business seek legal advice rather than providing clear and practical disclosure from their banks.

Can the Minister explain that? How does exclusion from a simplified statutory procedure for obtaining remedies, as that is meant to be, reduce costs? It does not. It increases compliance costs.

This is typical of this Government, which talks about reducing compliance costs on the one hand, and, on the other hand, works so hard behind businesses’ backs at increasing compliance costs. We see it again and again with legislation that comes before the House.

First of all, I would like to pick up on the required disclosure standards. The initial disclosure requirement is set out clearly in clause 15, but in the clauses dealing with continual disclosure there is a provision that they will be removed if there are no variations. We heard a number of submitters who wanted to see the removal of continual disclosure if there were no variations, but, to me, a change in interest rates is a variation. I think if an interest rate is changed because the Reserve Bank has changed its interest rate, it is a variation to the interest rate being charged. Therefore, people need to look very closely at that provision and treat it with caution. If that variation is not being disclosed during the process or at a later stage, when the interest rates rise, the debtor is at a disadvantage.

I would like to touch on clause 24, “Right to cancel consumer credit contract”. This clause contains the phrase “within 3 working days”. Members can imagine that 3 days is a long time. For example, a student can buy a stereo on Saturday morning, rev it up for a party on Saturday night, and take it back on Monday morning, saying: “I want to cancel the contract.” That is a rather bizarre example, but it was one that was raised at the Commerce Committee. Even more bizarre might be the other example that was given to us at the committee, of somebody taking home a bed, sleeping in it for 1 night, and then taking it back. Nobody would want to buy that bed after that. One could consider those 3 days to be an awfully long time.

I would like to raise the issue of the fees. The Minister in the chair, Judith Tizard, has stated that commissions are not counted. I ask her whether she was saying that commissions are not counted in this legislation. The Minister is not saying that. I am pleased about that. Clause 40, “Fees or charges passed on by creditor”, is about the that are charged by the agents that negotiate the contracts. There is a provision that the fees do not have to be disclosed, but the creditor cannot collect more than the amount being passed on to the agent. But if the fee is not disclosed, how does the debtor know how much is being charged and how much is being passed on? It would be very difficult for the debtor to work that out, if it is not being disclosed.

I will be disappointed if the Minister does not have another look at this. If the debtor has no knowledge of that amount, the creditor could be collecting a percentage, over and above, for the service. That would be totally against the intent of the bill. I would like to hear the Minister’s comments, because I am sure she was saying that commissions are not counted in the whole contract because they are being passed on to somebody else. If fees are not being disclosed, then we have a serious problem.

The debtor has the right to repay the full amount, but it is not clear to me whether there is a huge service fee included in that repayment. I would like to see the bill tightened up in that area, because I believe it does allow commissions on that service fee.

I move, That the question be now put.

I was not going to take a call on this part but I will do so to enlighten my friends in the National Party and the ACT party on this matter. I would have thought they would accept that it is OK for a business to make a profit, and they are becoming very confused about this fee. Let me give members some practical examples. A commission is allowed—in other words, a brokerage fee. So if someone goes to a mortgage broker and he negotiates a mortgage on behalf of a client, it is quite acceptable that he gets a fee for doing that.

I will give an example of this type of fee in the car industry. A car dealer may have an arrangement with a finance company whereby it can buy money at, say, 8 percent. Therefore, when the company sells that money to a client at a 1 percent mark-up, it is making a 1 percent profit—in other words, a brokerage fee. That amount is completely disclosed to the consumer. Consumers will see exactly what interest rate they are paying, but this legislation does not state that consumers must be informed of the profit that the seller is making on selling them the money. That also applies to many extended warranties—such as when a customer buys a fridge or a television, or even a car.

Customers will often be asked whether they would like to pay a $200 fee, or whatever, to extend the warranty on that purchase. The total cost they are paying for the warranty will be completely disclosed in the contract. What will not be disclosed—and this is where the confusion has arisen—is the proportion of that $200 that is profit for the business that is selling that money. I personally, and as a United Future member, do not see any necessity for disclosing to a purchaser the profit margin made by various segments involved in a purchase. What is important, and what this legislation does cover, is that purchasers know exactly what interest they are paying, and what interest they are paying if they have an extended warranty, and have hire purchase on that extended warranty. The amount of interest is totally disclosed. I think the confusion has arisen in terms of the profit in the brokerage fee. It is not a necessary part of what needs to be disclosed to consumers, but all the interest they are paying for the purchase is completely disclosed. I think that is very fair.

I move, That the question be now put.

The issue of brokerage is so important, I want to revisit it. I refer the Committee to Subpart 2, “Required disclosure”. Clause 15 states: “Every creditor under a consumer credit contract must ensure that disclosure of as much of the key information set out in Schedule 1 as is applicable to the contract is made to every debtor under the contract”. For a moment I want to skip back to clause 3, “Purposes”, which states: “The purposes of this Act are—(a) to protect the interests of consumers in connection with credit contracts, consumer leases, and buy-back transactions of land; and (b) to provide for the disclosure of adequate information to consumers under consumer credit contracts and consumer leases”. I ask the Minister in the chair to think about this: the purpose is defeated if brokers’ commissions are not declared, because they do not form part of the contract.

💬 Hon Judith Tizard: They do.

They do not. They are simply a fee for service. They do not form part of the contract. I have been in the industry, and I ask the Minister to have a look at this again, go back to her advisers, and say that she thinks they may have it wrong. I fear that some of the finance companies will change their constitution over night and will start becoming brokerages. That will simply defeat the purpose of what the legislation is trying to do. It will avoid disclosure, and the very people whom this bill is trying to protect will escape this clause. If we are dealing with this as a very serious matter, then I ask the Minister to rethink it. I understand from the Minister that there is an opportunity to revisit this. My passionate plea is: “Let’s do it once and let’s do it right.” There is no need to go back to this if we address this issue seriously and deal with it right now.

The other issue that concerns me—and others have mentioned it—is that of compliance costs. Having worked in the industry, I know that what has been suggested here, particularly under the hardship provisions, is going to drive the industry mad. It will not be enforceable, unless there are huge changes to forms, to audit systems, and to financial systems. Imagine the back-office systems that are in play here! Imagine trying to deal with systems—hard-drives, and floppy discs. The whole thing will need to be reworked. Back-office functions have been established and set up under a technology called credit scoring. Credit-scoring systems are very complex, yet this bill is undermining the industry, because it will not be able to price for risk—because it will not be able to evaluate the risk. How does the industry evaluate the risk that suddenly someone will say: “I’ve had a bad-hair day, and I want to get out of my contract.”? How does it deal with that? How does the industry evaluate the risk of someone saying: “He doesn’t love me any more, so I want to get out of my contract.”? We are simply not constructed as an industry to be able to deal with that type of issue. We need to think this through. Again I go back to the point I raised in an earlier call when I asked the Government to go back to the steering committee with this and rethink the issue. It is a very, very important issue.

💬 Hon Judith Tizard: The select committee went through it in some detail.

Well, if it did I can only assume the issue was not clearly understood, because it is still on the table for debate. [Interruption] There is “one rule for MP Harry Duynhoven and one for the rest of us” calling out again. There he goes again.

Why does he not do something constructive—like resign? Oh, he did, did he not? We forgot about that. [Interruption]

The CHAIRPERSON (Ann Hartley): Order!

I think the member was inviting me to take out dual citizenship. I refer now to compliance costs, and I know the member is upset because it is a very sensitive issue for him. He does not really understand it. He has been a ticket clipper all his life. I can tell the Committee that this is an issue—[Interruption] I raise a point of order, Madam Chairperson. I understand that a running commentary is outside the Standing Orders.

The CHAIRPERSON (Ann Hartley): Yes, it is. I have called for order.

I am simply trying to say, in a constructive way, that the issue of compliance is something that has not been thought through and clearly understood. The issues around the operations of back-office systems, the complex computer systems, and credit-scoring systems that underscore that are important.

I move, That the question be now put.

I want to raise a matter under Part 2 that is completely different from what we have been debating. Members have been talking about required disclosure and disclosure standards. It is clear that the whole point of having disclosure standards is to protect consumers who are entering into credit contracts. Clause 29(1) states: “Disclosure must—(a) be in writing in a disclosure statement; and (b) contain the information required by this Act;”. Further, subclause (d) states: “not be likely to deceive or mislead a reasonable person …”. How far do we go in trying to ensure that every person entering into a credit contract is a reasonable person? I have already talked about the concerns expressed by some submitters about trying to protect people, to the nth degree, from entering into contracts they do not understand. Who defines a reasonable person? Can they then go—

💬 Hon Judith Tizard: The court.

The court. Well, I want to follow up on the provision about not deceiving or misleading a reasonable person. I refer members to the comments I made earlier about the Kingdom Resources organisation, which recently offered a course “Beat the Budget Blues”, attended by a lady who simply did not believe what she was being told about hire purchase agreements. So she went back and checked her agreements. To her amazement she found that the information given at that course was correct. I put it to the Committee that she was a reasonable person, but did not understand the credit contract, even though she believed that she did.

Other people out there will believe they are reasonable people and that they understand these things, but, under the definition of “reasonable person”, and if they feel they have been misled, they can seek a remedy under the oppressive conduct provisions. The Committee will be debating those provisions later on in other parts of the bill. This is a concern, and it should not be a subjective test about who is a reasonable person.

💬 Hon Lianne Dalziel: It’s an objective test.

No, it is not. There is no definition covering it. It becomes subjective. Everyone could be deemed a reasonable person, and could interpret whether he or she has been misled and then call in the oppressive conduct provisions. We will discuss that issue later, and perhaps the Minister in the chair, the Hon Lianne Dalziel, will take a call and expand on that a little bit more. We would certainly appreciate that from the Minister.

💬 Hon Lianne Dalziel: I’ve already taken a call.

We have not seen the Minister take a call on this provision.

💬 Hon Tony Ryall: Yes, she did. She moved a closure.

Is that the best she can do? Perhaps she could give us the benefit of her legal expertise and explain the meaning of “reasonable person”—given the absence of a definition in the bill.

I would like to talk about compliance costs. They are jolly substantial, especially if—

Government member: They’re not.

The member says they are not, but that is because the Government does not understand the costs associated with business. Many of the submitters outlined the figures involved. For example, the big banks said that costs would run into millions of dollars. They will have to provide new forms, modify their procedures, make systems changes, and train staff. They will probably have to give some sort of outline and assistance to people who seek their services. This bill will not stop loan sharks. They will still be out there. That problem has been referred to in earlier speeches.

If members look at the business compliance cost statement in the explanatory note of the Consumer Credit Bill, as introduced, they will be able to answer: “Yes”, “Yes”, “Yes” to most of the questions raised about where the costs will be incurred. They will see, under documentation requirements, that there will be compliance costs and they will vary, depending on the lender. I put it to the Committee that all lenders who have those forms will have to modify their procedures, and, as we all know, information technology is pretty expensive—certainly for the bigger providers.

Staff training will be another cost. There will be an increased need in the short term, but staff movements will incur ongoing costs in training and retraining. It will not be just a short-term cost, as predicted in the business compliance cost statement. The cost statement mentions required calculations for finance rate and total cost of credit. It is estimated those costs will decrease, but I put it to the Committee they will not.

I move, That the question be now put.

I am driven to comment on this legislation, purely for the sake of placing a mark in the ground. Some law changes are made out of a strong sense of commitment and ideology that, in hindsight, look absolutely stupid. Some are made out of simple stupidity. There has to be something absolutely stupid to be following an Australian precedent into Australian-style cost levels, into generating Australian-style levels of income for lawyers. They come from something that is supposed to be to the advantage of consumers; a subpart called “Changes on grounds of unforeseen hardship”.

In this Credit Contracts and Consumer Finance Bill, this flagship reform that some utterly stupid Ministers are putting through, we have provisions that state that if a debtor experiences the end of a relationship, or an illness or injury, or loss of employment, then he or she may apply to the lender to get a change in the terms of the deal. Of course, they can. However, this Government thinks there are free lunches everywhere, and Father Christmas exists, so do fairies at the bottom of the garden. The Government thinks that a lender can be exposed to the risk of having a scumbag debtor fend off enforcement and fend off the collection of the debt by going along to the court and saying: “I’m in hardship. My marriage has broken up. I shouldn’t have to pay this back.”

Of course, people can do that, but someone bears the cost. Every debtor bears the cost. It is built into the interest rate, into the charges, into the documentation fee, and into the credit assessment. What does it do, for a start, to people who are in a relationship? It makes them slightly less desirable than those who are not. What does it do to the provisions in the agreement about meeting costs on enforcement? It means there is more enforcement cost to be spread across all those decent folk who want to borrow money and who are not in the category that causes this risk.

We are looking at a bill that deals with a non-problem. Have any of us been besieged by legitimate concerns about the existing Credit Contracts Act?

Hon member: Not one!

Not one! I spent 22 years as a commercial lawyer, and I think I would have seen one or two in all that time where I thought the creditor had been a bit harsh. Indeed, they leaned over backwards. After this, they will stand on their rights, and of course they will do all the back-covering steps. They will send all the letters, at the expense of borrowers. There is nothing free. There will be a whole category of borrowers who simply cannot get finance because they will be priced out or they will look too risky. Why would people lend to someone who is sick, if later on that person could say that because of the illness he or she does not have to repay on time, or that the interest rate is too high? Why would they lend to someone in a wheelchair, if that person could then say that injury is a problem? Why would they lend to someone who is in a threatened level of employment, if they had a choice, knowing that the person could come along and hold up the enforcement of the debt?

This provision is typical ignorant socialism. This is the kind of stupidity that a giggling Minister of Commerce—also a Minister of Immigration who cannot run that portfolio—shows when she is trashing a perfectly sound Credit Contracts Act. The Minister is giggling because she has no answer. She will not take a call, she will not speak, and she will not answer the arguments. She has no evidence that this bill will do a thing. Why did every creditor—the good ones and the bad ones—oppose this bill? This Minister will go down in history as one of the most stupid Ministers, not just doctrinaire, not just ideological, but simply stupid.

This stupid Government has caused enough grief for ideological reasons. It has the Resource Management Act. It has the Employment Relations Act. It has enough anti-business, yet it comes in with this bill and starts stuffing up the loan market for consumers. It was said, during the introduction of the bill, that there has been a huge expansion in access to credit. Does that say there is a problem? Does that say the market needs this intervention?

I move, That the question be now put.

I want to pick up a very important point that my colleagues Sandra Goudie, Brian Connell, and Tony Ryall have brought to the Committee’s attention, and that relates to clause 9. It is in clause 9 that we look at the meaning of “consumer credit contract”. The issue was very evident in the speeches of Tony Ryall, who has an understanding of financial matters, and of Brian Connell who, in his work in the finance sector, has for many years worked with credit contracts, variations of contracts, and other contracts of various sorts.

I was not happy with the Minister’s response, and I ask that she take a call on this very important part about the broker’s commission. The point I make is that when borrowing money, the borrower wants to know what it actually costs. When a person is borrowing X dollars, there could be insurance charges associated with that, and establishment costs to set the loan up. Those costs are acceptable and are happening all the time, but if a borrower is dealing with a broker, there is also a broker’s charge associated with that. That is what we are talking about—the total cost.

In the days when I worked for the Rural Bank, we had to look very closely at the contracts. At that stage, back in the 1980s, we were lending concessional money because the bank was a Government-owned agency at that time, but the bank moved into a commercial environment when the Rural Bank was sold, and the National Bank took it over. I was there when we moved from concessional interest rates through to market rates. Interest rates shot up very quickly, and there had to be disclosure. That is the point I am making, and the Minister has an opportunity to comment. If I am in a position where a broker is involved, why is the broker’s commission not included in the meaning of “consumer credit contract”? Why has it been discarded?

This bill is about protecting people who want to borrow, and that is fair enough. The question earlier on—and Stephen Franks made this point—asked what was new about this bill that was not in the current Act? Because if one has been dealing with credit contracts over a number of years, one would realise that the bill we are dealing with here does not substantially change things. In fact, if we look at some of the submissions that came in, it does not substantially change what was wrong with the Act under which we now work. So the question is: what is wrong with the existing Act?

💬 Sandra Goudie: There is no evidence that it is wrong.

There is no evidence in the submissions, and I have read through them. What is actually wrong with the current Act?

The point my colleague Sandra Goudie made, which is very important when dealing with business, was about the huge compliance costs that all businesses are having to deal with—“regulatory creep”, I call it. Businesses will have to face huge compliance costs if we implement this bill in its current form. We are a party that is opposed to huge compliance costs and to regulatory creep. We want to limit those costs, and that is why we will be voting against Part 2 of this bill. We do not agree with it. The concept of the bill overall is fine, but Part 2 misses the point that we think is so important for people who are borrowing—the creditors, the debtors, lessees, lessors, and people involved in the finance industry.

I will bring members back to the point, and read out Clause 9(1)(c), because it is significant. It states: “A credit contract is a consumer credit contract if—(c) interest charges, credit fees, or both are or may be payable under the contract …”. It does not include brokerage, and that is the point I keep making. If we are talking about the one-stop shop, and about the total costs that will be involved for the borrower—and that is what I am interested in: what will it cost me to get into this contract?—then the clause should include the brokerage fees. Speakers on this side have clearly articulated that if we want to protect the interests of the borrower, then we need full disclosure. That is why we are voting against Part 2.

I move, That the question be now put.