Statutes Amendment Bill

Members, we come now to Part 10. Part 10 is the debate on clauses 42 to 44, “Amendments to Credit Contracts and Consumer Finance Act 2003”. The question is that Part 10 stand part.

Thank you, Madam Chair. The Credit Contracts and Consumer Finance Act is an Act that’s dear to my heart, and, certainly, if Andrew Bayly was here, he would know what I’m talking about. Don’t worry, David Seymour, you can still get your lattes. Obviously, clause 43 deals with new section 9CA, which is about the inquiries, and the inquiries are affordability inquiries. The rule is that records about affordability inquiries have to be kept, and, I think, they have to be kept for seven years. That is so that if, down the track, someone defaults and they say, “Oh my goodness, they should never have lent me this money.”, then the bank can produce the analysis that they did and say, “Here you go. You can see that we went through and checked out whether it was affordable or not.” Then, it says here, that “To avoid doubt, the lender is not required to keep records about inquiries when an application is declined or withdrawn.” Obviously, if you go to a bank and you get halfway through the application process and it’s pretty clear that they’re going to turn you down or you get finance elsewhere and you say, “It’s all right. I don’t want to be your customer.”, then you can see why this would apply.

I guess, my question is: would this also apply where there’s an existing customer and the inquiries are about, for example, a variation of an existing mortgage? When people are a bit hard up, for example, they often go and ask, “Can I have a little bit more money to tide me over? I’ve just been made redundant. Can I draw another $10,000 down to get me through while I find a new job?”, or, “Can I please reduce my payments, extend my term, or go interest only?” and so on. Those variations also have affordability testing around them as well. Given that they are a customer and it’s about affordability and whether or not the bank should extend them either additional money or some variation to their credit contract terms, if the application is declined—“No, we’re not going to let you go interest only, even though you’ve just lost your job”—it would strike me that there’s a good argument that those affordability testing information and records should be kept. Whereas, if it’s a person who’s not a customer and never becomes a customer, it’s quite a different situation. Just to avoid doubt, can you confirm that this relates only to loan applications and not variation applications for existing customers?

Thank you, Madam Chair. This change that we’re making is—the reason why we’re doing it is because the current wording is inaccurate and it’s inconsistent with the requirements of section 9CA(2) of the principal Act. So we are merely giving a clarification of the status quo and there is no policy change here.

Thank you, Madam Chair. A quick question to the Associate Minister of Justice on clause 43, the new section 9CA(10). I understand that the lender’s not required to keep records about inquiries when an application is withdrawn, but for an application to be declined, surely the lender would want a record of that in case that person applies again or makes another inquiry, because then they can go “Oh, this person has been declined multiple times.” So I just want to check in terms of the rationale of including “declined” as a part of that.

Thank you, Madam Chair. The reality is that we don’t keep a lot of papers—or we’ve been required to keep a whole lot of papers—for people who have been declined. Once they’re declined, they don’t need to enter into that system, so there’s no need to keep the paperwork.

Thank you. Just moving on to another section, which is clause 44, amending section 35, which is about disclosure. This is more paperwork, of course. Disclosures are the documents that contain the key terms of the lending arrangement, which is provided to the borrower and the guarantor. In section 35(2), this section that’s being amended, it says, “after ‘specified’, insert ‘the same address for the purpose of subsection (1)(b) or’ ”, and that relates to electronic addresses. It allows financiers to provide a single set of disclosure documents when borrowers or guarantors provide the same address, and when it’s a postal address, you can see that. If you’ve got two borrowers who might be partners, to send one envelope with one name on it and another envelope with another name on it is a bit silly. The section actually talks about “information systems”, and so what they say is that where the person has specified the same information system, you can send them the same electronic set of documents. That’s actually quite problematic, because an information system—parliament.govt.nz all goes into the same information system. Were my colleague Camilla Belich to be my guarantor, and we both—

Grant McCallum: Ha-ha! Oh, wow.

Hon Dr DUNCAN WEBB: Ha-ha! Well, I would guarantee you any time—I trust you. The point being, if I was the debtor and she was the guarantor, and we both provided parliament.govt.nz addresses with our first names, that is the same information system, so in fact it should say something quite different. It should say “the same email address connecting to the same information system.” If we both agree that the appropriate email address is “camilaandduncan@xtra.co.nz”—that’s an unlikely address, but there you go—that would be OK because it’s just like our joint letterbox. But an information system is not the same as an email address or a unique email address, and that’s a common error in this kind of email service and email notification framework. There’s a real danger there. The danger, of course, is that I’m a rogue, and all the disclosure documents are sent to me, and I don’t hand them on, and my guarantor never fully understands exactly the extent of their exposure.

My question there is whether, in fact, the same address should not be clarified to be the same email address for the purposes of subsection (1)(b) and so on and so forth. It is actually quite a problem, and what people don’t understand is that there are some ratbags out there who use rules like this to deceive people—often parents and the like, in fact, and spouses—to enter into either joint arrangements or guarantee arrangements in quite dishonest circumstances. Those disclosure rules are really important.

Thank you, Madam Chair. The change in clause 44, section 35(2) is really just clarification to ensure that we have consistency across all legislation.

Part 10 agreed to.

Part 11 Amendment to Criminal Investigations (Bodily Samples) Act 1995