Credit Reforms (Responsible Lending) Bill

CAROL BEAUMONT (Labour) Link to this

I move, That the Credit Reforms (Responsible Lending) Bill be now read a first time. I seek the support of my parliamentary colleagues for people who are struggling, who are vulnerable, and whose families are being hurt by the actions of predatory and irresponsible lenders. These lenders, commonly referred to as loan sharks, are prospering in these hard economic times. I feel a great weight of responsibility raising an issue that has such serious implications throughout New Zealand, but particularly for low-income, Pacific, and Māori families. I have spoken to hundreds of people about this issue. There is widespread support for my bill and for the broader Stop Loan Sharks campaign. The community wants action, and it wants for this Parliament to act cooperatively to stop loan sharks.

I need to acknowledge many people. I start with Charles Chauvel, who has campaigned passionately on this issue. Charles was the original sponsor of the bill and—along with Mr Andrew Shann, who is in the gallery—has worked tirelessly on the need for regulation of loan sharks. Many members will have received detailed correspondence from Mr Shann, who is an expert in the area. I thank Andrew. I acknowledge the people who work so hard in the community to deal with the consequences of loan shark behaviour: the budget advisers. These people are true heroes. They have my utmost respect for the help they provide to people in extremely difficult circumstances. Despite being under-resourced, they often manage to do the seemingly impossible. The many budget advisers I spoke to told me that the majority of the people they see are hooked into high-interest loans. In some areas, it is 100 percent of the people they see. Community law centres, citizens advice bureaux, churches, unions, women’s organisations, Māori organisations, and Pacific organisations also assist those who suffer at the hands of unscrupulous loan sharks. I thank them all for their efforts on behalf of some of our most vulnerable people.

The purpose of the bill is to amend provisions in the Credit Contracts and Consumer Finance Act 2003 and the Credit (Repossession) Act 1997 to require lenders to act responsibly when lending and to curb excessive rates of interest. At the appropriate time I intend to move that this bill be referred to the Commerce Committee. Part 1 of the bill amends section 39 of the Credit Contracts and Consumer Finance Act to allow for a maximum rate of interest to be set by regulation. Such delegated legislation avoids the need to make amendments every time there is a change in the rate of interest. An amendment to section 118 extends the definition of “oppressive” conduct to include a responsible lending obligation. It would effectively impose an express duty on the creditor to have done at least some analysis of the debtor’s income, expenditure, and commitments in order to form a reasonable belief that the debtor can afford the lending. Part 2 amends the Credit Repossession Act 1997 by limiting the amount that the creditor can recover from a debtor. This is particularly so when it should have been obvious at the outset that the debtor would not have the capacity to meet the payments. Part 3 amends the Secondhand Dealers and Pawnbrokers Act 2004.

There is no limit in New Zealand on what interest rates companies can charge. They could charge 55 percent, 1,000 percent, or 2,000 percent. In contrast, interest rate restrictions now apply in Japan, many countries in Africa and Europe, and almost all of South America. Four Australian states have implemented pay-day lender caps at 48 percent, and nine of Canada’s 10 provinces have implemented, or are in the process of implementing, such restrictions. President Obama has undertaken to cap rates at 36 percent right across the US. In the UK the incoming Conservative - Liberal Democrat coalition Government has already undertaken to implement interest restrictions on store cards, and Britain is one of the last countries in the European Union to take such measures. Responsible lending provisions are also used in other countries—for example, the UK, Australia, and South Africa. It has been successfully argued that a responsible lending obligation already exists by virtue of sections 28 and 29 of the Consumers Guarantees Act, which guarantees consumers of lending services that a creditor will use requisite skill and care and that their services are fit for purpose. However, for those in the community who have English as a second language or who have communication difficulties, having to argue the above in legal proceedings is not very accessible.

In speaking to people about this bill and the broader loan shark campaign, I have been deeply moved by what I have heard. Stories abound of people hurt by irresponsible lending and excessive interest rates. I am sure that many other members have heard of this harm. I will mention two such stories because this bill is about people, like the Tongan family that needed $3,200 to repair their car. The family have five children under the age of 13. The husband works as a storeman and the wife is a stay-at-home mother. His total take-home pay is $598 per week. They also receive Working for Families. They took out a loan with a company in Ōtāhuhu, and as security put up their car as well as two cultural mats that had been in their family for over 80 years. The loan was for $3,500. The interest charge was 55 percent over 24 months. The family had to repay $1,925 in interest, or $5,425 in total. They defaulted in the third month, then default charges started. Nine months later this family have had their car repossessed and they have had to pay for vehicle towage and storage. The family wants their mats back, but the company refuses to return them until such time as the debt is paid off in full. They have no car and still owe more than $10,000.

What about the young woman called Honey? At the age of 21 she is in huge debt, due to loans for her family members. She was extremely scared when she approached the budgeting service. She felt her only option was suicide. I quote: “I’ve done nothing but a good deed to help out when needed, but I get stepped on the back for this. I seriously want to die, as a way out of this mess. I’ve had enough. I’m 21 years of age and I’ve never been in this situation before, and I’m as scared as hell.”

There are many organisations that hear these stories and that support this bill. The Salvation Army says that it deals with people who are victims of loan shark activity daily. The activities of loan sharks in offering loans at exorbitant rates of interest cause immense suffering and lock people into poverty. The finance sector union says that the Government is developing a negative record of siding with banks and financial institutions, rather than customers. FinSec members see firsthand the negative impact of debt on borrowers and their families. The Problem Gambling Foundation says that the campaign is long overdue, and that problem gamblers are easy targets for loan sharks. The Pasifika community, in urging the Prime Minister to support this bill, explains that finance companies exploit people during their vulnerable times, and legislation is required to ensure families do not end up on the breadline because they have borrowed from an unscrupulous lender. Child Poverty Action Group says that the charging of outrageous interest rates is one of the cruellest aspects of unregulated lending, and talks about the obscene practices impacting negatively on the poorest children. The Jubilee Christian Centre points out that there are 23 references to the term “usury” in the Bible, and none speak favourably of it. They believe this should be a parliamentary-wide bill, with support from all members who have a conscience.

Last year both the Prime Minister and the Deputy Prime Minister publicly condemned banks for taking advantage of credit card users by charging high interest rates of 22 percent. Although I agree with them, 22 percent does not even compare with loan sharks hitting our most desperate and poor community members, sometimes with interest rates in three or four figures. I can tell the House that the community expects us to show leadership on this issue, and to send a strong message that we are willing to work together to protect those who have been targeted. I have been very disappointed by the comments of the Minister of Consumer Affairs and of ACT and National colleagues. There have been lots of sympathetic words attached to excuses about why they will vote against this bill, such as that the bill does not go far enough. Well, it is a starting point and provides focus tools to deal with the problem. The damage is a much wider creation from low incomes, poor access to reasonable credit, and poor financial literacy. There is also the comment that the bill will not work. I believe we should test this robustly through the select committee process. Many countries have interest rate caps, and they do not seem to be having too many problems.

National MPs say they are already working on the issue. I was shocked to find out recently that the review of the Credit Contracts and Consumer Finance Act, which contains some good suggestions but does not deal with excessive interests rates, has been deprioritised by the Minister. That is right; any outcomes have been delayed by a whole year. How can that be right? I look forward to hearing of the Government’s work on this matter. I now urge members across the House to do the right thing, to listen to the community, and to show leadership in helping some of the most vulnerable who are being exploited.

Hon HEATHER ROY (Minister of Consumer Affairs) Link to this

Although the Government does not support the Credit Reforms (Responsible Lending) Bill, I would like to begin by commending Carol Beaumont for her desire to protect New Zealanders from some of the problems that arise from over-indebtedness and for bringing this well-intentioned bill to the House.

Credit is an important part of everyday life. It provides flexibility for consumers to access goods and services, and enables increased participation in the market. But in the current economic climate many consumers face greater challenges in accessing, using, and repaying credit. Care is needed to ensure that consumers can access credit, and also use and manage that credit appropriately.

Consumers are protected in credit contracts by the Credit Contracts and Consumer Finance Act, or the CCCFA as it is routinely called, which covers all loan arrangements that are primarily for personal, domestic, or household purposes. The Ministry of Consumer Affairs monitors the effectiveness of credit legislation. The ministry’s monitoring of the operation of the credit market resulted in a discussion paper, The Review of the Operation of the Credit Contracts and Consumer Finance Act 2003. The paper was released in 2009 and addressed many credit-related matters, including the ones raised in Ms Beaumont’s bill.

This bill is promoted as a solution to the problems in the area of fringe lending. It has four main features. The first is introducing a cap on interest rates. The second feature requires lenders to reasonably believe that borrowers will be able to repay loans. Thirdly, the bill limits what lenders can recover, should a borrower default on loan repayments. Lastly, the bill allows pawnbrokers to charge administration fees. I would like to address each of these four parts in turn.

Ms Beaumont argues that capping interest rates will prevent excessive or exploitative profits from being made from disadvantaged and vulnerable groups, and she points to caps on interest rates in other jurisdictions, as we have just heard, such as the United States, the United Kingdom, and most Australian states. But the Australian Government is currently reviewing the effectiveness of interest rate caps and has stopped the introduction of further caps in order to monitor the effects of the ones already in place. The Ministry of Consumer Affairs is monitoring the outcome of this review.

The ministry’s research into interest rate caps has also found that those most likely to be affected by caps will be the disadvantaged and vulnerable borrowers whom the bill aims to protect. A possible unintended consequence of interest rate caps is that if the cap is set too high—and I would suggest that 48 percent, as Ms Beaumont promoted as a reasonable amount, is too high—it could become a target. In fact, if a Government-approved target is set too low, the cap could result in a decrease in the supply of credit, which would disadvantage those who most require it.

CHARLES CHAUVEL (Labour) Link to this

An American Vice-President once said that the moral test of a Government is how it treats those in the dawn of life, those in the twilight of life, and those in the shadows of life. The Credit Reform (Responsible Lending) Bill is about protecting those people in some of the darker shadows of life—Kiwis who have become so trapped in the cycle of poverty and debt that they are forced to borrow money from predatory fringe lenders just to live from one day to the next. Those lenders—let us call them by their true name: loan sharks—target the most vulnerable members of our society and charge them obscenely high interest rates, sometimes 1,000 or 2,000 percent per annum once the true rate is calculated. The lenders have no intent of ever seeing their loans repaid; that is not how the business model works. Instead they profit off the rapidly compounding interest and the subsequent seizure of the debtor’s assets once the debt has been sold on to a repossession company. That behaviour is morally repugnant.

I am proud that Carol Beaumont has sponsored this legislation, which seeks to regulate the interest rates that lenders can charge and require them to take responsibility for ensuring that those people taking out loans can actually pay them back. I congratulate Carol Beaumont on her campaign on this issue, and on her determination to pursue it, whatever the outcome of tonight’s debate. She can be assured of the continuing support of all members on this side of the House.

The changes set out in the Credit Reforms (Responsible Lending) Bill have never been as urgent as they are now. Times have never been better for loan sharks. Unemployment is up and families are struggling to make ends meet. At least 75 percent of taxpayers earn under $40,000 a year. That is a huge group who have been left worse off as a result of this year’s Budget and the price inflation and wage deflation we are seeing in its wake. Despite that, the Government refuses to act.

Heather Roy has just trotted out the claptrap we have heard from the officials at the Ministry of Consumer Affairs for the last 5 years. Her excuse for turning her back on the vulnerable people targeted by loan sharks is that the area is too complex and that credit contracts law is currently under review. Well, that is not good enough. Struggling families out there cannot wait another year for her review and for solutions that may not even hit the target as far as what is required. We have to take action now. For National and ACT to refuse to let this bill go to a select committee is to let down all Kiwis.

This bill was drafted with input from a number of individuals. I give credit to former professor Duncan Webb and Andrew Shann, in particular, for their assistance. Andrew Shann has campaigned tirelessly on behalf of those people adversely affected by loan sharks. He took the issue to National and asked it in good faith to act on this issue, only to be ignored. He has authorised me to say that his father, now 91 years of age, is at home listening to the debate tonight. Mr Shann Snr is a former National Party electorate chair. His family’s support for the National Party goes back to that party’s foundation in 1936. He is appalled that the party today lacks the decency to see that supporting this legislation is the right thing to do.

While we are talking about National Party pedigrees, if she does not mind me putting it that way, I want to acknowledge the presence of the Mayor of Porirua, Jenny Brash, in the gallery tonight, and the Deputy Mayor of Porirua City, Litea Ah Hoi. Porirua City has been fantastic in supporting this measure. It sees every day the damage that loan sharks do, and it understands the need to regulate.

I challenge the Government to do what is morally right: to protect the most vulnerable, struggling New Zealand families from those who are exploiting them. It owes it to people such as the family in Mount Albert whose house I was present at last year when the repo agent came to call on behalf of Budget Loans. That agent’s conduct was disgraceful. At the time, Budget Loans was and still is owned by Cynotech Holdings Ltd. Cynotech is run by convicted fraudster Allan Hawkins. Its fifth-largest shareholder is a subsidiary of the New Zealand Guardian Trust. Its sixth-largest shareholder at the time was the family trust of Craig Foss, chair of the Finance and Expenditure Committee, although I note that the trust has now disposed of that shareholding. Clearly, there is a lot of money to be made by those who choose to profit from the activities of loan sharks. Shame on them, because they do it off the backs of the most vulnerable in our society, and shame on National and ACT for leaving us in the company of countries like Nigeria that fail to act to protect the vulnerable. That failure is a betrayal.

PESETA SAM LOTU-IIGA (National—Maungakiekie) Link to this

I rise to speak in opposition to the Credit Reforms (Responsible Lending) Bill. Although I admire the intention of the bill to address issues relating to loan sharks, I believe that the bill is flawed in many ways. The amendment to section 118 of the Credit Contracts and Consumer Finance Act amends the definition in that Act of “oppressive”. I would first of all question whether a legislative change of this sort is needed. As the Minister of Consumer Affairs has alluded to, the section already contains the word “unconscionable”. Surely, if any debtor could prove that the lender knew that he or she could not repay, then a court would accept the conduct as being unconscionable. The onus would be satisfied if the lender had asked for proof of income, but that is the easy part. Any lender can ask for bank statements, pay records, or any other proof of income, but in the real world the ability to repay a loan has much more to do with one’s expenses as with one’s income. This is the point. At the end of the day a lender can judge the ability of a debtor to repay based only on what the debtor chooses to disclose of his or her expenses. Borrowers are likely to say whatever it takes to obtain a loan, and this clause does not remedy that.

The bill also seeks to regulate interest rates and it requires the Governor of the Reserve Bank to provide them. In Canada, section 347 of the Federal Crimes Act criminalised interest rates charged in excess of 60 percent. Since then, the Federal Government has had to change that law to exclude pay-day lenders. A 48 percent interest rate on a pay-day loan for $1,000 over 2 weeks is $18.40. No one will do business on those types of terms at that rate.

The member’s answer might be that lenders can charge fees. Well, that is the next problem with this clause. Caps on interest rates alone do not cap the cost of borrowing funds. That is why fees are regulated along with interest rates in Singapore and why fees are completely prohibited in Hong Kong. The member’s bill has no prohibition on fees. Therefore, her interest cap is completely ineffective. This bill does not propose a realistic or workable solution. This is an important issue that needs to be looked at in the forthcoming review.

The third change is to repeal section 57(2) of the Secondhand Dealers and Pawnbrokers Act. In the explanatory note of this bill, the claim is made that if fees can be charged, then there will be no need to charge high interest rates. That goes against the member’s concerns about the total cost of borrowing. I ask why allowing more fees to be charged would lower the total cost of borrowing. It would simply spread the total cost of borrowing between interest and fees. You see, it is very clear from legislation elsewhere that if we want to effectively cap the cost of borrowing, we cap interest and ban fees, we regulate fees and interest, or we cap the total cost of borrowing not just the interest. In one clause in this bill Ms Beaumont proposes that we cap interest and let lenders charge whatever fees they wish to charge, and in another clause she wants to allow fees where they are currently prohibited. This is clearly an ad hoc and confused approach to legislation.

In my electorate office in Maungakiekie we have seen the effects of these loans on our constituents. In fact, in my meetings with many budgeting agencies like the Salvation Army and other budgeting services, I have discovered that the problems are more far-reaching than this bill would address. It is what this bill does not contain that is disturbing. I have a problem with dragnet clauses that allow a moneylender to grab everything in a borrower’s home and to come back for more and more. There are real problems with moneylenders being able to send in repo men to take away children’s beds, bedding, clothing, and toys. I have issues with the fact that a car dealer needs a certificate to sell cars, but needs nothing to finance the sale. There are problems with the fact that a pawnbroker can loan money against the property that he or she holds and needs a licence to do that, but a lender who loans money against security not held needs nothing.

Most countries that legislate in this area, for good reason, have a licensing regime. This matter needs to be looked at seriously in the upcoming review. The problems that I have alluded to have no political party slant. It is not about the left and the right; it is about what is right and what is wrong. For this, we need better law than we have here today and we need to have a much better bill to go to a select committee.

DAVID CLENDON (Green) Link to this

I am pleased to stand on behalf of the Greens to support this Credit Reforms (Responsible Lending) Bill tonight. It is a bill intending to require lenders to have reasonable expectations that money lent will be paid back—that the borrowers have the capacity to pay it back—and to prevent excessive rates of interest being charged on those loans.

The bill will require lenders to seriously consider the ability of prospective borrowers to repay a loan. That is something one would wish; that, in an even somewhat imperfect world, people who lend money would do as a matter of course. But, sadly, we know that that is not the case. Even lenders who are operating more or less within the law are able to charge their customers excessively and to put people into extraordinarily poor financial positions.

Credit and the access to debt seem to be something of a national disease. Even quite legitimate lenders in recent times have been guilty of encouraging and actively selling debt. I recently spoke to a banker, a fellow who was the first of three generations of bankers in his family. The grandfather was the first of the generations. In his day, to borrow money was a serious matter, and banks required significant references, credentials, and a very close examination before they would lend money. His son operated in a somewhat looser environment. The grandfather was horrified to discover that his granddaughter, who was also a banker, was being actively encouraged to sell debt and was being rewarded for selling debt to people. She was selling credit cards and selling loans, and that is a reflection of our culture. Of course, the loan sharks that this bill endeavours to drive out, or at least to put some controls on, are the extreme reflection of that culture.

Why do borrowers engage with these clearly unscrupulous and cheating lenders? To some extent it is to do with naivety, a lack of financial literacy, or sometimes just sheer desperation. People need money to repair a car or to make a car warrantable to enable people to get to work. People need to pay bills and to repair appliances so that a family might continue to function. There are cultural demands for travel or to meet other family obligations, such as weddings, funerals, or whatever else it might be. There is a temptation to purchase toys, be they cars, large televisions, or expensive telephones. That is driven by the relentless consumer advertising that we are all constantly exposed to. Often the least well off, the most vulnerable, are the most vulnerable to that consumer advertising.

A very wide and diverse range of organisations has spoken out in support of the proposal in this bill, including the New Zealand Federation of Family Budgeting Services, which said that over 30,000 new client families walk through its doors around the country every year, many of them hopelessly indebted to loan sharks. Loan sharks are in the business of making money off those vulnerable people, those vulnerable communities, and they deliberately target those groups by their store locations and presentations.

I currently live in Avondale, which is a low-decile suburb, if we could describe it that way. Just off the top of my head, I can think of four or five outlets in the main street of Avondale where one can walk in and just about be guaranteed to walk out with often quite substantial sums of money, with very little reference to one’s ability to repay that money. FinSec, the bank workers union, came out in support of this legislation and, as has been pointed out, noted that the Prime Minister criticised charging a rate of interest on credit cards of 22 percent, which hardly compares with the rates that are being charged by the worst of these loan sharks.

The point is already made that we are actually out of step, and it is made again by FinSec that we are seriously out of step internationally with other developed countries. Restrictions apply in Japan, in many countries in Europe, in South America, and even in Africa. Caps have been implemented or proposed in most of Australia, Canada, the USA, and the UK, but we seem to struggle with the very notion of applying these limits and controls on unscrupulous lenders.

I will quote from a speech made on a similar topic: “Firstly, and probably most significantly, the Green Party believes there should be a named and fixed limit on interest rates charges. Many low-income people in south Auckland and elsewhere are defaulting on loans that have exceptionally high finance rates … Those loans are being made by moneylenders who are very well aware that it would be just about impossible for a borrower to meet the repayments.” That quote was from a speech made in 2003 in this House by Sue Bradford at a time when what was then called the Consumer Credit Bill had its first reading debate in this House. Seven years ago, the Greens and Sue Bradford were advocating for exactly the sort of mechanism that we are now again endeavouring to bring back to this House.

TE URUROA FLAVELL (Māori Party—Waiariki) Link to this

Tēnā koe, Mr Assistant Speaker. Kia ora huihui tātau katoa. Ko tāku noa ake ko te whaiwhai haere i te āhuatanga o ngā kōrero kua puta, me kī, i a Reipa me ngā Kākāriki mō tēnei pire. Ko tā mātau e kī nei, hāngai tonu ana tēnei pire ki te hunga rawakore, koremoni me te hunga pani rānei. Kāre mātau i te tino whakaae atu ki tērā momo huarahi. I tōna pūtake, he kōrero tēnei mō te hunga penihana, te hunga koremahi. Ka huri ki hea ki te kimi moni, ka huri ki te nanakia, ki wētahi hei utu i ngā nama, pēnei i te kai, ngā mea, me kī, hai ōranga mō te tangata. Nō reira, tēnei pire he kōrero mō te ōranga o te tangata. Ka kore he moni, kore he kai, ka huri ki hea? Ka huri ki te nanakia. Nā reira, he aha tēnei mea te nanakia? E ai ki tā te Department of Internal Affairs , anei te whakamārama i te reo Pākehā mō tēnei mō te loan shark . E ai ki rātau.

[Greetings, Mr Assistant Speaker, and greetings to us all gathered here. I want to follow up on what Labour and the Greens have said about this bill. We advocate that this bill focuses on the needy, the penniless and those without. We do not go along with what they say. Essentially this story is about beneficiaries and those without work. Who do they turn to for finance? To the loan shark or to others who can offer finance to pay bills like those for food and essentials to survive on. So this bill is a story about one’s survival. If there is no money, no food, who does one turn to? To the loan shark, no doubt. So what is this thing called a loan shark? This is an explanation in English to the Department of Internal Affairs.]

A loan shark is a person or entity that offers loans at very high interest rates, typically illicitly and requiring little or no security. Repayment is often enforced by blackmail or by threats.

Nō reira, koinā te pūtake o tēnei pire mō tērā momo nanakia. Ko tāku he mihi ki tērā mema a Carol Beaumont. Ko ia tēnei e kōkiri nei i tēnei pire ki roto i te Whare Pāremata i te mea, i ngā tau kua hipa, ehara i te mea kua tino rongo ngā taha e rua ki te pūtake o tēnei o ngā take. Mēnā ka taka te tangata ki roto i te raruraru ā-moni nei, ānō nei, ko te korokoro o te parata, inā kē tōna toronga. He kore moni, he āwangawanga ā-ngākau, he māuiui, he whakawehewehe i te tāne me te wāhine, wahine ki te tāne, kore moe, ēnei āhuatanga katoa. Nō reira, ka pā kaua ki te pūkoro i tōna kotahi engari, ko te noho o te tangata i tēnei ao. Kāore e kore, tātau katoa kua huri ki te pēke, ki tētahi atu rānei ki te moni. Ko te mate mō tēnei pire, inā kē te nui. He nui noa atu te moni e kimihia nei e ētahi ki te haere ki te pēke mō te whare, ā, mō te aha rānei. Nō reira, koinei tā mātau e āwangawanga nei. Kua rongo ake i te ingoa o tēnei tangata nei a Mr Andrew Shann, ka nui te mihi ki a ia. Nāna tēnei take i kōkiri me tautoko ka tika. E ai ki tāna, e 90 pai hēneti o te hunga haere ki te kimi moni, nō te Moana-nui-a-Kiwa, nō te Ao Māori, ngā mea o Tonga, o Hāmoa rānei, nō te Ao Māori—e 90 pai hēneti o tērā hunga nō tātau. Nō reira, kia tūpato tātau.

Arā anō te pātai, he aha te take ka haere mai ki a au, a Māori nei, a Hāmoa nei, ā Tonga nei? Mō te aha? Ā, nō te mea kai te rongo tātau i te ngau o kore moni, ērā āhuatanga katoa. Engari, me hoki rā anō ki tēnei tangata ki a Mr Shann me te mihi ki a ia i te mea, ko ia tētahi kua tae mai ki a mātau o te Pāti Māori i ngā toru tau kua hipa. Me mihi ki a ia. Me mihi ki te mēa o Porirua ki a Jenny Brash, ki a Litea Ah Hoi, tēnā kōrua, tēnā koutou hara mai i te mea, nā kōrua anō rā tēnei take i kōkiri pēnei i tā te mema a Charles Chauvel i kokiri nei i tēnei take. Me mihi ki a ia i te mea, kua puta i roto i wāna rangahau ēnei kōrero katoa. Kia huri au mō te wā poto ki te reo Pākehā.

[So that is this bill’s rationale for that kind of loan shark. I commend that member, Carol Beaumont, for bringing this bill before the House, because neither side in the past has been prepared to face up to the issues around this matter. When a person falls into debt it is like dropping into a huge whirlpool in the sea called the throat of Te Parata. Its effect spirals. It creates poverty, stress, illness, a breakdown in relationships, sleepless nights, and all those kinds of things. So it is not the pocket alone that is affected, but a person’s lifestyle in this world as well. Without a doubt we all turn to banks or someone else for money. The problem for this bill is the scale of it. The amount sought by some for the house, or whatever, from the bank is huge. And that is a concern to us. Hearing the name of this person, Mr Andrew Shann, brings to mind the solid work he has done in this area. We acknowledge and appreciate him greatly. According to him, 90 percent of those who seek money are from the Pacific Islands and Māoridom; from Tonga, Samoa, and Māoridom; 90 percent of that group were ours. So we need to be careful.

Here is another question. Why do Māori, Samoans, and people from Tonga come to me? What do they come for? Because we are feeling the sharp edge of poverty and all those kinds of things. But we must go back to this person Mr Shann, and commend him, because he was the one who worked solidly with us, the Māori Party, in the past 3 years. We acknowledge him. Acknowledgments as well to the Mayor of Porirua, Jenny Brash, and Litea Ah Hoi; greetings to you two, and the others, welcome. You two worked on this matter as well, like the member Charles Chauvel. But we must be grateful to him because all that we have talked about here was revealed in his research. I wish to switch to English for a brief moment. ]

Mr Shann’s research indicates that actual annual interest rates being charged by fringe lenders can exceed 400 percent per annum, effectively compounding to well over 1,500 percent. Secondly, he says insufficient attention has been paid by regulators to the fringe lending sector. He says that whether fringe lenders can legally recover the extremely high rates of interest they charge is unclear, and that New Zealand is lagging behind the Australian states in protecting consumers from the behaviour of the fringe lending sector.

Ka mutu i tēnei pire tēnei momo ngāngara? Ē kāo! Engari, tērā pea arā anō ētahi tiakitanga hai āwhina i ahau a Māori nei, otirā, te hunga noho koremoni nei. Kua roa mātau e kōrero ana mō tēnei take, mātau, ngā mema Pāremata o te Pāti Māori. Katoa ngā mema kua rongo i ngā kōrero mō te ngau o ngā nanakia nei ki ngā mea e noho nei i roto i ō mātau rohe pōti. Nō reira, he pai tonu te āta titiro ki ngā waka ātaahua, ngā whiriti ātaahua, ngā mea hōu mō te kāinga engari, mēnā ka ngau tonu tērā i tō pūkoro me te āhuatanga o ētahi nanakia e haere nei i roto i ngā hapori, ka raruraru i reira. Nō reira, ka tautoko te Pāti Māori i tēnei pire.

[Will this bill put an end to this type of reptile? Not at all! But it might give more helpful protective measures to Māori like me, indeed to vulnerable people on lower incomes. We, the members of the Māori Party, have spoken out about this issue for a long time. All members have heard stories about people in our electorates who now owe more than they own. So while it is still fine to look carefully for flash cars, fridges, and new things for the home, the moment it hits the pocket and one becomes a victim of a shady loan shark in the community, then there is a problem. So the Māori Party will support this bill.]

SU’A WILLIAM SIO (Labour—Māngere) Link to this

I join with my colleagues tonight in recommending the Credit Reforms (Responsible Lending) Bill to this House and thanking members for their support. I simply appeal to those who are able to acknowledge that we have a problem in our communities with loan sharks. I ask members to consider the matter before they vote.

Yesterday some of us joined Carol Beaumont and others who support her member’s bill in front of Parliament, where in a symbolic gesture we attempted to use a net to catch a young man who was dressed in a shark suit. In my mind, that was a very powerful symbol that highlighted what Carol Beaumont’s bill is attempting to do. It reminds me of a Samoan proverb “E mana’o i le i’a, ae manumanu i le upega”. Literally speaking, it means “If you want to catch fish, you cannot be worried about tearing your net”. Another meaning of this proverb could be “If we want to protect our people, to protect the vulnerable New Zealanders, we must build a stronger safety net”.

This bill is a small safety net in the overall scheme of things. It is a small step in efforts to prevent fringe lenders or loan sharks from charging excessive interest rates. It is a step change towards ensuring that loan sharks are more responsible when lending money, especially when lending money to vulnerable people. It is a small signal to unscrupulous lenders who are in a powerful position in an extremely free environment where they can charge any amount of interest. This bill is a signal to those loan sharks about their predatory behaviour in exploiting poor people who are not financially savvy in their time of desperation. We are saying to those loan sharks that that sort of behaviour is unacceptable in our community, in any city in New Zealand. Loan sharks’ unbridled exploitation of desperate people is unacceptable to the Kiwi way of life.

The concept of interest is difficult for many Pacific people to get their heads around. From a Pacific eye, the concept is better understood when the word “usury” is used in the Bible. Many who understand the term will recognise that it is promoted as evil. It is a bad thing. If we love our brother, then we will not charge an arm and a leg when our brother is in need—or our sister, for that matter. That is what this bill is about. People who approach loan sharks go to them as the last resort. They are unable to get loans from banks or the help they need from credit unions, so they go to these loan sharks in desperation for simple things like the rent or the electricity bill that is 2 weeks overdue. The loans sharks know that they are desperate. They know that these people will struggle with repayments, and that is why they add on that particular interest. The minute somebody is unable to pay that loan, other costs are added on to it.

A short example is of a man who owed $300 to the Ministry of Justice, which confiscated his car. He did not have $300. He went to a loan shark to borrow that money to get his car so he could get to work. Today, 3 or 4 months later, he has paid the $300 but he is still paying interest to the loan shark he borrowed the money from.

The way that loan sharks advertise and behave is really predatory. They use people who are familiar to them in a friendly manner.

HEKIA PARATA (National) Link to this

Tēnā koe, Mr Speaker. Huri noa i tō tātou e te Whare, tēnā tātou katoa. I begin my remarks on the Credit Reforms (Responsible Lending) Bill by acknowledging Carol Beaumont for the work, effort, and purpose that sits behind the bill, and her predecessor, Charles Chauvel, who equally has made significant contributions to this area of work. I also join with the House in acknowledging Her Worship the Mayor of Porirua, Jenny Brash, the Deputy Mayor of Porirua, Litea Ah Hoi, and Andrew Shann. I acknowledge all the work he has done and the many months and years he has devoted to that work. If it is not clear from the speeches tonight, I will make it clear that I do not think there is any disagreement between any sides of the House as to the problem we face and the concern we have about the predatory nature of fringe lending and the vulnerability of fringe borrowers. But, with respect, the fact that we disagree on the solution to this problem does not attribute to one side or the other a greater moral authority. I think it is important—

CARMEL SEPULONI (Labour) Link to this

I would like to begin by commending my colleagues Carol Beaumont and Charles Chauvel for a job well done: for the fantastic campaign they have run, and the foresight they have shown. I also wish to acknowledge the Mayor of Porirua, Jenny Brash, and the deputy mayor, Litea Ah Hoi. I thank them both for coming along to support this bill. I also acknowledge Andrew Shann for the amazing amount of work that he has put into this member’s bill.

I need to start by dispelling some of the myths that have been said tonight in the House. We heard from a number of members, but I wish to speak to the points that were made by the Minister of Consumer Affairs, the member Hekia Parata, and the member Sam Lotu-Iiga. All three said that this bill does not go far enough. I have been a member of Parliament for only 18 months, but I have seen a number of bills come through this House. No bill is perfect when it comes up for its first reading. That is why we allow it to go to a select committee. We make the decision on whether it should go to a select committee based on the intention behind the bill and what the bill seeks to achieve. Everything that this bill seeks to achieve is something that we as a whole Parliament should be endorsing.

Four things stand out about this bill. I think they need to be mentioned and told to members on the Government side of the House, because they fail to get it. This bill is about the duty of care to vulnerable citizens. It is about protection of the weakest members of our society, advocacy for those members of our society, and fairness. Those are the four points that members on that side fail to understand.

I am a Pacific woman, and it has come up over and over again tonight that Pacific people are the ones, alongside Māori, who are disproportionately affected by loan sharks. As a Pacific woman, I humbly need to acknowledge that an organisation that does not take political matters lightly or come out endorsing political matters has done so on this occasion. That organisation is P.A.C.I.F.I.C.A. Inc. That organisation has written to the Prime Minister, pleading with him that he support this bill. The reason it is pleading with him is that the organisation knows that loan sharks are out there being predators on our families and our communities. Rather than speak on behalf of myself as an individual, I wish to read directly the letter that has been written to the Prime Minister by the Pacific women’s organisation P.A.C.I.F.I.C.A. Inc. I say from the get-go, with my hand on my heart, that I am a member of this organisation, but I have not even spoken to those people about this legislation, so I have in no way lobbied them in that regard. The letter is addressed to the Prime Minister and states: “We are writing to seek your urgent action on loan sharks by seeking your support for the Credit Reforms (Responsible Lending) Bill. As the premier organization of Pacific women in New Zealand, with 20 branches from Whangarei to Invercargill, PACIFICA has been supporting Pacific families by empowering Pacific women for over 34 years. Unsurprisingly, PACIFICA has been seriously concerned by the significant number of Pacific families struggling on low incomes, who are vulnerable to accessing expensive finance company loans. Prime Minister, it is evident that our families are preyed upon by loan sharks. Targeted advertising campaigns, free ‘Pacific focused’ gifts such as boxes of corned beef, trips to Samoa and Tonga, and the recruitment of Pacific frontline staff are all practices that loan sharks use to attract Pacific clients. On any given Sunday evening when Pacific programmes view on Triangle TV, the car dealer and finance company advertisements repeatedly target their Pacific viewing audience. The problem we have Prime Minister, is not with loans being easily accessible; but that finance companies exploit people during their vulnerable times through the supply of high interest loans with high fees, making them more expensive than loans provided by banks. Families who are already shackled by the constraints of low income, now have the added burden of having to pay back more than just the principle and the interest. Furthermore, when a client falls behind in their repayments they are subject to default interest and penalty fees, in some cases this can add up to more than the principle. … It is upon this basis, that we contest that all lenders should be fair, legal and monitored by the government. We are now seeking your support for the first reading of this Bill and we ask that this matter be given the chance for public discussion and debate through Select Committee.” It is signed by Sally Dalhousie, National President.

CAROL BEAUMONT (Labour) Link to this

My colleague Steve Chadwick said to me: “I don’t know whether to feel sad or mad.”, and I feel exactly the same way. I feel both ways: I feel very sad that I have heard in this House tonight that the Government will not take responsibility on this issue; I feel very mad that the voice of the community has not been listened to, and that a genuine effort to deal with the problem of loan sharks is being ignored. Instead, members have tried in 5-minute speeches to argue what is wrong with the Credit Reforms (Responsible Lending) Bill. I think it deserves a fair hearing at a select committee, and the public deserve the right to have a say on it. I acknowledge those parties that have spoken in support of this bill—the Greens, the Māori Party, the Progressive party, and I understand that United Future will also be supporting it—and I thank them for that.

I believe that what I have heard in the House tonight has been truly awful. The speeches have been probably some of the worst speeches I have heard in my time in Parliament.

I do not think there is any disagreement that there is a problem with loan sharks. Any member of Parliament will know there is a problem, because they will see it in their communities. They will have people coming to their offices and they will hear the stories. Certainly, I found it quite tragic that the member for Maungakiekie spoke in the way he did, because in the very area that we share our offices—we both have offices in Onehunga—there are many loan sharks. Just this week, I saw featured on television a young man going into one of those places and being offered loans at 25 percent per month, which on a compounding basis is over 1,300 percent per annum. I found it disgraceful that the member for Maungakiekie made the kind of speech that he did.

Members know there is a problem with loan sharks. I want to repeat for the House what was said by the Jubilee Christian Centre, which is a registered charity with no interest at all in getting involved in party politics. It talked about the use of the term “usury” in the Bible, and that none of the references—all 23 of them—speak favourably of it. My colleague Su’a William Sio also mentioned that. The centre went on to say that this bill should receive parliamentary-wide support, and that all members who have a conscience, including Government members, should support it. At this stage in the debate, I am still standing before the House urging members to make the right decision to assist people who are struggling, who are vulnerable, and whose families are being hurt by the actions of predatory and irresponsible lenders.

We have heard a number of excuses given tonight that make me mad and angry. It has been said that this bill does not go far enough, but, frankly, some of the issues that lead to the problem are not things for which we would legislate—for example, we all agree that we need to improve financial literacy. That is about resources and focus; it is not a matter for legislation. Members have mentioned low incomes in New Zealand, but I do not see the Government doing a lot of work in that area. Certainly, that is one of the root causes of the problem, as is the credit market itself, where those who are outside the banking system who cannot get credit from banks need access to credit on reasonable terms. That is also not a matter for this bill, but there are targeted suggestions that are worthy of consideration in a select committee.

We have heard the excuse that the provisions in the bill will not work. In several 5-minutes speeches, we have had supposedly some analysis of that issue. Well, I would like to see a great deal more robust consideration of that in a select committee where we look at the experience of other countries. I do not see that the dire consequences being predicted by the Minister and some of the other speakers are in play in those countries.

National and ACT MPs have said that their parties are already working on this issue, but I say that that is the biggest and worst excuse of all. Frankly, there are some good provisions in the review of the Credit Contracts and Consumer Finance Act, but why has it been delayed for 12 months? How can those members stand in this House and tell us that that legislation will help when they have delayed it by 12 months? It is an absolute disgrace. I find those excuses very hard to stomach, and doing nothing, which is effectively what is happening here, is not a plausible answer. Where are the solutions? None of the Government members who have spoken tonight have suggested solutions.

I want this House to know that this campaign will not end here. The community wants something done, and I and my colleagues will be working with the community to continue this campaign.

CARMEL SEPULONI (Labour) Link to this

I seek leave to table the letter to the Prime Minister, dated 19 July 2010, by the premier organisation of Pacific women in New Zealand—P.A.C.I.F.I.C.A. Inc.—asking that the Government send this bill to the select committee.