11. CAROL BEAUMONT (Labour) Link to this
to the Minister of Consumer Affairs
What evidence from the experience of the many other countries who use interest rate caps does she have to support her conclusion that interest rate caps are “not a viable solution” to the problem of fringe lending?
Hon RODNEY HIDE (Acting Minister of Consumer Affairs) Link to this
The Minister has said that she has reservations that interest rate caps are a viable solution to the problem of fringe lending, as interest rate caps are a relatively blunt tool to deal with a complex problem. Based on advice from the Productivity Commission, the Australian Commonwealth Government likewise has reservations, particularly about the impact on access to credit. As a consequence it is not prepared to include interest rate caps in its credit reforms without further review of the costs and the benefits. It would be prudent for New Zealand to wait to consider evidence from the Australian evaluation, which is under way.
Why is she focusing only on interest rate caps in Australia, when they have been implemented right across the OECD, including in the USA, France, Germany, Holland, Italy, Canada, and Japan; and when will she join with many other countries and put a cap on interest rates as one means of taking action against loan sharks?
I appreciate that the member said that it is only one measure, because the Government has several initiatives that address issues around fringe lending. They include the review of the Credit Contracts and Consumer Finance Act, the implementation of consumer dispute resolution schemes through the Financial Service Providers (Registration and Dispute Resolution) Act, and the review of consumer law.
Does she agree with consumer law expert Bill Bevan that the responsible lending provisions of my bill, the Credit Reforms (Responsible Lending) Bill, are “a clear improvement to the current law”?
When she said in answer to my written question that access to low-cost credit was an issue, does she agree that interest rates of 55 percent or even 80 percent are not low cost, and that a measure such as an interest rate cap would lower these rates?
Of course 80 percent is high, but I note that the member’s bill would set the rate at 48 percent. I think the member is aware, from the ministry’s surveys, that the interest is about 38 percent. I make the point again that it is a blunt instrument to deal with what is a complex problem. The Government has a number of initiatives under way.
Mr SPEAKERThe member cannot litigate the answer by way of a point of order. She could ask another supplementary question if she wishes, but she cannot do it that way.
I seek leave to table an email from Darryl Evans, from the Mangere Budgeting Services Trust, outlining three case studies that involved the interest rates referred to in my supplementary question.
I seek leave to table an email from Bill Bevan, from the Whitireia Community Law Centre, in regard to the responsible lending provisions of my bill.