Datasets:
neibla
/
debates

Dataset card Data Studio Files
xet
Community
text
stringlengths
0
8.04k
Hon EUGENIE SAGE (Minister of Conservation): Tēnā koe e Te Māngai o Te Whare. I am very pleased to speak on the Financial Markets (Conduct of Institutions) Amendment Bill and support it on behalf of the Green Party.
The members of the Opposition seem to have their eyes wide shut. They seem to be unaware of the need to have a much greater standard of fairness in the financial sector, as Deborah Russell alluded to. Yes, there is already a licensing regime, which the Financial Markets Authority can administer, but what this bill does is build on the results of the Australian reviews and the reviews which have been done in New Zealand, which highlighted that issues like incentives, which were based around targets to sell particular volumes or to sell to a particular value, which rewarded the adviser with trips overseas, soft rewards like that, ended up being to the detriment of the customer and focus more on benefiting the sales adviser rather than benefiting the customer. They resulted in, as one of the reviews showed, a tetraplegic being sold life insurance which excluded tetraplegia; so it was, essentially, meaningless.
This Government is about fairness. I find it extraordinary that members of the Opposition are siding with the big people, the banks, the big insurers, and not with the consumers. We all want financial markets which are fair. What this bill does, by providing a regulation-making power, is not using a sledgehammer to crack a nut but is ensuring that we have a fair market so that people can trust, and if people trust the markets they are involved in because it's got a good regulatory framework, they are more likely to buy those services rather than being vulnerable to exploitation. We know that these contracts are very complex, that there is not a high degree of financial literacy in New Zealand, and because of that people can be exploited. So this bill is about ensuring that we manage those risks, that we have greater accountability, and that we have an ability to enforce fair conduct and good conduct.
The National Opposition did pass some legislation, but like everything, it did not go far enough. This, through using the licensing system that already exists, through using the ability to pass more regulations, will ensure a much stronger standard of fairness throughout our financial markets. The Green Party is pleased to support it.
STUART SMITH (National—Kaikōura): Thank you very much, Madam Speaker. It's great to have my first speech in the House for 2020. Unfortunately, it's not on a particularly good bill, but that's been well covered by my colleagues.
Going back to the New Zealand First speaker earlier who spoke quite a bit about the lack of symmetry or an asymmetrical imbalance in terms of knowledge, there will always be, in a transaction, an asymmetry in knowledge. The seller always, almost always, will know more about what they're selling, about that product, than the buyer. That is just commerce every day. Now, to try and balance that up by putting in this overbearing regulatory regime is just nonsense.
We have caveat emptor as my colleague mentioned before—the buyer beware. People have buyer's remorse all the time. They buy something as little as a pair of jeans, perhaps, or as large as a house, a big transaction, they can then have buyer's remorse the next day or in the coming days and have all sorts of regrets about that purchase. It seems a lot of that thinking is rooted into this bill.
When we go back to the commission that looked at the banking in Australia and then the inquiry that was held here in New Zealand, yes, they found some issues in there. The main issue was there was a lack of documentation. It didn't satisfy the inquiry as to what the documentation around those transactions was, not necessarily anything further than that. This is such an overbearing reaction. It shows a lack of understanding of commerce, it shows a lack of understanding of business, and I certainly am very suspicious of anyone going down this path. I always think back to, you know, the devil makes work for idle bureaucrats. That seems to be what they've done here, try and find something to fill out their legislative programme because they didn't do the work when they were in Opposition to do some policy research. Fortunately, we aren't falling into that trap.
I just go back to the pursuit of profit. It is absolutely in a transaction. The seller is trying to maximise the price and the buyer is trying to minimise the price; that is how a transaction happens every time. This seems to be a surprise to people on the other side of the House. This legislation won't change that. In fact, what really worries me about it is the regulation-making powers, which as my colleague said, may even allow them to seek to ban sales altogether. It is just a nonsense. This bill deserves to go in the bin. I'll be voting that way.
DEPUTY SPEAKER: Right, so this is a split call.
JAMIE STRANGE (Labour): Madam Speaker, thank you for the opportunity to take a call on the Financial Markets (Conduct of Institutions) Amendment Bill—my second speech in the House this year. We've heard from the Opposition that they're not voting for this bill because it regulates companies to comply with ethical behaviour. Now, I think there's some confusion over there, because wouldn't we want companies to comply with ethical behaviour? And those were the exact words that came out of the mouth of one of the Opposition members. So I think the Opposition members do need to have a little bit more of a think about this.
Look, there is an imbalance of power between financial institutions and consumers—and, yes, in most cases, the seller does have more knowledge than the purchaser—but trust and confidence in our financial sector is a vital part of our economy, and even if the members opposite don't believe that we need balance or that we need fairness, surely they believe that our financial sector must be strong and stable. If there is no trust and confidence in these services that are provided, then we could have a whole lot of people not taking out life insurance, for example, and something like that, you know, could have a disastrous effect on our economy potential. So we need trust and confidence and, at times, the Government do need to provide some regulation to ensure that stability.
This has stemmed out of recent reviews into banks and life insurers—and the Green Party member mentioned one of the reviews in Australia, which quite clearly showed up that we do need some regulation. Just to close, this is actually a win-win for banks and institutions and consumers, and the reason it's a win-win is because it creates confidence and trust in the financial sector, and that's what we need for our country. Thank you.
ANDREW FALLOON (National—Rangitata): Thank you, Madam Speaker. It's my first opportunity to speak in the House this year as well; so can I just welcome everyone back. It's wonderful to be here. I will just be taking a reasonably short call this evening, though, for two reasons: first of all, because I think my colleagues over this side of the House have laid out very well the reasons that we won't be supporting the bill, and, secondly, because I'm conscious that Mr Ian McKelvie is due to speak after me, and I'm sure everyone will be looking forward to that. So I'll just take a very short call.
I am quite interested in this bill, though, and particularly the history of it, because prior to coming to Parliament, for a short time I did work in banking and so I am aware of some of the history behind the bill and certainly what happened in Australia. So what interests me is that obviously the Australians went off and did their royal commission, found a large number of systemic problems in the Australian banking system, and so following on from that New Zealand regulators and agencies went off and did their own review. And what they found actually was that there wasn't this level of problems—anywhere near the level of problems—that exists in Australia.
So it was quite interesting to hear from Minister Eugenie Sage earlier saying that this bill builds on the review that was done in Australia. This intrigues me because what they're, essentially, doing is saying there's a problem in Australia; therefore, we need to legislate in New Zealand. That to me really is suggesting that we're creating a solution to a problem that doesn't actually exist in New Zealand, because what they found was that they said there's a small number of conduct issues related to poor conduct by bank staff but not widespread misconduct or culture issues like in Australia. So, again, nowhere near the level of problems that they see in Australia.
We do support some of the aspects of this bill. There are some important issues in it, and we do support, of course, a strong banking conduct framework, but where I think they go too far is in relation to setting rules for sales incentives by regulation. There's two important parts to that, and the first one of those is that we said it's heavy and disproportionate to, essentially, hand a power to Government to say that there could be a blanket ban on any sort of sales incentives and, in particular, my colleague Melissa Lee has laid out the concerns that we have in relation to that. The second important point is actually that it's taking away the power of Parliament to do that and giving it to a Minister to set by regulation and so there'll be no scrutiny of that decision by Parliament, and that is pretty concerning to me.
I do want to just touch on what the effects of that will be, and actually that's laid out quite well in the regulatory impact statement, which talks about the fact that the bill could lead to more expensive financial products and services, for instance, if costs are passed through to customers. My concern around that—and to me it really sums up what this Government does actually—is they come in and they think, "Oh well, look, here's potentially a problem that we need to fix."—or in this case, probably not a problem at all—"So what we'll do is we'll put a whole bunch of new costs on to businesses or on to farmers or on to landlords, whoever it might be, whatever industry they decide to pick on.
They think to themselves, "OK, well, this, of course, will have no effect. There'll be no effect of doing this." But of course, as we know, there is an effect because all of those costs just end up getting passed on to the end-user—in this case, the customer or the consumer. So when Eugenie Sage earlier today said that we are siding with the big guys, siding with the big guys by not voting for this bill, well, actually, Ms Sage, we're not siding with the big guys; we're siding with the customers. We are siding with the consumers who, ultimately, have to pay more as a result of this bill.
GREG O'CONNOR (Labour—Ōhāriu): I'd just like to correct that previous speaker, Andrew Falloon—that we've had an inquiry into New Zealand. What Australia had was a royal commission of inquiry with the ability to summons people to the inquiry, and anyone who has been subject to a commission of inquiry, particularly a royal commission of inquiry, will understand they leave no stone unturned. In New Zealand, what happened was the Financial Markets Authority and the Reserve Bank wrote to the banks and asked them if they were engaging in the sort of behaviour that the Australians had done. Funnily enough, they said they weren't. Well, that was our commission of inquiry—a good old Kiwi one.
I was once the chair of a mortgage company, and that was in the good old days when the margin between lending and borrowing was around 400 percentage points, or 4 percent. Now, when that existed, and that was the financial regime which existed, and no one really needed to do this sort of thing because everybody was making so much money, virtually overnight, the percentage went down to less than 1 percent. When we exited that particular product, we were actually getting less than 1 percent, or 100 basis points, between borrowing and lending, and the reason we exited was the only other way we were actually going to be able to continue to make money was on value-added products like insurance, etc. What quickly became clear was that we were going to have to incentivise a lot of people for us to make any money and the only people who were going to suffer were going to be our customers. So we exited. So I have a firsthand account or experience of that change in incentive.
So this is a very essential piece of legislation. Nobody in banking is a particularly bad person. Nobody in there is out to rip anyone off. What they're doing is doing what humans do: they are out there to make a living the best way they can. Some people sell drugs because it's the only way they can make a living. The authorities—the State—stop them from doing that and so it is essential that just the ability, the desire to make money, the need to make money is not by itself a reason why the State, the regulator, should not become involved. The more incentive there is, the more there will be an incentive for those to actually act against the interests of everyone else in the industry, and that's exactly what happened in Australia and there's no reason to expect that largely it hasn't happened in New Zealand. This is to ensure it doesn't happen. This is to ensure we protect New Zealand customers. I commend this to the House, Madam Speaker.
IAN McKELVIE (National—Rangitīkei): Thank you, Madam Speaker, and I will be brief because most of the extremely valuable stuff I was going to introduce to this debate has been introduced already, but I can't resist but to comment on a couple or three comments from Government members who've already spoken. And I want to start with the last one, Greg O'Connor, who I think vastly or grossly underestimates the diligence of our Reserve Bank Governor. I wouldn't want to be on the end of one of his letters. I think that might be a bit testing. So that's the first thing I want to bring up.
The second thing I want to talk about was something that Fletcher Tabuteau raised with relation to this bill as well. He talked about the gaps in the legislation. Well, the unfortunate thing about legislation is every time we create a piece of legislation, we create another gap. So you can't plug gaps in legislation with more legislation.
And the third thing I want to comment very briefly on is that I sort of didn't really like the comment that Jamie Strange made. I thought it was rather a strange comment, in fact, where he accused us of opposing a bill that encourages ethical behaviour. I think we're really opposing a bill that, in my view, is liable to lump costs on the very people that it's designed to protect, and I think that's the issue that I have personally with a lot of the legislation—not just this piece of legislation; the previous Government passed some pieces of legislation which have proved to be extremely expensive for those people that we're trying to protect as well. So we have a habit in this House of passing legislation without fully understanding the ramifications of it and making sure that what we do is going to in fact achieve what we want to achieve without imposing extra pain on the people that we deign to protect.
Now, there's a couple of other things I want to comment on, and it's very interesting, because I do think that some of our sales habits—or some of our incentivising of sales—over the years has been suspect. I myself have been involved in the motor industry for a long time, and we had some very odd and unfortunate sales incentives set in that industry at times, which actually cost the industry a lot of money. That's what almost always happens with poorly designed sales incentives. They almost always backfire on the industry in the end.
The other comment I wanted to make was around education. I think, rather than keeping passing bits of legislation to protect people from other people, we'd be much better to introduce a whole lot more education into our system around financials and how people should manage their lives. I don't think it would be that hard. I know education's a touchy subject and I shouldn't be talking about it in Deborah Russell's presence, but education, for mine, would overcome a whole lot of issues we have with these kind of rules that we're trying to put in place with legislation like this.
Some of these transactions are quite complicated. We've seen a number of cases of very complicated banking arrangements that have ended up in court and ended up with people being repaid money and all sorts of things over the years, because they are complicated. Even very simple transactions are complicated. So I think it's important that we get more education for the system.
We aren't supporting this bill, not because we don't think those people that it purports to protect need protecting but because we think it's a completely inadequate piece of legislation and partly already covered. So thank you, Madam Speaker.
Dr DUNCAN WEBB (Labour—Christchurch Central): Tēnā koe e Te Mana Whakawā. Ngā mihi nui. It's good to be here in this new year. Look, this is a really important piece of legislation. Stuart Smith stood up before and talked about caveat emptor and then made a quite unusual comparison between buying financial services and buying a pair of jeans. I just want to pick up on that, because, when you buy a pair of jeans, you see exactly what you get—although, having seen his attire, perhaps he didn't look closely enough. When you're buying some insurance product, you're buying something which is entirely impossible to understand exactly. You're buying a promise—you're buying nothing more than a promise—that a faceless company will do good and indemnify you—will make up any losses that you suffer.
The document—and let's be honest: who's read cover to cover their insurance policy? I suggest—[Dr Deborah Russell raises hand] Perhaps Dr Deborah Russell, but no reasonable person. The fact is we take it on trust that the insurance company has written fair and reasonable terms. Then, when a claim comes along, all of the power is in the hands of the insurer—as Stuart Smith should know, given his electorate. So, in fact, we've got a situation where we're buying a product. We don't actually know what it's going to deliver. We don't know when it's going to deliver it or whether the insurer will stand behind it when the time comes and deal with this fairly. And what does this bill do? What's its central precept? That when selling these products—these complex products—the interests of the consumer should be taken into account.
We've heard that old term "caveat emptor" bandied about by the other side. There's a reason that it's Latin and hasn't been used for 100 years: it's because it's a pretty useless term. What it means is it's a licence to cheat, to manipulate, to misrepresent, and, basically, to rip the other side off if they're not as smart as you are. Frankly, the law has moved on, and I'm glad to see it. That is why we have a bill like this, which is here to protect consumers, to impose a duty on insurers and other financial service providers to take into account and take care of consumers. It's how it should be—a great bill. I commend it to the House.
A party vote was called for on the question, That the Financial Markets (Conduct of Institutions) Amendment Bill be now read a first time.
Ayes 63
New Zealand Labour 46; New Zealand First 9; Green Party of Aotearoa New Zealand 8.
Noes 57
New Zealand National 55; ACT New Zealand 1; Ross.
Bill read a first time.
Bill referred to the Finance and Expenditure Committee.
Hon Dr DAVID CLARK (Minister of Health) on behalf of the Minister of Commerce and Consumer Affairs: I move, That the Financial Markets (Conduct of Institutions) Amendment Bill be reported to the House by 23 June 2020.
Motion agreed to.
FAIR TRADING AMENDMENT BILL
First Reading
Hon Dr DAVID CLARK (Minister of Health) on behalf of the Minister of Commerce and Consumer Affairs: I move, That the Fair Trading Amendment Bill be now read a first time. I nominate the Economic Development, Science and Innovation Committee to consider the bill.
The Fair Trading Amendment Bill amends the Fair Trading Act 1986 to introduce new protections for businesses and consumers against unfair commercial practices. Firstly, it introduces a prohibition against unconscionable conduct in trade. Secondly, it extends existing protections against unfair contract terms in non-negotiable consumer contracts, or "take it or leave it" consumer contracts, to also apply to business contracts with a value below $250,000 in a given year. Thirdly, it strengthens the ability of consumers to require uninvited sellers to leave or not enter their premises, including through the use of "do not knock" stickers. The bill also makes a number of technical changes to the Act to improve its functioning and to support consistency with other legislation enforced by the Commerce Commission.
This bill supports this Government's goal of building a more productive, sustainable, and inclusive economy. An important part of achieving this goal is ensuring that New Zealand has a trading environment where both businesses and consumers are treated fairly. At its core, a fair economy is one where businesses and consumers trust each other, where businesses compete on their merits, where businesses have a reasonable opportunity to grow and thrive, and where consumers are protected from high levels of detriment.
New Zealand already has a number of protections against unfair practices, including those contained in the Fair Trading Act. However, when consulted in 2018 on whether these protections went far enough, many submitters told us that they did not. We've heard about firms who are bullied by their larger suppliers or business customers. We've heard about cases where the larger business unilaterally buries the terms of the contract, including price, and we've heard about countless examples of businesses who have had to wait very long times to be paid, sometimes up to 90 days and beyond after the work has been done or products supplied.
This stuff matters because it makes it hard for New Zealand businesses to focus on what really matters: developing their products and services, innovating, and growing their businesses. Instead, businesses have to spend hours reviewing contracts to ensure there are no unfair terms. They have to work with their accountants to deal with cash-flow issues arising from late payments—which is no reflection on their accountants—and they have to deal with the stress that comes from being bullied or harassed by their suppliers or business customers. This has flow-on effects also for other parts of the economy, especially for the families and communities that these businesses support. We've also heard about real consumer harm as well. We've been told about businesses preying on vulnerable consumers in shopping malls, in their homes, and even in mental health units. We won't get to a more productive, sustainable, and inclusive economy with these sorts of practices in the market place.
I'd like to talk about some aspects of the bill in more detail: firstly, the bill's prohibition against unconscionable conduct. Unconscionable conduct is serious misconduct that goes beyond what is commercially necessary or appropriate. The bill does not define exactly what is unconscionable; however, the prohibition is based on provisions in the Australian Competition and Consumer Act 2010. The bill is designed to make clear that the prohibition goes beyond the narrow concept of unconscionability that currently exists in the New Zealand courts. In Australia, the courts have said that conduct is unconscionable if it goes against conscience by reference to the norms of society. The courts have stated that such norms include honesty and fairness. The bill provides a list of factors for determining whether the conduct is unconscionable, such as whether parties acted in good faith, whether a trader used any unfair pressure or tactics, and whether the person affected was in a position to protect their own interests.
Unconscionable conduct will be an offence subject to penalties of up to $200,000 for individuals and $600,000 for bodies corporate. This prohibition is necessary to deal with a very small minority of businesses that take advantage of the vulnerabilities and lack of bargaining power of consumers or other businesses. However, any business that acts fairly and reasonably should have no reason to be concerned that they are in danger of breaching this new prohibition.
Secondly, the bill extends the current protections against unfair contract terms in consumer contracts to also protect small trade contracts. Unfair contract terms are defined as terms that are imbalanced, unnecessary, and that would cause detriment. Small trade contracts are, broadly, non-negotiable contracts between businesses that form part of trading relationships that have an actual or expected total value of less than $250,000 in any 12-month period.
A standard form contract is a non-negotiable contract presented on a "take it or leave it" basis. For example, a standard franchise agreement used by a restaurant franchiser or a standard lease agreement offered by a large commercial property owner for office space. The bill provides that if the Commerce Commission seeks and receives a High Court declaration that a contract term is unfair then parties may not include or enforce such terms in their non-negotiable contracts. The extension of the unfair contract terms protection to businesses recognises that, like consumers, some businesses can face a complete lack of bargaining power when dealing with other businesses. This leaves them with no real choice but to accept unfair terms in contracts because the alternative might be for their main customer or supplier to walk away from them and leave their business and livelihood in jeopardy.