The people who petition Parliament may feel they are shouting into the wind when their concern isn’t instantly enacted as law. Even for those whose pleas spark change it’s seldom rapid. Ideas become plans which are beaten into policies, negotiated into agreements, written into bills and eventually some become laws.
But when you watch the process unfold you see how pitfalls and missteps are avoided along the circuitous path.
This week, for example, the Finance and Expenditure Select Committee is hearing dozens of submissions on a bill aimed at restricting predatory lending (loan sharks). The bill does a number of things, including capping the total return (fees and interest) on a loan to 100% of the original loan amount.
A little more than two years ago at the same committee (but in the previous Parliament), I watched a group of women from the Coromandel who ran a micro-lending scheme call for exactly that - a cap on loan interest.
Linnea McDonald (left) and Cara Penny (right) of the Thames Coromandel Women's Loan Fund telling the Finance and Expenditure Committee (in 2017) that a cap on interest rates charged in New Zealand is essential to protect vulnerable members of society. Photo: VNP / Phil Smith
The women didn’t receive an entirely friendly reception at the time.
Some MPs argued that a cap could distort the market; one intimated that if people were silly enough to be sucked in by predatory lending that was their own look-out; and another said that if people unable to repay loans were forced to seek finance from loan sharks it was the fault of the submitters (as a micro-finance lending group) for not having lent them money.
They possibly went away feeling they’d tilted at windmills. But now, two years later the same committee is running hearings into a bill that does what they had asked for.
The Credit Contracts Legislation Amendment Bill was announced last year and was introduced in April. The FEC committee is due to report back to the House with any suggested changes to it at the very end of October. Feasibly the bill could be law by year’s end, but early next year seems more likely.
The process is lengthy and the select committee usually inquiry takes at least six months. But the hearings this week illustrate why taking it slowly can solve all manner of problems and prevent unintended consequences.
Select Committee hearings on bills have two broad purposes. They give interest groups the chance to weigh in on proposed legislation, attempting to ameliorate the effect on them.
But they also give the public, experts and interest groups the chance to point out where the bill is flawed and can be improved.
And when the bill is about finance it’s a thorny thicket to begin with. The 152 submissions on the Credit Contracts Legislation Amendment Bill are full of complicated financial scenarios and arguments and examples of how things could backfire.
But amid the tangle, a single submitter from this week provided a number of clear examples of how writing this kind of legislation is difficult; and how the process can catch mistakes or improve the final law.
The submitter was Emeritus Professor Jeremy Finn from Canterbury University. Like many submitters his written submission is longer and more detailed but in person he made three specific points:
He pointed out that an interest rate cap only works if it has a duration attached. So the hundred percent cap may sound nice but it also allows loan sharks to charge 100% for a one week loan, which is actually the equivalent of 5200% per annum.
He noted an issue with the principal Act (that the new bill amends), where a predatory loan contract might in contravention of the new law but still be enforceable. He wanted an amendment made so that a loan found to be in breach would be void with only the original amount loaned would needing to be repaid.
And thirdly he argued for specific requirements to prevent loan sharks avoiding their obligations of full disclosure. He noted that contracts are often written in “mouse print”; such small type they are practically unreadable, which should be outlawed.
Toward that same goal he suggested that a lender should be required to provide disclosure information in any language they advertise in. This would prevent lenders advertising in, say Samoan, and then providing information in complex legal English.
It’s a hard road writing the perfect law, so select committees ask for all the help they can get.
