Hobson Article - July/August 2016

Friday, July 1, 2016

Parliament, not surprisingly, is good at passing laws.  Some legislation enables Government to spend money, and we try to do that wisely. Some legislation tries to stop people doing bad things.

In my area as Minister of Commerce and Consumer Affairs, for example, in the past couple of years we’ve changed the Fair Trading Act and the Credit Contracts and Consumer Finance Act to, amongst other things, stop people making unsubstantiated claims for products, to prevent businesses offering ‘unfair contracts’ where unreasonable penalties and conditions are listed on, say, page 32 of the fine print, and to put a stop to irresponsible lending practices, where fees and penalties are not properly disclosed.

But legislation is only useful if it is properly enforced.  In the examples above the Commerce Commission is the enforcer, and like any agency with a fixed budget it has to make choices about which cases to prosecute. 

I was determined that we give the Commerce Commission the best chance to protect consumers and promote competition, so I’m very glad that Budget 2016 provides an extra $15.2 million of operational funding over the next four years. 

The last time the Commission’s funding for general markets regulation was increased was in 2005; we’ve now increased it by 25 per cent.

This is an area that can make a huge impact on people’s lives.  I wrote last year about an iPhone 5 that I saw advertised in South Auckland for $59 a week, for 100 weeks.  No total price was given for the phone, which had a cash price at the time in most stores of about $800. 

New consumer credit laws that came into effect in June last year require traders and money lenders to be much more upfront about the total cost of purchases and interest rates.  The Commerce Commission is actively enforcing those new rules, and has taken several traders to court since the new laws took effect, which has already had an effect on behaviour.  The extra resources will enable them to go further.

We know, however, that when it comes to steering people away from being entrapped in a cycle of debt and poor financial decisions laws, properly enforced, can only achieve so much.  The long term challenge is to improve the money skills, or financial capability, of vulnerable New Zealanders.  That’s why the Government continues to invest in budgeting courses and resources for teachers and schools to improve money skills, as part of the broader National Strategy on Financial Capability.