Measure twice, cut once. New Consumer Affairs Minister Kris Faafoi is on a mission to make our laws fit for purpose.
Unfair clamping fine from a private carpark: $760. Phone call from a debt collector: $30. Interest on a short-term loan: 400%.
These are the sort of consumer outrages in the sights of Commerce and Consumer Affairs Minister Kris Faafoi, the former TV news guy turned MP for Mana.
Perhaps it’s because of he comes from Porirua. The town has it all: loan sharks targeting low-income earners with high interest credit, truck shops touting low quality merchandise for top dollar, slightly more reputable finance companies too often allowing customers to over-extend, and of course, there are the fees – fees on top of fees on top of everything.
While Transport and Housing Minister (and Te Atatu MP) Phil Twyford has been Labour’s highest profile, slinging insults aimed at the clamping heavies and popping the meth standard hysteria, Faafoi has been low-key riding in the wake. He announced a recall of 50,000 vehicles at risk from unsafe airbags, is reviewing insurers’ use of onerous disclosures to knock-back claims, has launched a public consultation on new regime for fairer outcomes for Ponzi scheme victims, and he looks set to restructure the Credit Contracts and Consumer Finance Act – rewriting the rulebook for borrowing money.
Oh yeah, and there’s a little matter of the review into that miserable meth standard which he is overseeing.
Since his appointment last year he’s made not-so-complimentary noises about ticket scalpers, loan sharks, so-called soft commissions (trips, event tickets etc) paid to insurance agents and of course, those infamously extortionate clampers, typified by the wildly over-the-top charges levied by former Ponsonby residents, Bashford Antiques.
But for every Bashford saga, there are hundreds much more mundane stories of Kiwis getting ripped off and their consumer rights smothered or ignored, whether it’s by an unscrupulous clamping gang or its a loan heavy charging per phone call. The damage is deep; low incomes plus high credit equals depredation. It’s a Porirua story, sure, but it’s an everywhere disaster.
Faafoi has been repping Labour in Mana since 2010; he’s only ever known opposition, but he’s ready to make his mark. Action, he says, is coming.
So let’s talk about clamping. “For me,” the minister says, “it’s one of those issues that I think has been popping up in the media for years, which should have been dealt with.” He says he wants to move on clamping; and with haste, but talks about property rights and reasonable prices to remove a clamp for overstaying parkers, or cars parked “wrongfully”.
But, banning is still a potential option Faafoi mentions; so is capping the fees that can be charged for clamp removal.
“I certainly saw a story recently where someone had only been parked for somewhere for half an hour, got clamped,” the minister recalls. “And good on the media for outing them if doing that. But certainly we’re not happy with the practices. The stories that come through the media are predominantly those who are least able to afford… So making sure that we take some action there, with the proposed options that [we’ve] got.”
That won’t necessarily help to combat the companies Faafoi notes which are “just clamping people for no good reason”, but within months we’ll know which way the minister and his government goes – Faafoi says it won’t be “a number of months”, but what it will be is a legislative change. “We’re certainly as sick and tired of it as most consumers are.”
The 42-year old says his work ties in with that of the government’s overarching goal of lifting families out of poverty. He says he’s also looking at anyone who’s giving credit, armed with grim evidence from MBIE of financial distress inflicted on vulnerable families, and will now review the over-arching legislation governing lending guidelines with debt collection methods, unrealistic repayment schedules, harassment, false and misleading claims and punitive interest and fees all under the regulatory microscope.
But didn’t we know all this stuff already? And surely Faafoi should, so do we really need a review? The last government made changes to consumer credit laws in 2015, bringing in responsible lending guidelines, but little seems to have changed amongst unscrupulous lenders. Faafoi says there’s still valuable information to be gleaned; he was surprised to hear debt collectors were charging $25 for a phone call, but its a case of a new scam same as the old scam as this 2003 story illustrates.
“I call it measure twice, cut once,” Faafoi says, defending the review. “Because I’d rather get it right now and deal with all these issues that… A lot of the sneaky ways the companies are operating, so we can make the changes of the legislation to prevent their kind of behaviour.”
“We wanted people’s stories about what they are seeing,” the minister says, “what they’re hearing, and some of the experiences that they have had. Whether it be… those truck shops or anyone who’s giving credit. Sometimes we are open to capping interest rates, or looking at other measures to make sure people aren’t getting themselves into these deep spirals. We are seeing a lot of behaviour where vulnerable families have been preyed upon… I have seen first hand some of the trouble that families get themselves into if they get stuck into these deep spirals.”
We’ll certainly crack down, he says. It’s critical that consumers at all ends of the market have somewhere safe to borrow from. So once we’re post-clamping, potential legislation for dodgy lenders should land towards the end of the year, or early next, he says.
On the other side of the consumer ledger, Faafoi says he’s looking at how he can beef up consumers’ knowledge of their rights, and have the financial capability to make sound decisions about debt. “So that if they are looking at going a loan, they understand that they’ve got rights and know exactly what they are getting themselves into. Again, to make their judgment as to whether or not this is a good decision or a bad decision.”
And if all else fails, he can stay true to his Labour roots: Faafoi is not averse to market intervention, pointing to the airbag recall (the previous government failed to act, he says) as evidence of that. He doesn’t ascribe to the view that New Zealand has been plagued by industry capture and a toothless legislative regime – the tools were there, he says, and he used them. “We knew some time ago that the [Takata] Alpha airbags posed a risk, and that’s why Australia moved… And the previous government knew of their risk too. But certainty I wasn’t going sit in the act of being briefed, and allowing the risk that the airbags could cause serious harm or death and do nothing.”
“Again, there was the ability for us to call the mandatory recall, which we did. It just needed the willingness to do it and the realisation of the seriousness of the situation.”
For the airbag recall a website was built that’s “seen good traffic”. He’s also gone full circle and back to his first home, TV, appearing on Fair Go in a bid to drive feedback on the insurance law review.
So let’s look at online. There’s no doubt the scams are already there, seeking to hook unsuspecting consumers; like all of us investing in new platforms. But online also offers an opportunity, Faafoi says, take product recalls for example. Here too, social takes presence (and probably dollars from print and newspapers) – officials now tweet out the latest product recall rather than placing an ad in the local paper. Audiences habits are changing, Faafoi says. “If we need to look at new, and more effective ways, of letting consumers know that something’s happening that’s, then we’re more than happy to look into that.”
Should the Commerce Commission, in charge of policing consumer interactions with business, be doing more to plug their role and pitch for complaints? It does a lot, he insists. But it has a lot on its plate, too. Mergers and acquisitions, along with every little grassroots complaint.
That’s why consumers have to go back to basics, he says. If you have a problem, initially, you go back to the retailer. And they should know they have to be reasonable if they’re at fault. And if that doesn’t work, there’s Citizen’s Advice Bureau.
And if that doesn’t work there’s always regulation, and the regulator.
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