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Speaker 1: Now the government's defending the move to change a law

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Speaker 1: which would protect Ossie banks from Kiwi customers. On the

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Speaker 1: show yesterday we spoke to Scott Russell. He's a lawyer

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Speaker 1: who's leading the class action of one hundred and seventy

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Speaker 1: thousand Kiwis against ASB and A and z.

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Speaker 2: Aims in ASB is saying that generally's under the law

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Speaker 2: potentially presents an existential risk to the economy. What we're

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Speaker 2: saying is that's just simply rubbish. There's no evidence of that,

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Speaker 2: and it seems the suspicion is that by mending the

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Speaker 2: law it's just national helping out the Australian banks in

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Speaker 2: this case.

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Speaker 1: Commo's Commission, Scot's Comma's Commission. Minister scottssoners with me right now.

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Speaker 1: I don't know why a we're calling you, that's Scott,

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Speaker 1: You're just a commerce minister. How are you?

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Speaker 3: I'm all right? Thank you. Here the Friday afternoon, lots

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Speaker 3: of people heading to the coramandeler.

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Speaker 1: I hope we'll put it down to the wrong. Now,

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Speaker 1: why are you siding with the banks against the customers?

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Speaker 3: Well we're not. The banks aren't calling for this, and

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Speaker 3: that guy I just heard that replay Yesterday's completely wrong.

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Speaker 3: The banks aren't calling for this, the banks declared, and

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Speaker 3: they've already paid out thirty five million to those affected customers.

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Speaker 3: Now that's not the point. What we're trying to fix

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Speaker 3: here is some bad law to bring it into line

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Speaker 3: with actually the existing law. So a little bit of history.

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Speaker 3: Back in twenty fifteen, a strict liability offense was created

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Speaker 3: for lenders, and not just banks, for credit unions, for

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Speaker 3: building societies, for car finance dealers, you know, all that

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Speaker 3: sort of every kind of lender. The strict liability was

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Speaker 3: that if they made any mistake on their documentation at all,

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Speaker 3: no matter how minor, no matter how inoffensive, or whether

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Speaker 3: it had no impact at all on the lender, the

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Speaker 3: courts could only apply a strict penalty, and the strict

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Speaker 3: penalty was to refund all the interest and all the

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Speaker 3: fees relating to that loan. Now, if you've got a

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Speaker 3: twenty five year mortgage, that's a lot of interest and

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Speaker 3: a lot of fees over that period of design, is.

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Speaker 1: It not in the affected period rather than over the

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Speaker 1: life of the whole loan. It's just in that period

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Speaker 1: where the information was incorrect.

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Speaker 3: No The period that we're trying to fix is between

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Speaker 3: twenty fifteen and twenty nineteen. So by twenty nineteen, the

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Speaker 3: then Labor government had figured out that that was a

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Speaker 3: bad piece of law with really prescriptive and unintended consequences

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Speaker 3: of a magnitude that weren't anticipated when the law was

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Speaker 3: passed in twenty fifteen, so they fixed it in twenty nineteen,

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Speaker 3: which was a good thing. All we're trying to do

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Speaker 3: with this is to bring that period of time between

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Speaker 3: twenty fifteen and twenty nineteen. Now. I don't know why

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Speaker 3: Labour didn't fix it back to twenty fifteen at the time.

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Speaker 3: I suspect that there were no cases live then, so

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Speaker 3: they didn't, you know, there was sort of kind of

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Speaker 3: no reason. But what the issue is now is that

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Speaker 3: acts or omissions, no matter how minor or small, or

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Speaker 3: petty or inconsequential to the lender, the courts can only

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Speaker 3: give that penalty, which is refunding all interest in all payments.

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Speaker 3: So what we're trying to do is give the courts discretion,

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Speaker 3: as they currently have for post twenty nineteen cases, to

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Speaker 3: come to a fair and equitable judgment. We're letting the

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Speaker 3: courts decide that the courts are the right people, the

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Speaker 3: right place to decide what the appropriate penalty should be

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Speaker 3: and weighing up the will facts.

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Speaker 1: So these errors are not altogether petty, though are they?

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Speaker 1: At least at least a couple of these errors from

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Speaker 1: Z and ASB have been reasonably significant in that they

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Speaker 1: have A and Z, for example, mislead customers as to

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Speaker 1: how much interest they would have to pay.

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Speaker 3: That's right. So I'm not a lawyer. I'm not a lawyer,

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Speaker 3: and I'm not a judge. That's why I want to

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Speaker 3: give judges the opportunity to assess for themselves what the appropriate.

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Speaker 1: People I understand something from you, Scott. In the when

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Speaker 1: the penalty is applied and all of the interests has

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Speaker 1: to be refunded, is it for the period of the

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Speaker 1: loan where the error was happening, let's say from twenty

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Speaker 1: fifteen to twenty sixteen, or is it for the period

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Speaker 1: of the entire loan.

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Speaker 3: My understanding is it's for the period of the entire loan.

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Speaker 3: So that is the risk. Now, as I say, I'm

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Speaker 3: not a lawyer, but the advice I've had from MB

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Speaker 3: officials who are very concerned about this is that we

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Speaker 3: just need to bring the existing law. As I say,

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Speaker 3: it was fixed in twenty nineteen, So anything that happened

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Speaker 3: after twenty nineteen, the courts can make decision. It's just

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Speaker 3: instances that occurred between that period between twenty fifteen and

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Speaker 3: twenty nineteen now, so we're just trying to bring that

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Speaker 3: period into line with the existing law and the ability

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Speaker 3: of courts and judges to make decisions as they can today.

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Speaker 1: What will it take the possible penalty from? And then two,

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Speaker 1: what is the possible penalty.

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Speaker 3: At the moment? Well, the only penalty at the moment

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Speaker 3: for cases in that period of time is a refund

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Speaker 3: of all interests.

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Speaker 1: Yes, I understand it's worth about ared a few hundred

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Speaker 1: million dollars.

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Speaker 3: Yeah, well, there's been some estimates that it could be

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Speaker 3: several hundred million up to a billion. And the real

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Speaker 3: risk around that is not to the big banks. Actually

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Speaker 3: it's to the.

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Speaker 1: Small Who's making these estimates.

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Speaker 3: Well, MB advisors and you know they have been thinking

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Speaker 3: about this. And as I say, this was fixed in

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Speaker 3: twenty nineteen, so this is not a new issue. And

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Speaker 3: then what does it take it down for a while?

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Speaker 1: So several hundred million up to a billion down.

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Speaker 3: To what, Well, that will be a decision for the

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Speaker 3: courts to decide. All I'm hoping to do is give

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Speaker 3: the courts a discretion. They might decide it could be more,

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Speaker 3: but at the moment, the courts don't have any flexibility.

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Speaker 3: They can only impose one penalty, and I think it's

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Speaker 3: appropriate and fear that the courts make those decisions, not politicians.

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Speaker 1: Lately, the court that this isn't the legislation for a reason.

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Speaker 1: I mean, the reason that the banks have to cough

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Speaker 1: up as much as we are telling them in this

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Speaker 1: legislation to cough up is because we want to keep

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Speaker 1: them honest, right, because they deal with huge amounts of

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Speaker 1: paperwork and you as a borrower, a MEAs borrow, I

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Speaker 1: don't read all that stuff. So it is I rely

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Speaker 1: on the fact that they going to be completely honest.

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Speaker 1: Given the fact that these guys make a billion dollars

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Speaker 1: plus every single year, the only way to keep them

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Speaker 1: honest is to have really big fines and penalties coming

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Speaker 1: at them. That's why it's in the legislation, isn't it.

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Speaker 3: Well, that was why it was in the original legislation,

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Speaker 3: but by twenty nineteen the government of the day had

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Speaker 3: figured out that that wasn't enough discretion to give the courts.

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Speaker 3: It was too much of a place.

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Speaker 1: Literally, why are you saying that some Why do you

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Speaker 1: need to do the same thing that labour did. Labor

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Speaker 1: may have made a massive mistake here by making life farting.

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Speaker 3: Labor fixed it. Labor fixed it.

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Speaker 1: Alternatively, Scott alternative view on it is that Labor gave

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Speaker 1: banks a free pass to behavior however they want with

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Speaker 1: their information.

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Speaker 3: Well, no, because the penalties are still there. But it's

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Speaker 3: the courts that will decide the weight and the measure

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Speaker 3: of those penalties. I think that's where it should be done.

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Speaker 3: Let the judges decide.

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Speaker 1: Well, I would argue that.

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Speaker 3: I would argue it.

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Speaker 1: I would argue that you're tying the judges hands as

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Speaker 1: much as previously. You're just tying it in a different

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Speaker 1: way by saying that the fees the findes have to

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Speaker 1: be proportionate to the lot. And in some cases these

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Speaker 1: people may say there's no loss.

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Speaker 3: Well, if there's no loss, then that's a problem that

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Speaker 3: doesn't exist. Surely, that no loss.

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Speaker 1: That's where you are not and that is where you

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Speaker 1: are wrong Scott, because in some cases there may not

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Speaker 1: be a loss, but there has to be a disincentive

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Speaker 1: to the banks, doesn't it. There has to be a

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Speaker 1: punishment for doing something they know they shouldn't do.

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Speaker 3: Yeah, I completely agree with you, Heather, and that's why

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Speaker 3: I think it should be the courts and the judges

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Speaker 3: that make a balanced way to decision on what that

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Speaker 3: should be.

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Speaker 1: I've just been told that the fine is actually for

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Speaker 1: the period of the breach, not the whole known so

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Speaker 1: are you sure about your facts here?

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Speaker 3: But the KEP period of the breach is until it's corrected.

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Speaker 3: So if it hasn't been correct.

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Speaker 1: I come on, that is a completely different thing. I mean,

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Speaker 1: if the breach has been for eighteen months, that is

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Speaker 1: vastly different. Reimbursing eighteen months worth of fees compared to

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Speaker 1: twenty five years worth of mortgage.

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Speaker 3: Well, as I say, I'm not a lawyer, but you

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Speaker 3: are what I am so responsible for it. Yes, and

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Speaker 3: that's why I want to give the courts the discretion

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Speaker 3: to make an assessment that the courts can make based

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Speaker 3: on the facts of the case was entered to them.

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Speaker 1: You just said to me before, at the very start

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Speaker 1: of this you said banks are not calling for this.

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Speaker 1: Have you met Have you met with any banks? Have

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Speaker 1: you met with a banker's association about this?

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Speaker 3: I've met with the Bankers Association and they aren't calling

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Speaker 3: for it.

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Speaker 1: They your predecessor, Andrew Bailey, who actually wrote this into

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Speaker 1: the changes, met with the Banker's Association or the banks

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Speaker 1: about this.

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Speaker 3: I can't speak for Andrew. I've met with because Association.

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Speaker 3: They haven't met bs on that.

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Speaker 1: Don't you, I mean, come off at Why would you

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Speaker 1: people be making this change if it wasn't for the

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Speaker 1: fact that the banks wanted it?

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Speaker 3: Well, that's well, you might think that either. But I

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Speaker 3: take the view that the banks are entitled as our

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Speaker 3: credit unions, as our building societies, as our vehicle finance companies,

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Speaker 3: as are all lenders. I think that they should be

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Speaker 3: entitled to a fair and equitable judicial process, and I

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Speaker 3: want to give an opportunity for the judges to make

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Speaker 3: a decision about how impactful eras and omissions are, what

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Speaker 3: the impacts are for lenders, and what the appropriate penalties

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Speaker 3: should be.

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Speaker 1: Scott, it's always good to talk to you, and I

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Speaker 1: really appreciate you spending as much time with us as

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Speaker 1: you have. Thank you for that. Scott, Simson Komus finished

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Speaker 1: the Minnesota For more from Heather Duplessy Allen Drive.

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Speaker 3: Listen live to news talks the'd be from four pm weekdays,

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