Consumer Guarantees (Removal of Unrelated Party Lender Responsibility) Amendment Bill

Consumer Guarantees (Removal of Unrelated Party Lender Responsibility) Amendment Bill EXPLANATORY NOTE GENERAL POLICY STATEMENT The Consumer Guarantees Act 1993 (the Act ) is intended to provide protection for consumers against traders. The Act currently gives consumers broad recourse to both traders and lenders (creditors) equally. This is appropriate when the trader and lender are effectively the same, that is, when they are related parties in terms of NZ IAS 24: the accounting standard concerning related parties. However, when the trader and lender are separate and at arms length from each other (unrelated parties), recourse should be to the trader who made the sale and not the lender, because the lender has little or no influence on the sale and so should have no direct responsibilities under the Act. This anomaly has been highlighted by The New Zealand Initiative and arises because the current definition of supplier also applies the Act to the lender. The purpose of this bill is to amend the definition of supplier in the Act to exclude a lender who is an unrelated party from the definition of a supplier. CLAUSE BY CLAUSE ANALYSIS Clause 1 is the Title clause. Clause 2 is the commencement clause and provides that the Bill comes into force on the day after the date on which it receives the Royal assent. Clause 3 provides that the Bill amends the Consumer Guarantees Act 1993 (the principal Act ). Clause 4 amends section 2, which relates to interpretation. The definition of supplier that relates to certain creditors is amended to exclude unrelated parties, in terms of NZ IAS 24, and a definition of NZ IAS 24 is provided. The Parliament of New Zealand enacts as follows: 1 Title This Act is the Consumer Guarantees (Removal of Unrelated Party Lender Responsibility) Amendment Act 2015 . 2 Commencement This Act comes into force on the day after the date on which it receives the Royal assent. 3 Principal Act This Act amends the Consumer Guarantees Act 1993 (the principal Act ). 4 Section 2 amended (Interpretation) In section 2(1), insert in its appropriate alphabetical order: NZ IAS 24 means the New Zealand Equivalent to International Accounting Standard 24 issued by the Financial Reporting Standards Board of the New Zealand Institute of Chartered Accountants and approved by the Accounting Standards Review Board in November 2004 under the Financial Reporting Act 1993; and includes any amendments to the standard In section 2(1), definition of supplier , replace paragraph (b)(ii) with: ii a creditor within the meaning of the Credit Contracts and Consumer Finance Act 2003 who has lent money on the security of goods supplied to a consumer, if— A the whole or part of the price of the goods is to be paid out of the proceeds of the loan; and B the loan was arranged by a person who, in trade, supplied the goods; and C the creditor and that person are related parties in terms of NZ IAS 24: