ACT's leader tells Commerce & Consumer Affairs Minister Paul Goldsmith to overrule 'over zealous' regulator and make a law change for P2P lender Harmoney

ACT's leader tells Commerce & Consumer Affairs Minister Paul Goldsmith to overrule 'over zealous' regulator and make a law change for P2P lender Harmoney

By Gareth Vaughan

ACT Party leader David Seymour is effectively accusing the Government of putting 45 jobs at peer-to-peer (P2P) lender Harmoney on the line by not overruling the Commerce Commission and pushing through a "small amendment" to the Credit Contracts and Consumer Finance Amendment Act.

Seymour questioned Commerce and Consumer Affairs Minister Paul Goldsmith in Parliament on Tuesday about regulatory uncertainty around P2P lending platforms and the Credit Contracts and Consumer Finance Amendment Act (CCCFA). The ACT leader described the Commerce Commission as an "over zealous" regulator.

Seymour's questioning also suggested a difference of opinion between the Financial Markets Authority (FMA), which licences P2P lenders, and the Commerce Commission, which oversees consumer lending laws. The Commerce Commission has filed civil proceedings in the Auckland High Court seeking clarification over whether the "platform fee" charged by Harmoney to borrowers is a credit fee under the CCCFA. 

After several questions were played with a straight bat by Goldsmith, Seymour asked, "Does the Minister find it odd that his government spends so much time trying to pump up economic diversification and as soon as the private sector gives us some diversification his regulatory regime kills it as it is 45 employees at Harmoney in Parnell right now?"

Goldsmith said he agreed the regulatory framework for P2P lending needs to be clear, and said the Government does want to support innovation and competition in credit markets.

"And that's why we're giving this very careful consideration," said Goldsmith.

"The member will be aware that the Commerce Commission has [filed] civil proceedings to clarify whether one peer-to-peer lender platform fee constitutes a credit fee under the Credit Contracts and Consumer Finance Act so I don't want to go into the specific details of that. In terms of the broader question, yes I've had advice from MBIE [Ministry of Business, Innovation & Employment], FMA and the Commerce Commission and I'm considering them all as to whether the overall settings are right. And I'll be working with officials, and considering that carefully over the next few weeks," Goldsmith said.

Goldsmith also said that, as Minister, he wouldn't want to interfere with the independent regulator, the Commerce Commission.

Harmoney founder and co-CEO Neil Roberts last month told Harmoney representatives had met with Goldsmith "to request that this issue be clarified by appropriate legislative changes and we are hopeful of hearing back soon that there will be a clarification of the law." In response a spokeswoman for Goldsmith said he had asked government officials to examine concerns raised with him by Harmoney.

Harmoney, which says it has now facilitated $330 million of lending, launched in September 2014. From launch until December last year Harmoney charged borrowers a platform fee of between 2% and 6% of their loan amount, based on the loan's risk grade. However, last December - against the backdrop of a Commerce Commission probe - the fee was changed to a one-off flat fee of $375. 

The Commission argues the platform fee is a credit fee under the CCCFA, and that Harmoney is a creditor. Harmoney, however, argues it's an intermediary not a creditor, and that the fee is the revenue it earns for running its loans marketplace. The Commerce Commission notes that if the Court finds that the platform fee is a credit fee, the CCCFA requires the fee to be reasonable and only cover the lender’s transaction-specific costs. 

Squirrel Money and Lending Crowd, which were licensed as P2P lenders after Harmoney, launched assuming their platform fees would be captured by the CCCFA and thus adopted different fee models. And LendMe is facilitating small business loans, bridging loans, refinancing and property developments, plus plant and equipment lending, rather than consumer loans. 

The full exchange between Seymour and Goldsmith is contained in the video below. Seymour subsequently issued this statement.

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It is not the Government putting jobs at risk it is the Harmoney company not following the Law of New Zealand which we have and wanting to change it to something that suits themselves. They should have asked the Government to look at changing the Law BEFORE they employed 45 people to break our current laws.