"Anti-buy-backs Bill" halts housing scams

Published: Tue 7 Oct 2003 05:34 PM
"Anti-buy-backs Bill" halts housing scams
Hon. John Tamihere
First I would like to thank my colleague, Consumer Affairs Minister Judith Tizard for her work on this bill. I would also like to commend the Commerce Committee for its thorough consideration of the bill, and Commerce Minister Lianne Dalziel for her efforts in bringing to account the companies involved in operating housing buy-back schemes.
Earlier this year I became aware that a number of my constituents in my electorate of Tamaki Makaurau, many of them from the poorer parts of South Auckland, and many of them elderly, had lost their homes, or were under threat of losing their homes, through housing buy-back schemes.
Upon further investigation, it turned out that, while the buy-back schemes were most concentrated in Auckland, they were also operating in other parts of the country, including Christchurch and Tauranga.
Back in April I laid complaints with the Serious Fraud Office, the banking Ombudsman, police, the Auckland District Law Society and the Commerce Commission about the scams operating in my electorate.
Investigations by the authorities involved continue, and I am confident that those whose conduct is found to have been illegal, unprofessional or unethical will face the full consequences of such behaviour.
In June my colleague Lianne Dalziel moved to place eight companies operating buy-back schemes in statutory management, preventing the immediate sale of a number of families' homes.
The government also set up a hotline so that victims of housing buy-back schemes could get help, and alert the government to the full extent of the problem.
The people duped into these scams were not greedy people, hooked into get-rich-quick schemes by their own greed. Not all of them were the most sophisticated people in the world, but they were ordinary, honest, hardworking Kiwis.
They were people who, through years of hard work and saving had built up sometimes substantial equity in their own homes, and when offered the chance to use that equity to help family members to also be financed into their own homes, they took that opportunity.
Under the deals, they signed over the title of their homes to finance companies and "rented" back their own homes, with the opportunity to buy back their home within a few years.
Sadly for them, these schemes were set up to fail. The people who set them up designed them so that the people who signed up would inevitably could not sustain repayments. As soon as so much as a single payment was in default, the scam operators could turn these people out of what they thought were their own homes; they could sell the houses out from under them, and still claim the previous home owners owed them thousands of dollars.
The people signing up to these deals simply did not understand the implications of what they were getting into - if they had they would never have agreed to the deals.
They were taken in by some extremely cunning conmen - and the people running these deals are best described as sharks, who prey on the most vulnerable in our communities.
I have been contacted by more than 70 families involved in such schemes, and I believe there are many more. Many have not come forward because they are ashamed and embarrassed about going public after being ripped off by these shysters.
In some cases I have seen evidence that there was out and out fraud involved - for example, fraudulent signatures, and signatures cut from one document, and pasted on to another.
In other cases it was a matter of confusing people without a high level of education with masses of complicated documents, legalese and fine print. Hidden away in the fine print were exorbitant "transaction fees" and "establishment fees" of as much as $55,000.
In some cases, the conmen put unwitting victims' minds at rest by using respected elders in the community to publicly vouch for their schemes. Only the elders were being duped just as badly as the consumers. I know of one such elder who is now likely to lose his own home and faces bankruptcy as a result of being coned by on of these companies.
People entered into these schemes without independent legal advice - the same people giving them legal advice also acted as lawyers for the finance companies.
Amendments to this bill will protect consumers against future losses through such schemes, and will provide remedies for those already involved in these deals.
The bill will ensure that any consumer entering into a deal has received independent legal advice. It will prevent the sale of property without court permission, where full disclosure has not been made, or independent legal advice has not been given.
Futhermore, the bill's provisions relating to oppressive conduct will provide consumers with remedies against scam operators.
Together, these elements of the legislation should put an end to buy-backs.
Similar provisions in Australian law against "unconscionable conduct" covering credit arrangements, banking transactions and financial advice, particularly advice to disadvantaged groups, have been effective, and I expect that this legislation will carry similar weight in protecting consumers.

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