“The Commerce Committee inquiry into finance company failures will provide a welcome opportunity to correct some misperceptions about moratoria and – perhaps – to revisit some earlier policy decisions,” says Roger Wallis, a partner at Chapman Tripp.
Chapman Tripp has a particular interest in moratoria having acted for the majority of them, particularly the biggest ones.*
“A moratorium can offer a better outcome to investors than receivership and can be more innovative and tailored to individual circumstances. A lot of the things that the inquiry will look into are already covered by moratoria we have been involved with,” he said.
He noted that the Terms of Reference, which the committee had been developing behind closed doors over the last two months, were incredibly wide-ranging and covered a number of issues which had either already been regulated for or would have been regulated for by next year.
“As a result of all this regulation, the environment the committee will be reporting into will be quite different to the environment that applied in 2007 when the financial collapses began.
“Hopefully the committee will take the platform provided by the inquiry to rethink some earlier changes. A central plank of the regulatory regime for finance companies from next year, for example, is a mandatory requirement for credit ratings.
“We have seen over the last 18 months what happens to people who rely too heavily on credit ratings,” Roger Wallis said.
*Moratoria Chapman Tripp has advised on include: Hanover Group, OPI Pacific Finance, Boston Finance, North South Finance, Beneficial Finance and Orange Finance. Receiverships include: Bridgecorp, Belgrave Finance, Property Finance Securities, Western Bay Finance, Numeria Finance, Capital + Merchant Finance and Kiwi Finance.