Mr. Waterson: Ideally, without using the standard civil service word ''shortly'', can the Under-Secretary tell me when the review is likely to be concluded and when concrete proposals on consumer credit will emerge?
Miss Johnson: We have produced a timetable. I do not have it in front of me, but it is a published document that sets out the various elements. I will gladly give the hon. Gentleman a reference for him to follow it up later.
Mr. Gareth R. Thomas (Harrow, West): Will my hon. Friend reassure me that as part of the review of consumer credit legislation, the case of Paragon
Column Number: 656Finance, which was taken to the High Court in October and November last year, will be dealt with? Its standard interest rates quadrupled, apparently because the definition of ''extortionate'' in consumer credit legislation is insufficiently rigorous to prevent such activity.
Miss Johnson: Certainly the definition of extortionate is one of the issues under active consideration in the review. I can reassure my hon. Friend that we have every intention of dealing with the problem that he rightly draws to our attention.
The hon. Member for Orkney and Shetland seems to have left the Committee for this morning, but I am sure that the hon. Member for Southport (Dr. Pugh), who is in his place, will relay this information to him. The individual insolvency provisions will apply only to England and Wales, and it will be a matter for the Scottish Executive and Parliament to decide whether to apply the provisions north of the border.
There are a few general points to make about the question about bankruptcy proposals fuelling consumer bankruptcy in addition to my earlier points about mortgage arrears. The Committee should remember that of more than 11 million mortgage customers in that fund in the UK, only 18,000 were repossessed during 2001, which is only 0.16 per cent. of all mortgages. It is a tiny proportion, and mortgage lending represents 81 per cent. of all consumer lending in the UK.
Conservative Members suggested that the nature of the Bill would encourage the irresponsible use of credit among consumers. In particular, two systems were suggested; a relaxed regime for those in business and no change for those whose bankruptcy is a result of non-business debts. As I mentioned earlier, the current law does not discriminate between business and consumer bankruptcies. People find themselves being made bankrupt through no fault of their own. For those in business, that could be the result of a disproportionate increase in the cost of rent or materials. For those who are not, it could be the result of redundancy, ill health or marital breakdown; the sort of reasons that also lead to problems with mortgages.
As of 31 December 2001, bankruptcy statistics show that there is a split between self-employed bankrupts and the remainder; 43 per cent. were self-employed bankrupts and 56 per cent. were on the non-self-employed or ''consumer'' side. The use of the terms ''business'' and ''consumer'' bankrupts is, as I said, a crude way of expressing the difference. A consumer bankruptcy might apply to some self-employed traders if, for example, they have simply spent more than the income generated by their businesses. Some employees may also have small businesses that they carry on in their spare time.
The bankruptcy restrictions orders cover both consumers and traders and will act as a serious deterrent to the irresponsible. I have already run through the provision concerning the restrictions of between two and 15 years. As we all know, it is not an easy option, and will not become so under our proposals, for someone to take the route into
Column Number: 657bankruptcy. Trustees will be entitled to realise the same assets and income as now, and bankrupts who are able to contribute will still be required to do so. In fact, the income payments orders provision, which I mentioned earlier, will extend beyond discharge and run for three years, which is slightly longer than the current norm. The orders will still be advertised and the information will be held in the public domain. There will be a register, and the credit reference agencies will use the information.
The bankruptcy will affect consumers' future ability to obtain further credit and gain access to other goods and services. When a consumer has behaved irresponsibly, it will be probably be some time before lenders are prepared to risk offering credit. Therefore, there is a major disincentive for the majority of consumers. None the less, we believe that it is right to have a differentiation that has not been made before for those who ended up in that position through no fault of their own. It is also right to ensure that there is a different path of treatment, which is speedier and more effective and does not contain the stigma that is rightly appropriate for those who are placed under the BRO regime.
Column Number: 658
Question put and agreed to.
Clause 245 ordered to stand part of the Bill.
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