|Consumer Credit Bill - continued||House of Commons|
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Clause 45: Duties to notify changes in information etc.
77. Clause 45 inserts a new section 36A after section 36 of the 1974 Act, which concerns the duty on licensees to notify OFT of certain changes to their circumstances. Section 36A(2) requires licensees to provide OFT with information or documents in respect of a relevant application, where OFT has (after the application has been determined) published a general notice requiring the provision of that information. In this clause a relevant application means the original application for a standard or group licence, or an application for the renewal or variation of such a licence.
78. After the determination of a relevant application, the holders of standard licences and original applicants for group licences must inform OFT (within 28 days of their becoming aware) of all documents and information which they have provided under section 6 of the 1974 Act or under this clause, which have or has been superseded or otherwise affected by a change in circumstances. Any change of circumstances must fall within a description specified by OFT by general notice that must be relevant to a question of fitness of persons to have a standard licence or the public interest in maintaining a group licence.
79. The same persons must also notify OFT of any errors or omissions in any information or document which they have provided by virtue of section 6 or this clause that comes to their attention following determination of a relevant application. Section 36A does not require a licensee to notify OFT of anything that he is already required to notify OFT about under section 36 of the 1974 Act or any clerical error or omission in any information or document that does not affect the substance of the information or document.
Clause 46: Power of OFT to require information generally
80. Clause 46 inserts a new section 36B after the new section 36A (inserted into the 1974 Act by clause 45). Section 36B allows OFT, on giving notice, to require a person to provide specified information and documents. The notice must set out OFT's reasons for requiring the information and documents. OFT may require such information or documents from the holder of a standard licence and the original applicant for a group licence only if it is reasonably required for the exercise of OFT's functions under the 1974 Act. It may require information from others if a specified act or omission has occurred (or OFT has reason to suspect that a specified act or omission has occurred) and the production of the information or document is reasonably required to enable OFT to take steps under Part 3 of the 1974 Act or to consider whether to do so. Those events are specified in section 36B(6).
Clause 47: Power of OFT to require access to premises
81. Clause 47 inserts a new section 36C after the new section 36B (inserted into the 1974 Act by clause 46). Section 36C allows OFT to issue a notice requiring a licensee under a standard licence or the original applicant for a group licence to ensure that an officer of an enforcement authority (as defined in section 161(1) of the 1974 Act) may enter the specified premises on reasonable notice and at reasonable times for the purposes of observing a licensee's carrying on of his business, and to inspect relevant specified documents relating to the licensee's business kept at those premises, where it is reasonably required for purposes connected with OFT's functions under the Act. It may issue a notice to persons who are licensees under group licences if the events set out in section 36B(6) have occurred or OFT has reason to believe they have occurred and the observation or inspection is reasonably required to enable OFT to take a step under Part 3 of the 1974 Act or to consider whether to do so.
82. The licensee must give such access on such days and at such hours as OFT reasonably requires. A licensee is not required to secure access to premises if OFT has not given reasonable notice or the access is sought in respect of premises used solely as a dwelling. An officer of an enforcement authority inspecting a document may require anyone on the premises who is involved in the licensee's business to give him an explanation of that document.
Clause 48: Entry to premises under warrant
83. Clause 48 inserts a new section 36D after the new section 36C (inserted into the 1974 Act by clause 47). Section 36D allows OFT to obtain a warrant from a justice of the peace or (in Scotland) a sheriff if he is satisfied that there are reasonable grounds for believing that there is on the premises information or documents in relation to which OFT could impose a requirement under section 36B and that, if such a requirement were to be imposed, it would either not be complied with or the information or documents would be tampered with. An officer of an enforcement authority may be authorised to enter and search the specified premises, to seize and detain any information of a description specified in the warrant. The officer may also take such steps as are reasonably necessary to secure the protection of such documents or information, take such persons and equipment with him as he thinks necessary and use such force as reasonably necessary.
Clause 49: Failure to comply with information requirement
84. Clause 49 inserts a new section 36E after section 36D (inserted into the 1974 Act by clause 48). Section 36E deals with the consequences of failing to comply with an information requirement under the new section 36B or request to gain access to premises under section 36C. OFT may apply to the court for an order to enforce an information requirement or request to gain access to premises. If the information defaulter is a body corporate, or an unincorporated association, an officer of the body who is wholly or partly responsible for the failure may be required to pay costs or expenses as specified in the court order. If the information defaulter is a partnership, a member of that partnership may be so liable.
Clause 50: Officers of enforcement authorities other than OFT
85. Clause 50 inserts a new section 36F after the new section 36E (inserted into the 1974 Act by clause 49). Section 36F provides that anything done or not done by an officer of an enforcement authority other than OFT acting under sections 36C and 36D shall be treated as if done or not done by an officer of OFT, other than in respect of any criminal proceedings brought against that officer or his enforcement authority in respect of anything done or not done by that officer. Such an officer may not disclose any information that he obtains by virtue of new sections 36C or 36D other than to OFT unless he has OFT's approval or is under a duty to make the disclosure.
Clause 51: Consequential amendments relating to information
86. Clause 51 makes certain consequential amendments to the 1974 Act in respect of the sections relating to the provision of information to OFT or other enforcement authority. It extends section 7 of the Act, which provides that it is an offence for a person knowingly or recklessly to give OFT information which is false or misleading in a material particular, to cover information given under any requirement imposed or other provision made by or under the Act. The clause also provides that breach of a requirement imposed under the new sections 33A and 33B or certain of the information provisions (see new sections 36A to 36C, inserted by clauses 45 to 47 of the Bill) will not trigger the powers of entry and inspection under section 162 of the Act nor will it trigger criminal liability under section 165 of the 1974 Act. The clause inserts a new section 174A into the 1974 Act which makes clear that the information powers in the Act, as amended by the Bill, do not override legal professional privilege.
Clause 52: Power of OFT to impose civil penalties
87. Clause 52 inserts a new section 39A after section 39 of the 1974 Act. Section 39A confers a power on OFT to impose civil penalties on persons who do not comply with a requirement imposed by OFT under the new sections 33A, 33B or 36A inserted in the 1974 Act by clauses 38, 39 and 45 of the Bill. If a person has failed to comply with such a requirement, then OFT may, by giving the person a penalty notice, impose on him a penalty of up to £50,000 per breach. A person who commits such a breach is called a "defaulter".
88. A penalty notice must set out OFT's reasons for deciding that the defaulter is liable to a penalty, state the amount of the penalty that is being imposed, set out OFT's reasons for determining that amount, specify how the payment of the penalty may be made and specify the period within which the penalty is required to be paid to OFT (which should not be earlier than the end of the period during which an appeal may be brought against the imposition of the penalty). The defaulter is required to pay the penalty in the manner specified in the penalty notice.
89. The maximum penalty that may be imposed by OFT is £50,000 for every breach of a requirement. In determining the amount of a penalty, OFT must have regard to its published guidance and any penalty or fine that has already been imposed on the defaulter by any other body in relation to the conduct the subject of the penalty (see notes in respect of clause 54 below). OFT must also have regard to any other steps which it has taken or it might take in relation to the conduct in question (for example, revocation or suspension of a licence) (see notes in respect of clause 53 below). If the defaulter does not pay the penalty, OFT may recover it and the unpaid balance will incur interest.
Clause 53: Further provision relating to civil penalties
90. Clause 53 inserts a new section 39B after the new section 39A (inserted into the 1974 Act by clause 52). Before determining to impose a penalty on a person, OFT must give a notice to that person informing him that it is minded to impose a penalty on him and which sets out its reasons for being so minded, states the proposed amount of the penalty, sets out its reasons for proposing that amount and the proposed period for the payment of the penalty and invites him to make representations in accordance with section 34 of the 1974 Act. The maximum penalty may be changed by an order of the Secretary of State (approved by an affirmative resolution of both Houses of Parliament).
91. OFT must give a general notice of the imposition of a penalty on a person who is a responsible person in relation to a group licence, which must include OFT's reasons for deciding that the defaulter is liable to a penalty, state the amount of the penalty that is being imposed and set out OFT's reasons for determining that amount. A person may appeal in relation to the decision of OFT to impose a civil penalty.
Clause 54: Statement of policy in relation to civil penalties
92. Clause 54 inserts a new section 39C after the new section 39B (inserted into the 1974 Act by clause 53). Section 39C requires OFT to prepare and publish a statement of policy as regards the imposition of penalties under section 39A and the determination of the amounts of such penalties. In imposing any penalty, OFT must have regard to the statement of policy and it cannot impose a penalty until it has published the statement of policy. OFT may revise the statement of policy at any time after it has been published and must publish it as revised. In preparing or revising the statement, OFT must consult such persons as it thinks fit. OFT cannot publish a statement of policy without the approval of the Secretary of State and it must publish it in such manner as it thinks fit for the purpose of bringing it to the attention of those likely to be affected by it.
93. Clauses 55, 56, 57 and 58 establish the Consumer Credit Appeals Tribunal and deal with appeals to and from that Tribunal.
Clause 55: The Consumer Credit Appeals Tribunal
94. Clause 55 establishes the Tribunal and gives the Lord Chancellor the power to make its procedural rules. Schedule A1 sets out requirements for the appointment of the President of the Tribunal and the panels from which members of the Tribunal will be drawn, imposes requirements in relation to their qualifications and terms of office and also provides for the appointment of a Deputy President and administrative staff. It sets out the powers of the Tribunal to make orders and to award costs.
Clause 56: Appeals to the Consumer Credit Appeals Tribunal
95. Clause 56 amends section 41 of the 1974 Act which deals with appeals under the Act. Appeals in respect of decisions by OFT under the Act will be to the Tribunal and not the Secretary of State. The appeal is a rehearing of the determination appealed against. The time limit for claims and the form of the notice of appeal are to be specified in the rules of the Tribunal.
Clause 57: Appeals from the Consumer Credit Appeals Tribunal
96. Clause 57 inserts a new section 41A after section 41 of the 1974 Act and establishes the right to appeal to the Courts of Appeal of England & Wales and Northern Ireland or Court of Session in Scotland on a point of law against a decision of the Tribunal. If the appeal court considers that the decision is wrong in law it may quash or vary the decision, substitute a decision of its own for the decision of the Tribunal or remit (with directions, if it wishes) the matter back to the Tribunal for a rehearing and decision. An appeal may be made from the Courts of Appeal to the House of Lords with the leave of the Court or of the House of Lords. Appeals from the Court of Session lie to the House of Lords in the manner provided for in section 40 of the Court of Session Act 1988.
Clause 58: Consequential amendments relating to appeals
97. Clause 58 makes certain amendments to the 1974 Act in relation to the new appeals provisions. Clause 58(5) includes the Consumer Credit Appeals Tribunal as a tribunal covered by the Tribunals and Inquiries Act 1992. This means that the Tribunal will be subject to the supervision of the Council on Tribunals.
98. Clauses 59, 60 and 61 extend the jurisdiction of FOS established under Part 16 of FSMA, to hear complaints involving licensed persons under the 1974 Act. It provides for the detailed operation of the new consumer credit jurisdiction to be determined largely by rules made by FOS on which it is required to consult in accordance with the requirements of Schedule 2. A contravention by a licence-holder of any provision relating to the consumer credit jurisdiction may be considered by OFT in determining that person's fitness to hold a licence (see the notes on clause 29 above).
Clause 59: Financial Services Ombudsman scheme to apply to consumer credit licensees
99. Clause 59 inserts a new section 226A into FSMA introducing the new consumer credit jurisdiction and will require holders of standard licences under the 1974 Act to submit to the jurisdiction of the scheme. The Secretary of State may bring within the consumer credit jurisdiction types of consumer credit business. The scheme operator may make rules to describe the complaints it will and will not deal with under the jurisdiction it has been given. For example, if the Secretary of State was to apply the jurisdiction to "consumer credit businesses", FOS could consider (among other things) acts or omissions relating to advice on the credit, the making of the agreement, or the administration of the account. The clause sets out the circumstances in which a complaint can be dealt with: namely, that the complainant meets the relevant eligibility criteria (set by the 1974 Act and the scheme operator) and has asked the Ombudsman to consider the case. Finally, if the complaint can be dealt with under FOS's existing compulsory jurisdiction it will not be dealt with under consumer credit jurisdiction (e.g. a complaint involving an FSA authorised firm engaging in consumer credit activity will be covered by FSA's rules under section 226 of FSMA, rather than FOS's rules under section 226A).
100. Section 226A(6) makes provision for the making of rules in relation to the consumer credit jurisdiction by FOS. Such rules must be approved by FSA.
Clause 60: Funding of ombudsman scheme
101. Clause 60 prescribes the funding arrangements for the new scheme. It provides for FOS to levy fees on licensees to meet both the costs of establishing the consumer credit jurisdiction of the Ombudsman scheme and the costs of running the consumer credit jurisdiction. They may also include a fee to cover the costs of collection.
Clause 61: Consequential amendments relating to ombudsman scheme
102. Clause 61 makes consequential amendments to the 1974 Act and FSMA in relation to the ombudsman scheme, including inserting reference to the consumer credit jurisdiction. Section 229 of FSMA is amended to allow FOS to specify a maximum limit for compensation that can be awarded under the consumer credit jurisdiction. Section 353 of FSMA, which relates to powers to allow the disclosure of information, is amended to allow the Ombudsman to disclose information about cases and decisions to OFT to assist or enable OFT to discharge its licensing functions under the 1974 Act.
Clause 62: Monitoring of businesses by OFT
103. Section 1 of the 1974 Act sets out the general functions of OFT under the Act. Clause 62 amends that section to impose a general duty on OFT to monitor businesses being carried on under licences issued under the 1974 Act.
Clause 63: Determinations etc. by OFT
104. Clause 63 replaces section 183 of the 1974 Act. The new section 183 will provide that OFT can vary or revoke any determination made or direction given by it under the Act, except in relation to:
Schedule 1: The consumer credit appeals tribunal
105. Schedule 1 inserts a new Schedule A1 into the 1974 Act. The new Schedule A1 relates to the establishment and running of the Consumer Credit Appeals Tribunal established by Clause 55. Part 2 empowers the Lord Chancellor to appoint the President, Deputy President, the panel of Chairmen and members of the Tribunal, to determine the terms of their appointment, remuneration and allowances and to make provision for the appointment and remuneration of staff. Part 3 provides for the constitution of panels of the Tribunal to hear appeals and the appointment of experts. Part 4 deals with the Tribunal's powers and procedures. Paragraph 8 empowers the Lord Chancellor to direct the times and places at which the Tribunal may sit. Paragraphs 9 to 11 make provision for the conduct of hearings, the rules of evidence and the rules of procedure to be employed by the Tribunal. Paragraphs 12 to 16 make provision for the manner in which the Tribunal may dispose of appeals, make decisions and award costs and also for the enforcement of its orders.
Schedule 2: The consumer credit jurisdiction
106. Schedule 2 sets out a new Part 3A to be inserted into Schedule 17 of FSMA and relates to the consumer credit jurisdiction of the Ombudsman. This requires FOS to make procedural rules for the operation of the consumer credit jurisdiction of the scheme. For example, it provides for rules to be made which allow an Ombudsman to dismiss a complaint without consideration of its merits, for example where he deems the complaint to be frivolous or vexatious, and for the early stages of the handling of a complaint, for example a conciliation stage, to be handled by a member of FOS's staff other than an Ombudsman.
107. The new Part 3A also sets out the procedural matters to be followed by the Ombudsman for the making of rules in respect of the consumer credit jurisdiction. These include, for example, the means of recognising a verified version of the consumer credit rules and the obligation on FOS to consult before making any rules. The new Part 3A also deals with the fees payable to the Ombudsman and the way in which money awards made by the Ombudsman will be enforced.
Schedule 3: Transitional provision and savings
108. Schedule 3 sets out a number of transitional provisions which will apply following the commencement of specified sections. Some of these provisions are set out below in more detail.
109. As at the date of the commencement of section 86F, any term in an agreement existing at that date which enables the creditor to impose compound interest on a default sum will have the effect that he will only be able to recover simple interest in that regard.
110. Sections 140A to 140C will apply to all new agreements made after the commencement date and will apply to any agreements already made which continue in existence at a specified date after commencement. The period between the commencement date and the specified date is called the "transitional period." Sections 137 to 140 of the 1974 Act will continue to apply to agreements that have been completed (e.g. no party has any further obligations under the agreement because no further sums are payable) before the end of the transitional period. The transitional period will allow creditors to ensure that any agreements that will continue beyond the end of the transitional period comply with the amended 1974 Act.
PUBLIC SECTOR FINANCIAL COST AND MANPOWER EFFECTS
111. The Bill should have no significant effects on central government expenditure or public service manpower, however there are some other effects on expenditure:
SUMMARY OF THE REGULATORY IMPACT ASSESSMENT
112. The Government announced a review of the 1974 Act in July 2001. The main conclusions of the review, as set out in the White Paper, were that the legislation had worked well but that some important aspects of it required reform. Those areas were identified as consumer rights and redress, consumer credit licensing and whether there was a continuing need for a financial limit to the regulation of consumer credit agreements.
113. The Regulatory Impact Assessment for the Bill estimates the following costs and benefits. The Regulatory Impact Assessment is available from the Consumer & Competition Policy Directorate of the Department of Trade & Industry, 1 Victoria Street, London SWH1 0ET.
Potential Consumer Benefits
114. In addition to reducing consumer detriment, which is not readily quantifiable but is significant, the proposed reforms can provide consumer benefits. The provision of clearer pre-contractual information will allow consumers (should they wish) to shop around and potentially achieve a better deal prior to entering into the agreement. The provision of additional post-contractual information as proposed in the Bill may encourage consumers to switch to cheaper products. The provision of clearer post-contract information is expected to be directly attributable to £153 million of consumer savings a year.
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