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Mr. O'Brien: I am grateful for the Minister's explanation. I hasten to add that I meant no disrespect to him; I very much enjoy working with himand sometimes at himat the Dispatch Box. It would have been helpful to know that the Secretary of State was not listed to appear, and that today's arrangements were pre-planned. I am somewhat relieved to hear that she did not have to choose between being in London with the Prime Minister or in Africa with the Chancellor; instead, she decided to strike out on her own and go to India. [Interruption.] Labour Members clearly do not like being reminded of the proper courtesies of the House.
People have always wanted things that they cannot immediately afford, and there will always be others on hand with money to lend to themat a cost. We cannot at all times follow Polonius's famous injunction in "Hamlet" to
[Interruption.] Polonius, who was an old man, was indeed struck through after giving that sensible advice to a boy. Let us hope that no attempt is made to strike through this Bill, because as the Minister knows, it enjoys broad support.
As the former chairman of the National Consumer Council, Baroness Wilcox, has written,
"Many people are forced by necessity to borrow, sometimes on contracts that they do not understand, and at rates that realistically they may not be able to afford."
For precisely that reason, a previous Conservative Government introduced the Consumer Credit Act 1974. It regulates consumer credit and consumer hire agreements for amounts up to £25,000, and lays down rules covering the form and content of agreements; credit advertising; the method of calculating the annual percentage rate of the total charge for credit; the procedures to be adopted in the event of default, termination, or early settlement; and extortionate credit bargains. The Act also requires all traders who make regulated agreements to obtain licences from the Office of Fair Trading.
Of course, since the early 1970s markets for consumer credit have expanded significantly. Liberalisation of financial markets in the 1980s and shifting attitudes towards consumer credit have since contributed to an environment of greater financial sophistication. In 1971 one type of credit card was available. Today there are more than 1,300. Unsurprisingly, however, such rapid evolution of the consumer credit market has not occurred without serious consumer casualties along the way. The signs are that the number of casualties is increasing, not declining, under an increasingly outdated legislative framework.
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According to the National Association of Citizens Advice Bureaux,
"The number of debt related problems dealt with by Citizens Advice Bureaux has risen sharply in recent years, growing by about 75 per cent. since 1997."
I would like to congratulate the outstanding citizens advice bureau in Winsford, in my constituency. It has helped many people, particularly those in very challenged social and economic circumstances who have already got into debt problems. In response to an earlier intervention, the Minister made the important point that citizens advice bureaux are not the only organisations giving advice on debt; others also offer advice to such people before insurmountable debt problems arise. However, CABs are among the best organisations for offering advice to those who have already incurred the debt from which they must extract themselves.
Mr. Martin O'Neill (Ochil) (Lab): In the light of the praise that the hon. Gentleman is showering on CABs, can he assure us that they would not be subject to the proposed economies and savings in Government expenditure on which Mr. James and others are advising the Conservatives?
Mr. O'Brien: As usual, the hon. Gentleman makes a partisan point. I had hoped that, as Chairman of the Trade and Industry Committee, he would make an impartial one. Just as the Government have initiated the Gershon efficiency savings review, so the James report is advising the Conservative party. However, that report adopts a much more rigorous, bottom-up approach to efficiency savings. Whether the assurance that the hon. Gentleman seeks can be given will be determined by my right hon. Friend the shadow Chancellor. I am sure that where efficiency savings can be made, they will be made. No test would conclude that CABs should be cut, so I hope that the hon. Gentleman is not trying to suggest that the James review would recommend doing so.
Angela Eagle: All Members will join the hon. Gentleman in paying tribute to the great work that CABs do. In its briefing to Members for Second Reading, NACAB says that the £50,000 limit on fines for those who contravene the terms of their licence and deal in unfair or extortionate credit agreements ought to go. As the hon. Gentleman has spent the past few minutes praising CABs, and in the light of their expertise and experience, does he agrees with that assessment that the £50,000 limit ought not to be included in the Bill, and should go?
Mr. O'Brien: I am grateful to the hon. Lady for raising that point. I heard her previous intervention on the Minister, and she raises a fair question about putting the ceiling in the Bill. It is not unprecedented, but it is not common. We all work closely with the CAB in our surgeries and have a great deal of respect for it, particularly on debt issues. My hon. Friend the Member for Tewkesbury (Mr. Robertson) will be leading for us in Committee, and I am sure that he will deal with that matter and explore it in greater detail.
The challenge for policy makers is to ensure that consumers are, in the words of Baroness Wilcox, "in control" of the credit they take. Consumer choice is
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rightly a fundamental principle of a free market economy and consumers must be able to exercise their choice responsibly on the basis of full information that will apply for the life of the contract, not just at the time of the initial transaction. That is particularly the case for people on relatively low incomes. If their choices and obligations are not made easier to understand, they will continue to suffer the increasing financial exclusion that has escalated during the last seven years. It happens that, under a Labour Government, the gap between rich and poor has significantly widened.
Like the citizens advice bureaux and the National Consumer Council, the official Opposition welcome in principle the Bill's aims of cracking down on loan sharks and unscrupulous lenders, helping consumers challenge unfair credit agreements, and making credit agreements more transparent and understandable. We must bear in mind the fact that the vast majority of consumers handle credit sensibly, and for them the credit market is an important aspect of managing their affairs. Those on low incomes tend to be more vulnerable to the vicissitudes of financial fortune, and I pay tribute to the many Church organisations, charities, local government organisations and other groups, as well as the CAB, for the important work that they do on behalf of people on low incomes in their communities. It is vital unrelenting work of almost immeasurable worth to society as a whole, let alone to the individuals and families concerned. A prime example is the Royal United Kingdom Beneficent Association.
When we legislate, we must be careful not to confuse the fact of debt with the cause of debt, and we should not lose sight of the growing evidence that the primary cause of debt is often linked to the heinous practice of over-aggressive marketing, particularly to low-income people. I have to say that that applies in particular to doorstep selling, although I recognise the slight distinction that we have to make when it comes to doorstep selling and the campaign focused on it. That activity is not always carried out by those traditionally labelled the pariahs of societyloan sharks. Over-aggressive marketing is carried out by others, too, but the Bill is strangely silent on that serious aspect of the problem. I hope that the Minister will take the opportunity to explain the Government's thinking on what appears to be a glaring omission from the Bill.
I now turn to the action against what are known as rip-off practices. The duty of lenders to treat customers fairly in today's consumer credit market is a particular feature of the proposed legislation. The present extortionate credit test is 30 years old. In that time, the test has produced only 10 successful cases. It is clear that the difference between the original loan amount and the amount demanded back by creditors established as extortionate by the original Act is failing to prevent enough undesirable exploitative credit arrangements. It needs revision.
We support the principle of clauses 19 to 22, which give the courts new powers to make judgments about unfair credit agreements, moving the focus away from credit agreements to the overall way in which the lender deals with the customer. However, concern remains about the details of the legislation. The CBI and others
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believe that the burden of proof that it places on traders, so that every creditor-debtor relationship is unfair until proved to the contrary, is extreme.
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