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Mr. Michael Weir (Angus) (SNP):
On behalf of the Scottish National party and Plaid Cymru, I broadly welcome the Bill and we will support it. We believe that the new definition of unfairness is a major step forward that will start to attack the problem of excessive credit charges. However, in an earlier intervention on the Minister, I expressed some concerns about whether it would attack the root of the problemthe fact that only a few cases ever came to court. I accept that under the
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new definition that may change, and I welcome dispute resolution, despite the fact that I used to earn my crust as a lawyer. In these particular circumstances, such resolution could prove very useful, but I still feel that many people who are suffering under such agreements will never come forward, whatever the test.
Following the Meadows case I, with other Members, met representatives of the Office of Fair Trading to discuss the powers available to it. It appears that although the courts may find an agreement to be excessive, under the present law there are no powers to examine other agreements granted by a company. I appreciate that there is the matter of resources, and that this may be difficult, but will the Minister consider whether the intermediate sanction given to the OFT could include the power to order a company at least to alert other lenders to the judgment against it, and to investigate the terms of similar loans to establish whether they could be dealt with, without people having to go through the suffering of bringing a court case in the future?
In the Meadows case, the loan was granted by a company different from the one that finally became the defendant in the action. The loan had been sold on, which is not unusual in the financial services world. What concerned me when I spoke to the OFT was that it appeared that even when a company's licence was suspended or revoked, there was nothing to prevent it from simply selling on the loan book to another company, with the loans continuing under the same terms and conditions. Although a company had been struck off for excessive charges or other actions, its loans were not subsequently checked. That is wrong. There should be some procedure for alerting people to that problem. If a company has granted one loan, it is likely to have granted many others in similar circumstances. Will the Minister consider granting the OFT that power?
The most glaring omission from the Bill is the absence of any attempt to introduce rate capping, and it was interesting to hear some of the debate on that. We accept that debt incurred on the doorstep has been a pressing matter. Even if a power is not introduced at this stage, there is the possibility of introducing it through secondary legislation, should that be proved necessary by the review undertaken by the Department of Trade and Industry. We believe that it is necessary to tackle the problem.
Enough has been said this afternoon about the extent of the debt problem, and I shall not rehearse that. Suffice it to say that Citizens Advice Scotland, in its "On the Cards" report, shows that there has been a 64 per cent. increase in the average debt since 2001, and it now stands at more than £13,000. I noted that the BBC said this morning that calls to the consumer credit helpline had increased by 71 per cent. in the last year or so. That represents a tremendous increase in the amount of indebtedness in society, and shows just how deeply ingrained the problem is.
According to "debt on our doorstep", more than 3 million people on very low incomes have to borrow money at interest rates of between 150 and 200 per cent. We have heard examples today far above those rates. Even store cards from reputable stores charge interest rates of around 30 per cent.
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Much has been said about financial literacy, but one of the problems is that people do not understand APR, AER and many of the other acronyms presented to them. How many people read the detail of an agreement before signing it? Very few, I suspect. In the days when interest rates were rising sharply towards a 15 per cent. base rate, many lenders simply extended the terms of loans and sold them on the basis of the monthly repayment rather than the APR. Many of our fellow citizens did not understand that practice.
A statutory cap is not a new idea, or indeed a particularly radical one. It existed in the UK before the 1974 Act and still exists in many European countries and in several US states. I appreciate that a cap does not appear in the Bill, but is under review. I strongly urge that the review be carried out swiftly. If the financial services industry does not get its act together as a result of the Bill the cap will be necessary, and should be introduced quickly. We only have to look at the never ending stream of credit offers coming through our letterboxes to see just how many companies want credit business, and I do not think that a cap would slow that down.
The exact terms of clauses 12 and 13 do give us some concern. Clearly, we welcome the main thrust of the clauses and the provisions relating to default notices. Two points arise, however. The level of the default sum is not stated in the Bill, and it will be of little use if it is set too high. It has been suggested in lobbying that it could be £50, yet many of the default sums are currently set at between £20 and £25, so would not be covered by the clauses. Perhaps the Minister could share with us his thinking on the amount.
The second problem is that there is no provision as to the frequency with which charges may be imposed under the ceiling. For example, if the ceiling were £50, a succession of smaller charges under that figure could be imposed without restraint. The consumer would not have the benefit of being able to pay off a loan without incurring interest charges.
I am conscious of the time constraints in the debate so I shall end with one point on the issue raised by the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz) about time orders. I agree with him about the necessity to bring Scotland into line with the rest of the UK. From my previous experience I know that time orders can be very useful. In Scotland lay representation was originally allowed with such orders, but a problem arose because provision for that did not appear in the original legislationthe Debtors (Scotland) Act 1897. Following representations, it was decided that it breached the Scottish rules of court.
A similar problem would arise from simply amending the Bill. The rules of court needed amending with regard to the representation on which Citizens Advice Scotland has lobbied. Under the present rules, anyone seeking a time order has to pay to have the order served on the defendant, but under the English system, they do not have to pay. Because of the rules of court in Scotland, the sheriff clerk cannot serve it on behalf of the applicant free of charge.
My party and I believe that both those matters must be dealt with quickly. I am not convinced that that can be done merely through an amendment to the Bill; a Sewel motion may be necessary. However, I have
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spoken to my colleagues in Edinburgh, and as we are keen for the matter to be dealt with, we will co-operate in any way necessary to bring it forward, to ensure that people in Scotland who want to benefit from a time order can do so fully.
I welcome the Bill and the introduction of the unfairness test rather than the use of the word "extortionate". The test is helpful and will be preferable to an interest rate ceiling. As we know, interest rates do not reflect the cost of loans; there are a number of other factors, so the provision offers a good initial way of looking at the matter. However, we need a fail-safe to enable us speedily to improve the system by statutory instrument if the need arises. The matter need not take the proportions suggested by Conservative Front Benchers. I understand their points but, despite having the best of intentions, they are wrong on this issue. There should be provision for the introduction of a statutory instrument. The length of time that we have had to wait for the Bill means that we probably cannot afford to wait too long for changes that are more in the nature of fine tuning than fine principle.
We should look carefully at the fines ceiling of £50,000, which is far too low. As several Members have pointed out, the type of businesses we are talking about are not hole-in-the-wall operations; for many of them, £50,000 would be nothing. It should be possible to adopt a more pragmatic form of words to enable us to alter the provisions if the case for doing so can be shown.
Before Christmas, many of us were afraid that the Bill would not come before the House. The apparent sketchiness of some of its provisions may be attributable to the speed with which my hon. Friend the Minister was able to persuade others to get it into the pipeline. I imagine that there will be an incredible number of amendments in Committee to stiffen some provisions and to give others clearer definition. Draftspeople are probably working on them even as we speak.
As the Chairman of a Select Committee, I am, sadly, normally excused from participating in Standing Committeesactually, I do not really want to. In 1983, a group of us were dealing with the Mental Health Bill and had been working on it for several months. It was the first such Bill since 1959 and in the run-up to the 1983 general election, we eventually got through a compromise. More than 20 years later, another Mental Health Bill is being considered. I want to point out to my hon. Friend that legislation of that nature does not happen quickly, which is all the more reason for a pragmatic, open-ended approach to some of the provisions that several of us have identified as controversial.
I am not normally relaxed about, or praising of, the Scottish nationalists, but the last statement in the speech of the hon. Member for Angus (Mr. Weir) was encouraging. It is important to deal with time orders as expeditiously and as felicitously as possible. If we can have agreement in both Edinburgh and London that that is necessary and desirable, with a good wind we can get those provisions through, too. That will greatly
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enhance for the whole United Kingdom what promises to be an extremely effective and encouraging piece of legislation. It will make the lives of many of our people much easier. Those people may be vulnerable, stupid, indolentwe could apply any number of adjectivesbut, more than anything else, they look to Parliament for help and assistance. The Bill, and my hon. Friend the Minister's encouraging remarks, give us the chance to do something about that. I welcome the measure.
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