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'(1)   The Office of Fair Trading shall consult financial agencies and produce a standard method for the calculation of interest accrued to enable direct comparison between products.'.

New clause 5—Further duties of the Office of Fair Trading—

'(1)   The Office of Fair Trading (OFT) shall periodically, and at least annually, publish the range of interest rates and ancillary charges on the market for specified products.

(2)   The OFT shall publish court rulings and details of cases brought before the ombudsman on levels of interest rates and ancillary charges for agreements deemed unfair under section 19 and report on these findings to the Secretary of State.'.

Adam Price: Last year, I introduced a ten-minute Bill on creating an interest rate cap. I am grateful to the House for the opportunity to raise this very important issue again, as it is of great interest to many people. I speak in particular about the umbrella organisation, "debt on our doorstep", which has campaigned long and hard on the subject of an interest rate cap. Oxfam, Help the Aged, the Local Government Association and Church Action on Poverty are involved in that campaign. I also pay tribute to the Sunday Mirror,
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which has recently launched a campaign called "curb the credit sharks" to promote the idea of interest rate ceilings.

Essentially, new clause 2 would introduce a requirement on the OFT to collate accurate information on interest rates in the different segments of the consumer credit market and, separately, on any relevant court judgments. It would then provide the Secretary of State with an enabling power to introduce an interest rate ceiling subject to a one-year notice period, in order to allow sufficient time for consultation in the industry.

We have already had the opportunity to discuss this matter. On Second Reading, the Minister gave an assurance that the subject of interest rate capping would be kept under review—the door, if not wholly open, is slightly ajar. He said that he stood by the decision not to introduce a ceiling, but that he was committed to keeping the matter under review. I would be interested to hear today a little more about the Government's intention; how do they intend to keep the matter under review? I will make my decision on whether to force the new clause to a Division on that basis. The hon. Member for Rhondda (Chris Bryant) is listening intently to me for once; I thought that he wanted to intervene.

The "debt on our doorstep" campaign has asked the Government whether it can have more information on how they propose to review the matter. The emphasis in the Bill is on the new unfairness test, which is very welcome but will depend to some degree on interpretation in the courts. The new clause is intended to provide a further guarantee by requiring accurate information and allowing for the enabling power if the unfairness test does not create the desired security.

Mr. Sutcliffe: The hon. Gentleman hits on the crucial point of why we are not going for an interest rate ceiling and why I see the unfair credit test as the appropriate route. Unfortunately, because of the order of selection, the debate on unfair credit will come later. However, the hon. Gentleman will hear in response that I believe that the unfair credit test may be the appropriate way to head.

Adam Price: I hope that the Minister is right, but we will know only once the legislation goes through the courts. We do not want to get into problems of sub judice, but I think that the recent case is now subject to appeal under previous legislation. I suppose that the intention of legislators of the Consumer Credit Act 1974 was to provide some protection, but unfortunately that was not delivered.

Chris Bryant (Rhondda) (Lab): I do not know whether the hon. Gentleman has had the opportunity to read our proceedings in Committee, but we quizzed the Minister and pushed him quite hard to try to ensure that the unfairness test would catch many of the self-evidently unfair practices about which all Members are concerned. My worry about the hon. Gentleman's new clause—I wholly agree with his aim, not least because many of my constituents have faced the terrible practices of loan sharks and of those who do not look like loan sharks—is that we might be encouraging interest rates to creep up to the cap rather than bearing down on them.

Adam Price: The argument that the cap would become the market average was one of the points made
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in the research that the Government commissioned, and I will come to the Policis report shortly. I hope that the Government are right and that the unfairness test will be sufficient. The new clause would provide an additional safeguard and give the Secretary of State some flexibility; it would assess accurately through the collation of information whether the test is having the desired effect. I believe that the Liberal Democrats have tabled a new clause that includes a parallel provision. If it is felt that the unfairness test is not having the desired effect, another policy option would be available.

Mr. James Plaskitt (Warwick and Leamington) (Lab): The hon. Gentleman talks of the new clause being a further safeguard, but will he comment on the choice of words in subsection (3), which proposes the test of "widespread consumer detriment" which would trigger the cap? Do not excessive interest rates, which give us all cause for concern, especially when imposed by loan sharks, often apply to small groups of individuals in a confined area? Would that not always fail his test of widespread detriment?

Adam Price: That would be subject to interpretation by the Secretary of State in the first instance. A fairly generous notice period is allowed for. It would be difficult for the industry to argue that a 52-week consultation did not give it ample opportunity to respond to any move by the Secretary of State. I hope that that covers the hon. Gentleman's point.

I want to turn to some of the arguments about the collection of information.

Mr. Love: I have some sympathy for the argument that the hon. Gentleman is making, but let me express to him my concern. In a recent report, "Affordable credit: The way forward", Elaine Kempson from Bristol university, who is considered the foremost independent analyst in the area, said in her conclusion:

Does the hon. Gentleman think that his well-intentioned new clause might achieve that?

Adam Price: No, I do not think so. That is the Government's argument—

Mr. Love: It is Elaine Kempson's argument.

Adam Price: The argument is that an interest rate ceiling could lead to more rather than less financial exclusion, particularly given that we do not have a well-developed financial infrastructure for people at the lower income end. The UK is almost unique in not having controls in this area, yet we have greater financial exclusion than that in countries where there are interest rate ceilings. Therefore, the empirical evidence suggests the opposite: the UK, which does not have an interest rate ceiling, has the greatest problem with financial exclusion.

In France, the regulator has a remit to research and publish information on prices charged in the marketplace, as suggested in the new clause, and to set
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interest rate ceilings for different types of loans. In Italy, the Government take responsibility for setting a legal maximum interest rate, which is double the average rate charged. In Germany, there is also a maximum rate of double the average. In Switzerland, the legal limit is 15 per cent. There are similar arrangements in some of the Australian and American states. In the Netherlands, there has been an interest rate ceiling since before the second world war.

Mr. Sutcliffe: The hon. Gentleman is making some important points. He cites what happens in other countries, but I am sure that he will accept that the UK credit market is far more mature. Let us consider the levels of credit available across the range of products in the UK. That has tempered our view, and is why we would not learn from examples in other European countries. I understand his point, but I ask him to reflect on the nature of the UK credit market.

2 pm

Adam Price: Part of the UK financial services sector is very good at getting profits out of some of the poorest people in our communities. I know that that is not what the Minister meant, but I would not regard that as a sign of maturity. There are elements that we need to develop further. The credit union movement in Ireland, for example, is far wider and deeper than it is in the UK. There are the Sparkassen—publicly owned lending institutions—in Germany. An interest rate ceiling, while necessary, would not of itself be sufficient. There have to be other, complementary measures. I think that the Government have recognised that, because in addition to the welcome new safeguards in the Bill, they have accepted the need for a positive agenda on building up, initially through pilot projects, new mechanisms to combat financial exclusion.

My core point is that the evidence from countries in the European Union, north America and Australasia, some of which have had interest rate ceilings for many years, shows that they have less of a problem of financial exclusion. I therefore question the accuracy of the research on which the Government based their decision. Representations were made by "debt on our doorstep" and by Professor Udo Reifner, of the Institute for Financial Services in Hamburg. Professor Reifner was involved in the original work that led to the decision to create an interest rate ceiling in Germany. He wrote to the Department to express his concerns about the research. For example, according to him, there was no direct discussion with European consumer groups or with any of the key stakeholders that have a good overview in Germany.

There is a statutory requirement in Germany to measure the interest rate ceiling's effects on financial inclusion and exclusion, but the UK Government-commissioned report made no reference to that and its conclusion was precisely the opposite of what the German Government's statutory data show, which is that after the introduction of the ceiling there was less financial exclusion than before. The "debt on our doorstep" campaign has made an application under the Freedom of Information Act 2000 to get some of the working papers underlying the Policis report, and I
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believe that the deadline for the Department to answer is today. Perhaps the Minister will tell us whether he will release the information.

The Minister has been open and consistent. He says that this is an interesting and well-intentioned debate, which should continue, and that the Government are committed to keeping the matter under review. However, will he be more generous and say how they intend to keep it under review? Given the serious and well-founded concerns about the Government-commissioned research, will they commission further research, which might resolve some of the problems of the earlier research; allow a wider range of submissions; and perhaps take another look at the empirical experience elsewhere? I hope that we do not have to wait 30 years for another consumer credit Bill, but it would be useful, while the present proposals bed down, to carry out further research that redresses the flawed nature of the Policis report.

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