(Morning)
[Sir John Butterfill in the Chair]
9.25 am
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Gerry Sutcliffe): I beg to move,
(1) during proceedings on the Consumer Credit Bill, in addition to its first meeting at 9.25 a.m. on Tuesday 25th January, the Standing Committee shall meet at —
2.30 p.m. on Tuesday 25th January; and
9.25 a.m. and 2.30 p.m. on Thursday 27th January, Tuesday 1st February and Thursday 3rd February;
(2) the Bill be considered in the following order, namely, Clauses 1 to 55, Schedule 1, Clauses 56 to 59, Schedule 2, Clauses 60 to 68, Schedule 3, Clause 69, Schedule 4, Clause 70, new Clauses, new Schedules and remaining proceedings on the Bill;
(3) proceedings on the Bill shall (so far as not previously concluded) be brought to a conclusion at 6.55 p.m. on Thursday 3rd February.
Welcome to the Committee, Sir John. It has been my pleasure to sit with you on Finance Bills and on a variety of other Committees over the years, and I am delighted that you will be chairing our proceedings, together with your co-chairman Mr. Benton.The Bill has been well consulted on. It is a long time since the last Consumer Credit Bill was passed in 1974. When the White Paper was published, there was a great deal of consultation with industry and with consumer groups on the regulations that flowed from it, so the Committee will have a wealth of information at its disposal to enable it to deal adequately with the Bill. I am delighted that the hon. Member for Tewkesbury (Mr. Robertson) is in his place, and I look forward to his words of wisdom. Alongside him sit his Whip, and the hon. Member for Richmond Park (Dr. Tonge), who is in place of the hon. Member for Gordon (Mr. Bruce) this morning, who is away on parliamentary business.
The Committee has a wealth of talent, Sir John, given its experience on many issues, including debt. It would take too long for me to go through the expertise and knowledge of each Member—and, as a former Whip, I have other information as well. I look forward to their involvement.
The Bill is important, as it will affect the lives of all our constituents. Unfortunately, there are many sad stories of people getting into a great deal of difficulty with debt, and that is one of the reasons why the Bill is needed. I know that we will give it due consideration.
Mr. Laurence Robertson (Tewkesbury) (Con): I join the Minister in welcoming you to the Committee, Sir John. I do not have his breadth of experience of serving under you on Committees, but I am sure that it will be a very pleasurable and enlightening experience.
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I thank the Minister for his kind welcome for my colleague, my hon. Friend the Member for Bexhill and Battle (Mr. Barker), and me. I also thank him for his very open approach to the Bill. He has been willing to hold discussions with the official Opposition about the way forward. It is good to have such co-operation on an important Bill that will have a profound effect on the lives of all our constituents. It is important that we strike a balance: we must protect consumers, and that is of paramount importance, but we must not place unnecessary burdens on an industry that, by and large, is very successful.
The official Opposition are, of course, opposed to programme motions, and we voted against the programming of this Committee because we feel that these things should be more open-ended. Important issues are before us, and we cannot tell how long it will take to discuss them. However, we are where we are, and I have no intention of prolonging this part of the proceedings.
Dr. Jenny Tonge (Richmond Park) (LD): I apologise, first of all, for the absence of my hon. Friend, the Member for Gordon.
This is a new and interesting area for me: if you were coming to the Committee Stage of a Bill to regulate gynaecologists, Sir John, you would understand how I feel. It will be a very interesting experience. I have—this can be checked with our Whips—no personal experience of this subject, apart, I am proud to say, from my mortgage. However, I am not sure that my constituents are in the same position, as many, many people come to my surgery who have got into huge difficulties. For that reason my party and I welcome the Bill.
Question put and agreed to.
Mr. Sutcliffe: On a point of order, Sir John. I should like to deal with an issue that arose on Second Reading, on which some hon. Members would like clarification. Several Members asked whether the Bill could allow for lay representation in Scotland for time order applications. We discussed that with the Scottish Executive and the Scotland Office, and there is considerable support for permitting lay representation in time order applications in Scotland. As I said on Second Reading, the Government would like all people in the United Kingdom to be able to exercise their rights in the same way. Therefore, Sir John, we will return to that issue on Report.
The Chairman: Thank you.
I remind the Committee that there are a money resolution and a Ways and Means resolution in connection with the Bill. Copies of the resolutions are available in the Room.
Hon. Members should give proper notice of any amendments, as it will not be my intention or that of my co-Chairman to accept starred amendments. I also remind hon. Members that mobile phones and pagers should either be turned off or turned to silent.
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Clause 1
Definition of ''Individual''
Question proposed, That the clause stand part of the Bill.
Mr. Sutcliffe: Clause 1 amends the definition of ''individual'' in section 189(1) of the Consumer Credit Act 1974. The definition is important because an agreement is only a consumer credit agreement or consumer hire agreement as defined by the 1974 Act. The agreement is therefore capable of being regulated by the Act if the debtor or hirer under the agreement is an ''individual'' within the meaning of the Act.
As it stands, the definition in section 189(1) gives an extended meaning to the word ''individual'' that includes partnerships or other unincorporated bodies of persons of any size, as long as the members of the partnership or unincorporated body are not exclusively bodies corporate. Bodies corporate are not included in the definition of an ''individual''; they therefore receive no protection as debtors or hirers under the Act. Medium-sized and large partnerships, as hon. Members will know, are often highly sophisticated businesses, such as international firms of lawyers and accountants. They can look after themselves and do not require the protections afforded to ordinary consumers. That being said, the Government recognise the need to foster and protect small businesses to encourage enterprise in Britain.
In order that they might grow, many small businesses require access to ready credit, such as credit cards or hire purchase. Many people who are starting out in business operate with little distinction between their private and business lives. They also have the same, or similar, low levels of credit expertise and face similar borrowing risks to ordinary consumers. The clause will amend the definition of ''individual'' to include partnerships of three or fewer people, as long as not all of them are bodies corporate. That means that any small partnership including natural persons will continue to enjoy protection under the 1974 Act.
Hon. Members should note that sole traders are, and will continue to be, ''individuals'' within the meaning of the Act. They, too, will continue to be provided with the same protections they currently enjoy under the 1974 Act. The definition will continue to include unincorporated associations, provided that not all their members are bodies corporate, because the members of many of those bodies, which often perform valuable charitable and community work, are ordinary people. They, too, should continue to enjoy their current protection under the Act.
Question put and agreed to.
Clause 1 ordered to stand part of the Bill.
Clause 2
Removal of financial Limits etc.
Question proposed, That the clause stand part of the Bill.
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Mr. Sutcliffe: Clause 2 removes the current financial limits in the 1974 Act. The financial limit defines those consumer credit agreements and consumer hire agreements that are protected under the Act. Only agreements that provide credit or that require hire payment of up to the £25,000 limit are protected. The limit was initially £5,000, which was a considerable sum in 1974. It was raised to £15,000 in 1985, and the current £25,000 limit was introduced in 1998. To many consumers, £25,000 is no longer a substantial amount of borrowing; the average debt consolidation loan now exceeds £25,000. Therefore, subsections (1) and (2) will remove the financial limit that applies to consumer credit agreements and consumer hire agreements. In future, all agreements, for whatever amount, will be subject to regulation under the Act, unless specifically exempted. Exemptions already exist under section 16 of the 1974 Act. The Bill proposes additional exemptions in clause 4 for business borrowing and business hire agreements that exceed £25,000, and in clause 3 for high net worth borrowers and hirers.
The effect of subsection 1(a) is to remove the definition of a ''personal credit agreement'' from the 1974 Act. That term is used in sections 8(1) and 10(1) of the Act to refer to agreements providing credit to an individual for any amount. The term ''consumer credit agreement'' is used to identify credit agreements in which credit does not exceed £25,000. If the financial limit is abolished, those distinctions become redundant.
Subsection (3) extends the provisions of the Act that regulate the form and content of credit advertisements to regulated credit agreements, regardless of the sum involved and regardless of whether the creditor or owner requires security in respect of that agreement.
Question put and agreed to.
Clause 2 ordered to stand part of the Bill.
