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Mr. Robertson: I thank the Minister for attempting to explain, but I still do not see clearly. Business lending is either protected or it is not, but that is not the case here.
Mr. Sutcliffe: In clause 1, the definition of individual was changed to include sole traders and the ''under three'' provision, and that is protection.
Mr. Robertson: I am grateful to the Minister for his further attempt, but I am not sure of the philosophy behind the provision. Business lending should either
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be protected or not, but that is not the case here. It seems that a limited company is not protected, but a company which is not limited is protected. Have I got that right? Surely business lending should be protected or it should not? It concerns me that I, as a sole trader, can be protected, but if I were to form a limited company with £100, putting up my house and risking everything on that business, I suddenly would not be protected. I cannot see the logical leap, but the issue probably has been explored far enough.
Mr. Sutcliffe: I hesitate to intervene because I might make matters worse, but I shall try not to. I understand the hon. Gentleman's dilemma, but he does not exactly appreciate the clarity with which I think I put forward the Government's case. There is, perhaps, an issue here to which he or I may wish to return in further discussions. The best way forward now would be for him to be kind enough to withdraw his amendments, with my assurance that the definition will be examined in more detail later in Committee or at Report. However, I am clear that business lending is defined in terms of the purpose, and not the form, of the borrower. Limited companies have a particular form of constitution; their liability is limited, and they have benefits that sole traders do not have, for example, access to wider forms of finance. In the spirit of what we are trying to achieve, I ask the hon. Gentleman to withdraw. I give my assurance that the matter will be further discussed, so that he will be much clearer about what the Government are trying to achieve.
The Chairman: It is not necessary for the hon. Member for Tewkesbury to withdraw his amendments because, although they have been debated, they have not been moved and could not be moved until we came to clause 5. Since they are consequential upon clause 4 standing part or not, there is no need for the hon. Member to do so.
Mr. Robertson: Thank you, Sir John. I should just remind the Committee that that was meant to be an intervention from the Minister rather than a speech, but it is not necessary for me to move the amendments; we have not yet reached that position.
I am not persuaded that we should not consider what I am saying simply because it is not in the 1974 Act and that it would change the 1974 Act. The Bill is about changing the 1974 Act, so I do not think that that is a valid reason; otherwise we would never change anything in this place. I do not accept that there is a huge leap from becoming a sole trader to becoming a single director or one of two or three directors of a limited company. I am not persuaded that we should go down this route; however, the Minister has said that he will look at it again. I do not think that it is just about definition. It is a little bit more than that; it is about practicalities. However, the Minister said that he would have look at it again, and my experience of working with the Minister tells me that he will look at it very seriously indeed.
Question put and agreed to.
Clause 4 ordered to stand part of the Bill.
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Clause 5
Consequential amendments relating to ss. 1 to 4
Amendment made: No. 1, in clause 5, page 4, line 18, leave out 'that section' and insert
'section 185 of that Act (agreement with more than one debtor or hirer).'—[Mr. Sutcliffe.]
Clause 5, as amended, ordered to stand part of the Bill.
Clause 6
Statements to be provided in relation tofixed-sum credit agreements
Dr. Tonge: I beg to move amendment No. 29, in clause 6, page 4, line 32, after 'made', insert
'or the mid-point of the loan, whichever is sooner'.
We accept that lack of information for borrowers about their credit agreement contributes to the scale of debt. People who have fallen into arrears are especially affected. Clause 6 calls for annual statements, and that is very welcome indeed. Some people get annual statements now; some do not. We are concerned about fixed sum loans that last less than a year. They often carry very high interest rates and are often rolled over. People often get into huge difficulties with such short-term loans. The amendment asks the Minister to consider a mid-term statement as well as an annual statement for those on short-term loans so that debtors are quite clear on how they stand half way through the term. I understand that the Citizens Advice Bureau supports the amendment.
Mr. Sutcliffe: I thank the hon. Member for Richmond Park for the way in which she moved the amendment. Unfortunately, I must disappoint her and say that the Government will ask the Committee to resist it.
The amendment would require an annual statement to be issued for agreements that continue for more than one year. It is not confined to those with a contractual term of one year or more. Therefore, if an agreement runs for more than one year, despite originally being for a lesser period, a statement will be required. The Government have considered at great length the need to provide consumers with relevant and clear information for the reasons that the hon. Lady mentioned.
I believe that we have found a balance between her concerns and providing the required information. Agreements of less than one year are generally for small amounts of money and are unsecured. Consumers with such agreements often use credit products that are more transparent in the handling of information, such as home credit account books. However, we recognise, as the hon. Lady says, that some are not and that consumers are entitled to receive information about arrears and default sums.
The requirements will bind lenders in all circumstances. In addition, the debtor is entitled, at any time, to request a statement of his account from the creditor under section 77 of the 1974 Act. The
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proposal from the hon. Member for Richmond Park also gives rise to practical difficulties for lenders: an agreement with a one-month term would require a statement to be provided after two weeks; a 40-week term would require a statement after 20 weeks or about four months and three weeks. The permutations are endless and can only serve to decrease the flexibility of loan products for consumers who seek short-term credit and increase their price, and the Committee does not want that.
Mr. John Battle (Leeds, West) (Lab): I have some sympathy with the intention of the amendment. Will the Minister give me some guidance? I get the impression that people find one lender but then other lenders come along, and their debts are compounded. Lenders seem to be unaware that some people already have loans from other lenders. The problem lies with the lenders; it is down to them rather than the lack of information on a borrower's statement. The affordability test may meet some of hon. Lady's intentions, because the real pressure should be on the lenders not to lend indiscriminately. If we could get the message through to the whole sector, people would not be in double the debt if lenders made each other aware of whom they are lending the money to.
Mr. Sutcliffe: I fully agree with the direction in which my right hon. Friend the Member for Leeds, West (Mr. Battle) is heading. The whole purpose of the Bill is about responsible lending and borrowing. We are talking about a mature credit market with regard to the type of credit available to consumers. For many years, my hon. Friend has been concerned about people at the lower end of the market, who can be exploited. It is our intention to ensure that people are not exploited; the provisions are about balance. We do not want to remove products from the marketplace that people who want short-term credit at the lower end of the market should have.
Dr. Tonge: Does the Minister agree that it is not an onerous request to expect the lending company to produce more frequent statements? Banks will provide statements every week if customers request them. I cannot understand why it should be so difficult to provide a mid-term statement.
Mr. Sutcliffe: With respect to the hon. Lady, the provision is about the type of loan. As I said, in some cases there is a book that records the details of loans. We fully consulted with all sectors of the marketplace, including lenders and consumer groups. We could end up with the situation described by my hon. Friend the Member for Leeds, West whereby a tremendous amount of inappropriate information is given to the consumer, or information that the consumer does not fully understand and appreciate. We do not want to go down that route.
There are major issues about data sharing, which we will address later. That may offset some of the problems that the hon. Lady is pointing up. We have, I think, struck the right balance. Providing a mid-term statement would not really help a great deal. Making people fully aware of the products that they are using
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and where to go if they have difficulties will help matters. The Government have the balance right, and more protections will be in place, as the hon. Lady will discover as we go through the Bill.
Dr. Tonge: The Minister says that people should be fully aware of the products that they are accessing, but that is the problem. He bases his comments on the assumption that people should be, and are, fully aware of what is on offer, but they are not. People are vulnerable. If someone is poor or lonely or does not have many friends to advise them, they will not know what products are on the market, and they will not understand what they are doing. That is the problem, and that is why we seek more frequent statements.
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