Clause 18
Definition of ''default sum''
Question proposed, That the clause stand part of the Bill.
Mr. Sutcliffe: It may help the Committee to look at the definition in clause 18 of the default sum. Clause 18 defines the term ''default sum''. The term is used in clause 6, relating to annual statements; clauses 9 and 10, which deal with notices of sums of arrears; clause 11, which deals with the failure to give a notice of a sum in arrears; clause 12, which deals with notice of default sums; and clause 13, which deals with interest on default sums.
The term ''default sum'' means the amount payable, other than the interest, by a debtor or hirer in
Column Number: 45
connection with a breach of the agreement, such as a charge imposed for late payment. In such cases, the terms and conditions of the agreement may require that a debtor or hirer should pay all or part of the outstanding credit before it would normally be due. This is often called an accelerated payment clause. Such payments are not default sums.
Question put and agreed to.
Clause 18 ordered to stand part of the Bill.
Clause 19
Unfair relationships between
creditors and debtors
Chris Bryant: I beg to move amendment No. 8, in clause 19, page 13, line 13, at end insert—
'(bb) the debtor entered into the credit agreement as a result of the creditor sending him an unsolicited pre-approved application form;'.
The Chairman: With this it will be convenient to discuss new clause 2—51A Prohibition of unsolicited credit-token applications.
'(1) It is an offence to give a person an application form for a credit-token unless he has specifically requested it.
(2) To comply with subsection (1), a request must be made by the person making the request either by way of—
(a) a document signed by that person; or
(b) a recorded telephone call by that person to the person or company offering the credit-token.''.'.
2.45 pm
Chris Bryant: It is a pleasure, Sir John, to sit under your chairmanship, not least because you are a senior member of the all-party Spain group, and I know that we are dealing with some Spanish practices this afternoon [Hon. Members: ''Oh!'']. Sorry, it was a very bad joke.
I confess to the Committee that there are several versions of how to remedy the same mischief. I suspect that the Minister will want to throw the words of the three very similar amendments into a pot and return with a version of his own.
When we deal with any consumer issue, the primary consideration is that, in the first instance, it is up to the buyer to beware: caveat emptor. However, it is evident from the spirit of the Bill as written that consumer credit is a rather more complex matter. That is for many reasons, not least those highlighted by the appalling tragedy of the widow who this morning on the ''Today'' programme recounted the terrible situation of her husband getting into debt and his eventual suicide. I am sure that all members of the Committee will know the issues only too well from remarkably similar constituency cases. That is not an isolated case.
Unfortunately, according to the statistics, 80 per cent. of people do not understand percentages, let alone the statistic of 80 per cent. The fact that people have so little financial literacy makes it very difficult for them to make their finances add up. More importantly, it makes it very easy for others to
Column Number: 46
market products to them that they possibly do not understand, and almost certainly cannot afford.
In the run-up to Christmas, which is the time of year when many family budgets are at their most precarious, the industry sends out 140 million unsolicited, pre-approved credit card application forms. Last year, 13 million credit cards were taken out, increasing the number of credit cards in this country to 160 million. People are constantly being offered an increase in the credit that they are allowed on their credit card, even if they do not want it. The Bill attempts to deal with that process of offering easy credit.
Alistair Burt (North-East Bedfordshire) (Con): I am grateful to the hon. Gentleman for the opportunity to support his argument. Yesterday, I had to phone my credit card company because I had lost one of my cards. In addition to issuing a replacement card, which was kind, the credit card company immediately offered me another card, notwithstanding the fact that I was ringing only to admit that I was so incompetent that I had already lost one. Almost any contact with the credit card company allows the opportunity for customers to create yet more debt. That is the type of problem that the hon. Gentleman described.
Chris Bryant: I cannot comment on the hon. Gentleman's incompetence, but I give him credit—I have just been urged to say that—for bringing the issue further to our attention. On a serious point, my experience last week of phoning to have my new credit card authorised for use involved the company trying to sell me another five products, none of which I wanted. I said very early on that I did not want any other products, and that I was simply ringing to get my credit card started again. The industry should examine how they train people to deal with customers, particularly over the telephone.
In my constituency, where there are many families whose financial situations are complex or finely balanced, it is all too easy for the process of acquiring further debt—which they could not afford in the first place—to lead to financial ruin. The Government's regulatory impact assessment in the run-up to the Bill's publication cited irresponsible marketing—and irresponsible lending based on irresponsible marketing—as one of the major mischiefs that the Bill aimed to tackle. In some measure, the Government dealt with the issue of marketing techniques through the Consumer Credit (Advertisement) Regulations 2004, which emerged late last year and which laid out the wordings that must be used when someone wants to consolidate a series of loans into a single loan that is then secured on their home.
Mr. Ian Liddell-Grainger (Bridgwater) (Con): It may help the hon. Gentleman to know that some work has been done on the problem of people getting unsolicited mail through their front door. The most vulnerable, those who feel cut off from society, are among those most likely to reply because it gives them a point of contact with people outside their home. Does the hon. Gentleman agree that the Government should perhaps examine that area?
Column Number: 47
Chris Bryant: Absolutely; that is one reason why I tabled amendments. My amendments sit alongside the one that my hon. Friend the Member for Warwick and Leamington (Mr. Plaskitt) tabled, which we shall debate later. Changes in the banking code nod in that direction. Many banks and lenders have already decided that they will not send mailings and marketing products to people who are, for instance, aged under 25. However, Which? magazine's excellent report on the matter outlined significant details which remain to be considered. That report points to credit card checks, which we will debate when we come to new clause 1 and to the subject of mailings.
I had not expected to have much concrete evidence on this issue, until yesterday, when I received two letters. One was from Hfs Loans and announced:
''Congratulations
Your debt busting Hfs loan could be just days away.
Pay off your existing debts!
Save over £288 a month''.
It is difficult to work out how that company arrived at a figure of over £288 a month.
At the bottom of the letter it stated:
''I would like a cheque for:''
and one can fill in the amount that one wants. That is perfectly legitimate under the banking code. Under last year's regulations, such letters should state that potential customers must think carefully before securing other debts against their homes, as their homes may be repossessed if they do not keep up repayments on a mortgage or any other debt secured on it. There should be a clear statement of the annual percentage rate, and so on. I note that such letters cite a typical repayment of £100.39 a month over 300 months for £10,000 borrowed. That is not what most people would term a mortgage, although it is paid back over 25 years. Getting such a loan requires writing out a cheque for oneself with which one is then able to start the loan process. Such marketing is irresponsible, and I know that many of my constituents get dozens of those letters, week after week. If such a letter lies on someone's doorstep when he has financial problems, that is the day he will take it up. Those loans do not pay off people's existing debts; they roll them up, possibly into something that is more expensive than the debt they already have.
That Hfs Loans letter was entirely unsolicited. At the same time, I got another letter from Capital One that asked: ''What's in your wallet?'' Remarkably little actually, but that is a minor detail. The letter stated that if the reader answered yes to certain questions, he or she would be guaranteed a card. One would think that those questions would be difficult—for instance, ''How much do you earn?'' or ''What is your state of credit?''—but in fact they ask whether the customer is aged 18 or over; a UK resident and able to prove their identity and address; whether they are bankrupt or listed on fraud databases; and whether they are able to provide a deposit of between £49 and £200 if required. I should like to tell the Committee that all those would be possible for me—
Paul Farrelly (Newcastle-under-Lyme) (Lab): My son, who receives umpteen of those application forms,
Column Number: 48
finds it difficult to answer that question honestly as he will be only six next week.
Chris Bryant: The company sent me that letter and asked for proof that I am aged 18 or over, which frighteningly betrays the fact that it has no idea how old I am. That shows the irresponsibility of the unsolicited pre-approved process that mostly takes information from other organisations without getting full information from a series of other creditors.
| 
