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Mr. Sutcliffe: I will take your guidance, Sir John, because I do not want to stray into the clauses that deal with licensing. However, that area is also protected, in that a lender's performance will be examined before a licence is issued. Lenders will have to comply with criteria tests. That might help the hon. Lady to understand why we are where we are in relation to being fair to borrowers.
Dr. Tonge: I have come to the Bill late in the day, and I have not read its text in detail. Is the Minister suggesting that it will be the lender's responsibility to cross-check that people are not already in debt or to carry out a means test to ensure that they can make their payments?
Mr. Sutcliffe: We have asked the industry to share information. We have said that hiding behind the Data Protection Act 1998 is not appropriate. The industry is examining ways to improve the sharing of information, because we do not want people to accumulate the number of cards to which the hon. Lady referred in relation to the incident that was reported in the press.
The Chairman: Order. We shall not debate now the issues that will be debated under clauses 28 to 31.
Dr. Tonge: I thank the Minister once again for his patience. I am somewhat more reassured.
Mr. Robertson: We have had a very good discussion on this and, indeed, the previous amendment, and that makes it unnecessary for me to repeat many of the arguments that have been made. However, the Committee would be disappointed if I did not refer to my own amendment, No. 23 in some detail. I admit that its drafting may not be perfect. The Opposition do not have the benefit of officials or parliamentary draftsmen. I do not say that maliciously; it is true, but it may not have captured exactly what I was thinking. However, I have tried to help to define ''unfair''.
Section 138 of the 1974 Act goes into some detail about what extortion is, whereas the Bill does not go into any detail on what is meant by ''unfair''. I am a bit surprised that the Bill does not go into the same degree of detail. For example, section 138 (2A) mentions interest rates prevailing at the time. Regardless of whether we wish to compare what lender A offers and lender B offers, my point is that the Act goes into far more detail about what is meant by ''extortion'' than the Bill goes into about what is meant by ''unfair''.
When introducing a new concept into English law—and the test of unfairness is a new concept—we need to be a bit more prescriptive. The most important word in the English legal system is probably the word ''reasonable''. I do not suppose that that word is defined anywhere, but the assumption is that what is reasonable is what the man on the Clapham omnibus
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thinks is reasonable. What test do we have for the meaning of the word 'unfair'? I suspect that it will be a matter of several court judgments before we establish precedent and are able to operate in the industry with any degree of certainty.
There will be a time—from now until those court judgements have been made—in which there will be a great deal of uncertainty, not only in the minds of consumers, but also in the mind of the industry. I said this morning that one of the biggest concerns about the Bill is that it is so uncertain and vague in so many areas. This clause, in particular, has excited the industry more than any other in the Bill, because people simply do not know what ''unfair' means. People also do not know how the definition will be determined. The exchange that we had a few moments ago with the Minister did not satisfy me that we have made any progress on that.
3.45 pm
Mr. Lazarowicz: When I first considered this issue, I had some sympathy for the notion that it would be right to try to set out the test for unfairness in more detail. I do not want to stray into a stand part debate, but does the hon. Gentleman not agree that his proposed new subsection (2A)(c), in which one of the tests that a court should consider would be
''whether the initial terms of the agreement might be considered to be significantly unfavourable to the debtor when compared with other similar agreements, when there are no compensating factors within the said agreement available to the debtor'',
is itself a vague definition that would require the same sort of tests to be applied to it by the courts in due course? The difficulty of his approach is the danger that it becomes too restrictive to rule out any new devices that are dreamt up by the rogues that unfortunately exist in the financial services industry and elsewhere.
The Chairman: Order. I have already said that the debate on these clauses is becoming so wide that there will be no room for a stand part debate on this clause.
Paul Farrelly: On a point of order, Sir John. Are you ruling that there will there be no stand part debate?
The Chairman: There will be no stand part debate.
Paul Farrelly: I was reserving my remarks for that debate.
The Chairman: Then I think it would be better if the hon. Gentleman sought to catch my eye.
Mr. Robertson: I do not agree with the point made by the hon. Member for Edinburgh, North and Leith, because clause 19(2A) states:
''In particular, when determining whether an agreement is unfair, the court should consider—''.
However, that does not mean that nothing else could be considered.
On the hon. Gentleman's other point about whether the initial terms of the agreement might be considered unfavourable, I accept that that may be considered a little prescriptive, but section 138 of the Consumer Credit Act 1974 is even more prescriptive. Section 138(3)(a) and (b) mention age, experience, business
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capacity, state of health, and the degree to which a person was under financial pressure at the time of making the credit bargain. I do not claim that that is the right approach, but it is our approach for tackling the meaning of the word ''extortion''. However, we have absolutely no guidance for tackling the meaning of the word ''unfair''.
Before the hon. Gentleman made his helpful intervention, we were having an exchange with the Minister about his ability to introduce a statutory instrument to give guidance to the courts. I am not satisfied that he has that ability under the Bill, and I cannot see that he has it under the 1974 Act because it does not address unfairness. I am not a lawyer, and I would gladly be corrected on that matter. However, I am concerned that he would not have the opportunity to introduce those statutory instruments.
Chris Bryant: We were not talking about unfairness, but the matter of advertising in section 44 of the 1974 Act. Section 189(1) is so widely drawn in its definition of advertising that it would give the Minister the powers that he used last year to provide guidance on unfair advertising. However, I accept that the hon. Gentleman is correct because the Minister would not have any power to define an unfair relationship.
Mr. Robertson: I am grateful to the hon. Gentleman for clarifying that matter. How do we give that guidance to the courts?
Mr. Sutcliffe: The hon. Gentleman is not trying to be difficult; he is trying to get to the core of the issue, and I respect that. However, he said—or implied—that the term ''unfair'' was a new legal precedent; it is not. He will be aware of the principle of unfair dismissal in employment legislation and the FSA's principle of fair treatment of customers. There is a principle of fairness, but this is about unfairness tests. I will try to reassure him, but I understand the difficulties.
Mr. Robertson: I accept those comparisons. However, a mass of employment law comes into play alongside the term ''unfair''. While I accept that I have been corrected to some extent, my point may also have been proven because the mass of employment law makes it easier to define unfairness, whereas it is not easy to determine that in this matter.
Alistair Burt: There is no disagreement between respective Front Benchers on the concept of unfairness as it is a matter with which we are all familiar. The issue is the evidence upon which a decision on fairness or unfairness is based. At the heart of my hon. Friend's argument is an attempt to establish—in the absence of a body of case law—the building blocks upon which a decision on fairness or unfairness will be based. Notwithstanding the perfectly correct point made by the Minister about the concept of unfairness, we, like borrowers, are still in the dark about those building blocks unless the matter is settled in the way that has been suggested by my hon. Friend.
Mr. Robertson: I am grateful to my hon. Friend who is a lawyer and knows more about these issues than I do. We have probably exhausted that point, but it will be important to gain a degree of certainty not
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only for the industry, but for the debtor because on the matter of establishing unfairness, a case could be brought by the creditor—or indeed the debtor—if I have read the clause correctly. There needs to be more certainty. However, I fear that several court cases will be heard before we achieve that certainty.
My amendment refers to amendment No. 17, which fell after I pressed it to the vote. My amendment asks the court to consider whether the lender has set out the exact terms of the agreement. The court should then ask whether the lender has complied with all the requirements of the Bill and the 1974 Act when determining whether an agreement is unfair. It should also ask whether the initial terms of the agreement might be considered to be unfavourable to the debtor when compared to other similar agreements. That is not a new concept; it was part of section 138 of the original Consumer Credit Act 1974. No Government considered it so unreasonable that they hastened to change it—it has taken 30 years to get to that point.
Proposed new section 140A(2A)(d) refers to
''whether the running of the agreement might be considered to be significantly unfair to the debtor when taking into account the relative financial strength of the parties to the agreement.''
That concept is already in the legislation that we are seeking to amend. The amendment seeks to cover the establishment and the operation of the agreement, and there is scope to discuss its terms. There is also scope for arguing whether something is unfair or asking how far one has to vary from what is normal before it becomes unfair. I accept that that is a difficulty, and I sympathise with the Minister. Obtaining certainty of advice is difficult.
I reiterate the comments of the hon. Member for Richmond Park (Dr. Tonge) in that the longer that I work on the Bill, the less certain I become that we will be able to protect vulnerable people from debt, extortionate charges, interests rates, compound interest and default fees, all of which lead to problems such as those that we heard about on the radio this morning. Citizens Advice has published an interesting briefing that details horrendous stories about how people borrow £1,000 and end up owing £30,000. Members are aware of those situations. Unless the Bill is clearer, such cases will continue to exist.
It is too easy to borrow money. After Christmas I went into Marks and Spencer, which is a reputable company, where I paid around £200 for several items, mainly clothes. I was not really paying attention; I was hot since I had my coat on, I was carrying many messages, and I wanted to get out of the store. I was informed that if I subscribed to a store card, which I imagined to be similar to a petrol card on which one can amass points, I could get 10 per cent. off my purchases. That would have saved £20 pounds. I filled in the form and did not think any more of it until a card appeared in the post about a week later. On the accompanying piece of paper, bigger than any other writing, was the £7,500 credit limit. That occurred without me really thinking about what I was doing, so it serves me right. I do not seek to blow my own trumpet. I am not particularly financially literate. I suppose that the company did a credit check, but they
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certainly did not know much about me. I was later informed that the card was not a store card but a MasterCard that could be used anywhere. That was a double-whammy, to coin an old phrase.
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