Consumer Credit Bill

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Standing Committee E

Thursday 27 January 2005

The Committee consisted of the following Members:

Chairmen: Sir John Butterfill, †Mr. Joe Benton

†Barker, Gregory (Bexhill and Battle) (Con)

†Battle, Mr. John (Leeds, West) (Lab)

†Bruce, Malcolm (Gordon) (LD)

†Bryant, Chris (Rhondda) (Lab)

†Burt, Alistair (North-East Bedfordshire) (Con)

†Farrelly, Paul (Newcastle-under-Lyme) (Lab)

†Keeble, Ms Sally (Northampton, North) (Lab)

Lazarowicz, Mr. Mark (Edinburgh, North and Leith) (Lab/Co-op)

†Liddell-Grainger, Mr. Ian (Bridgwater) (Con)

†Plaskitt, Mr. James (Warwick and Leamington) (Lab)

†Quinn, Lawrie (Scarborough and Whitby) (Lab)

†Robertson, Mr. Laurence (Tewkesbury) (Con)

†Sutcliffe, Mr. Gerry (Parliamentary Under-Secretary of State for Trade and Industry)

Tami, Mark (Alyn and Deeside) (Lab)

Tonge, Dr. Jenny (Richmond Park) (LD)

†Watson, Mr. Tom (West Bromwich, East) (Lab)

Geoffrey Farrar, Committee Clerk

† attended the Committee

(Afternoon)

[Mr. Joe Benton in the Chair]

Consumer Credit Bill

2.30 pm

Sitting suspended for a Division in the House.

2.34 pm

On resuming—

Mr. Laurence Robertson (Tewkesbury) (Con): On a point of order, Mr. Benton. A few minutes ago, I tried to get into this Room to retrieve papers and to prepare for the debate. I was told that Members could not enter the Room until 2.30 p.m. I pointed out that the Committee started at 2.30 p.m., and that that would make me late, but I was still refused access. I bumped into you in the corridor and protested further. The person responsible for unlocking the Room made another telephone call and was eventually told that hon. Members could enter the Room once the Chairman had appeared. Could you, through your good offices and as a member of the Chairmen's Panel, look into this matter? It seems very hit and miss indeed? Perhaps the way forward might be to agree a time; say, a quarter of an hour before the Committee is due to sit. Some degree of certainty would be useful. It was the most ridiculous situation, and it should not occur again.

The Chairman: Having experienced the same incident, I can say only that I agree entirely and I will ensure that some arrangement will be made.

Clause 55 ordered to stand part of the Bill.

Schedule 1

Schedule A1 to the 1974 Act

Mr. Robertson: I beg to move amendment No. 48, in schedule 1, page 55, line 24, at end insert

'or for any other reasonable reason, providing that reason is stated.'.

Welcome back to the Chair, Mr. Benton. The amendment relates to paragraph 4 of schedule 1, which deals with the terms of office of the members of the consumer credit appeals tribunal panel. Sub-paragraph 2 states:

''The Lord Chancellor may remove a member of either panel from office on the ground of incapacity or misbehaviour.''

The meaning of ''misbehaviour'' is perhaps obvious. The meaning of ''incapacity'' might be open to some debate. Would it be helpful to the Lord Chancellor to have a slightly extended remit and to allow him to remove a member of the panel for

''any other reasonable reason, provided that reason is stated.''?

 
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That might enable the Lord Chancellor to ensure that the panel is flexible and able to understand all the issues likely to come before it.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Gerry Sutcliffe): I, too, welcome you to the Chair, Mr. Benton. I have not been out to lunch today so my memory will not be impaired. I fully remember the issues that we discussed this morning.

I would like to go through my case with regard to amendment No. 48, and then perhaps we can explore it further. The only grounds on which the Lord Chancellor may remove a member of the appeals tribunal from office are incapacity or misbehaviour. The schedule does not change the current position of members of the existing panels. There are strict requirements for the qualifications of panel members, which are set out in paragraph 3 of schedule 1.

Once the Lord Chancellor has appointed the members, they are entitled to a full term of office unless they are incapacitated or misbehave. It is imperative that members of the tribunal are certain of their security of office. The schedule makes the reasons for removal very clear. It also makes it clear that tribunal members should hold and vacate office in accordance with the terms of their appointment, which will be determined by the Lord Chancellor.

Further to that, the selection of particular members of the tribunal to hear each appeal shall be carried out in accordance with arrangements made by the tribunal president. That enables the president to take into account members' availability and particular areas of expertise. Of course, the Lord Chancellor does not have to reappoint any member once their term of office comes to an end. That is the case that we wish to pursue with regard to this amendment. However, I am interested to hear whether the hon. Gentleman wishes to discuss it further.

Mr. Robertson: The Minister has given a sympathetic response, but he appears to be fishing for more information from me. I do not think that I can explore the matter any further.

Mr. Sutcliffe: I am not wildly opposed to what the hon. Gentleman says. There are established criteria, but I will give a commitment to consider the issue of reasonable grounds. If we are able to amend those we will, and if we are unable to, I will ensure that the hon. Gentleman gets the reasons for that.

Mr. Ian Liddell-Grainger (Bridgwater) (Con): Perhaps I can help the Minister a bit. The Committee on Standards in Public Life has a code of practice. Would the Minister consider incorporating part of that? It is not applicable to most of this, but there is a serious set of guidelines that could be used. Perhaps the Minister will consider that; it may be helpful.

Mr. Sutcliffe: I am happy to do that. I must be careful not to start off the afternoon by—[Interruption.] Does my hon. Friend wish me to give way?

Chris Bryant (Rhondda) (Lab): No.
 
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Mr. Sutcliffe: I thought that my hon. Friend was trying to be helpful again.

In the spirit of the amendment, we will examine that matter—I wish to reassure the Committee on that. However, if, in the spirit that I am trying to engender, I somehow drop myself in it, I am sure that the hon. Gentleman will accept it if we are unable to do as he wishes. We will consider the idea of ''any other reasonable reason'' as an additional test.

Mr. Robertson: I am happy to accept that. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 1 ordered to stand part of the Bill.

Clause 56

Appeals to the Consumer Credit Appeals Tribunal

Question proposed, That the clause stand part of the Bill.

Mr. Robertson: Clause 56 concerns appeals to the consumer credit appeals tribunal. In a wider context, can all OFT determinations be appealed to the tribunal? Does leave have to be sought, or is there an automatic right of appeal? Perhaps the Minister could clarify those two points.

Mr. Sutcliffe: I shall try to do that. As the hon. Gentleman said, the clause relates to the new consumer credit appeals tribunal. That tribunal is being established to hear appeals against determinations of the OFT, and it replaces the current system of appeals to the Secretary of State. The clause amends section 41 of the Consumer Credit Act 1974, which contains the existing provisions for appeals against OFT determinations. The clause would repeal subsections (2) to (5) of section 41 and insert the new subsections proposed in subsection (2).

Appeals should be made by sending the tribunal notice of appeal in the form specified by the rules. Appeals are be carried out by way of a rehearing, which means that the merits of the case are considered by the tribunal on the day that the appeal is heard. The tribunal will then able to consider evidence that was not available to the OFT at the time that it made its determination. There is no requirement for leave to be granted to appeal determinations of the OFT to the new tribunal. I hope that that is helpful.

Question put and agreed to.

Clause 56 ordered to stand part of the Bill.

Clauses 57 and 58 ordered to stand part of the Bill.

Clause 59

Financial services ombudsman scheme to apply to consumer credit licensees

Question proposed, That the clause stand part of the Bill.
 
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Ms Sally Keeble (Northampton, North) (Lab): I am grateful for the chance to ask questions about this important clause, which sets out the proposals for the extension of the ombudsman scheme to cover consumer credit licensees. In a sense, the OFT deals with the trade end of the regulations, and this provision deals with the consumer end. I have always found the ombudsman's services—in all matters with which it deals—extremely helpful and important because it provides a chance for people to get justice and redress without going to court.

I would welcome clarification of some of the terms used in the clause. It seems that it would be only in the cases of regulated credit, loans and debt that people will have recourse to the ombudsman's service. Will the Minister clarify that, because the clause states the condition that respondents must have possessed a standard licence at the time that the complaint relates to. Subsection (3) also states that the provision applies to firms that provide consumer credit, to businesses as they relate to debt counselling, and to businesses as they relate to debt collecting. Does that refer only to the consumer credit companies and any advice they might provide on debt management, or does it refer to a different category of business altogether?

2.45 pm

Will my hon. Friend also explain how the scheme will operate and how much promotion there will be? I note that some statements on this matter refer to the provision of information, the relationship between the ombudsman and the Office of Fair Trading and the exchange of information between them. It is important that members of the public, who may be in debt and who may feel that this provision is a source of redress for them, understand how they can access it. It is important that they know that this big expansion of services has taken place. I suspect that the provisions will be extremely important for some of our constituents, particularly those who have had problems with credit, even in cases where that credit came from registered companies. I shall return to that matter later.

Will my hon. Friend explain the relationship between this clause and unregulated debt? I am thinking about two types of debt. Normally, if constituents come to us with debt problems, they have not only one debt, but a whole host of them. Some concern credit cards and other such loans, and some concern the public sector. I ask the Minister to address public sector debt, especially its relationship to private sector debt. I shall give an example, and I hope that it will not delay the Committee too much.

One of my constituents started with quite a small debt of £10 or £15 for a parking ticket and £53 for a second parking ticket, which he disputed. The constituent received income support. He did not pay the fines, and that was entirely his fault, but by the time Northampton council sent the bailiffs round, the debt had escalated to £600. Three days before Christmas, the bailiffs took his sofa, his dining table and chairs and his television set. Three days before Christmas, that is a disaster. He got a £600 loan to pay off the debt, which will take him a couple of years to repay.

 
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If that constituent gets a £600 loan from a business regulated under this legislation, and there is a dispute, he can presumably seek redress, depending on the terms of the provisions, through the ombudsman scheme. However, for the original debt, which some may say was unjustified and due to an unfair relationship, he cannot gain that same redress. I am concerned that people will be able to gain redress through this legislation for some debts but not for others, if there is maladministration.

Finally, I am also concerned about the article that my right hon. Friend the Member for Leeds, West (Mr. Battle) mentioned this morning, which I too saw in the Financial Times, which addressed debt management and the fact that people who are most in need get credit from pawnbrokers and informal money lenders. Those are businesses in which we want to prevent sharp practice. We wish to see an improvement in the way in which credit is provided. Businesses must conform to the best practice in the industry because people need credit. What happens when people have problems with a loan shark? Presumably, if a business does not have a licence, the debtors will not have any redress through the ombudsman. We must make sure that those people can be brought into the equation.

I welcome the extension of the financial services ombudsman's remit. I hope that we will receive enough information to ensure that when our constituents experience difficulties, they can benefit from the service.

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Prepared 27 January 2005