Mr. Mitchell: By expanding my hon. Friend's point, I think that the argument will be elucidated. There is a further problem, in that the ombudsman does not rule on pricein other words, on interest rates. That is clearly central to the problem of unfairness. The ombudsman would have to be given powers in that area.
The fairness doctrine improves matters, in that it creates a fear in large organisations that they will be taken to court and that something can be ruled unfair. That is especially important for credit card consumers who often face what I regard as unfair and heavy charges for late payment, or for exceeding a credit limit. Such charges build up. A fear will be instilled in credit companies that they might be taken to court and that they should be cautious.
I share my hon. Friend's concerns. With respect to other right hon. and hon. Members, I am not a lawyer. I fear legislation that we in this place deliver into the hands of lawyers, who live off the face of it for
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ever. It does not reach the areas where it is needed. I do not want legislation introduced that leads to a row about the role of the court. I want to know how there will be free access so that poor people can arrive at a resolution when they feel that they are being unfairly treated. That is my main aim. My hon. Friend the Minister might care in Committee to spell out the alternative dispute resolution scheme and explain how that can help. We need clarity. I need to be able to tell my constituents, "This is how the system works. This is who you go to to get help and to sort out the so-and-so who comes round and overcharges you."
Norman Lamb: Speaking as a lawyer, may I ask whether the hon. Gentleman agrees that it is better for Parliament to be setting a framework for how the term "unfairness" is to be interpreted, rather than a court setting precedents?
John Battle: I understand that the hon. Gentleman is on side, although he is a lawyer. The focus of our discussion must be to ensure that people are clear. The hon. Member for Wealden, who leads for the Opposition, said that businesses need to be clear. My point is that that applies also to the poor. Between us, I think that we have an agreement that can be clarified within the law. I suggest to my hon. Friend the Minister that that work needs to be done.
Those who lend to people without taking account of their ability to pay should be drawn into the same regulatory process as mortgage lenders and court fines. The Lord Chancellor has made it clear that if someone goes to the magistrates court because they have not paid their council tax for whatever reason, the fine, to be effective, must be proportionate to their income or their ability to pay. There is no point in giving someone who owes £135 in council tax a £500 fine, as they do not have the money to pay it. The Lord Chancellor proposed that fines should be proportionate. Why on earth does that not apply to the lenders? A responsible lending test should be built into the Bill, so that the lenders cannot get away with repeatedly lending to people without undertaking an assessment of their ability to pay back the loan. Such tests are included on mortgage forms, so why do we not include them on loan forms, especially as people are sometimes lent more than they are given for their mortgage?
Mr. Russell Brown (Dumfries and Galloway) (Lab): My hon. Friend is quite right. Credit rating is vital in business, and must be in place before one business provides a service to another. It is eminently sensible to apply that test to individuals who are seeking to borrow money.
I agree, as would the majority of lenders in the business. They want to drive the worst lenders out of the marketplace, and would support a programme in which people must provide accurate, up-to-date information about their ability to repay so that repayment judgments can be made before they are lent money. We must then implement a panoply of financial advice, including on budget management. We must make sure that programmes are available in schools and
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neighbourhoods so that people can learn to manage their budget. Ironically, society is much more willing to discuss sex than debtit is the great no-no. Part of the problem is that people will not admit how much they are in debt, and are ashamed of their debts.
As the Minister knows, we have had lengthy discussions about unjustifiably high interest rates. I still believe that the Government should serve notice in the Bill that if lenders exceed a market rate they will be penalised. The Minister said that interest rates will be kept under review, but I would like a reserve power to be introduced. If he thought the rate was too high he could draw on that power instead of being in a position where rates might be reviewed by his successors in the next 30 years. I would like to hurry that along, but it is open to debate. The Minister will wish to make his own arguments, so perhaps we should clarify the position at a later stage.
In conclusion, the concept of an unfair credit test must be clarified. We should introduce a responsible lending test for lenders so that the poor are not driven further into debt without protection. There should also be a reserve power to cap interest rates in future. I welcome the Bill, which provides a good framework. Much good work has already been done by Members of all parts of the House, and the Bill has widespread support. We must, however, make some of its definitions clearer. We must make sure that it is not an impotent measure in the background; but most importantly, we must put it on the statute book quickly so that people have redress and protection. Some individuals are enduring unsustainable debts and pay the highest price of all to borrow money for basics for their families. They should not be forced to live in financial misery for a single day longer.
Norman Lamb (North Norfolk) (LD): I agree with much of what the right hon. Member for Leeds, West (John Battle) said. On the question of timetabling, it is important to put the Bill on to the statute book and to implement it speedily. It took many years to implement parts of the Consumer Credit Act 1974, and implementation this time around must be much quicker so that we can deal with the serious concerns expressed by the hon. Gentleman. He gave a moving account of what it is like to live on a low income, struggling to cope and facing harsh interest charges. I also agree with much of what the hon. Member for Wealden (Charles Hendry) said.
I thank the Minister for his kind words of welcome. He must be delighted to be dealing with the issue for a second time, and will have a sense of déjà vu. I congratulate him on making sure that the Bill has been introduced speedily in the House, as it is important that we make progress. I did not participate in debates on the original Bill, but in the last Parliament I was a member of the Treasury Committee, which conducted an inquiry on the credit card industry and practices that have caused genuine concern to pressure groups and the public. When the original Bill was introduced, the right hon. Member for West Dunbartonshire (Mr. McFall), the former Chairman of the Treasury Committee, said on Second Reading that it was scandalous that it had taken so long to introduce draft legislation in Parliament. The Minister is not to blame, because the delay occurred before he took up his portfolio.
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It has taken far too long to introduce new legislation. The 1974 Act is more than 30 years old, and since its introduction there has been a revolution in the availability of credit and the range of credit products. As the hon. Member for Wealden pointed out, there has been a dramatic growth in the number of credit cards that are available. There was one in 1971, but more than 1,300 today. Borrowing on credit cards has gone through the roof. The legislation is therefore no longer fit for purpose. The new measure is long overdue and it is good that it is before Parliament today. Because the 1974 Act is no longer fit for purpose, consumers, including the most vulnerable, have been left unprotected, which is unacceptable. Today's press report that RBS NatWest has experienced an increase in arrears, following similar warnings by Barclays, HBOS and HSBC, is a timely reminder of what happens when interest rates go up. It is always the most vulnerable who are hit first. The market is not operating properly and that must change.
Before applying our minds to the legislation, we should state the principles that we will follow. The availability of credit is a good thing. We all need credit from time to time, and some people always need it. Different people need it to a different extent and for various periods of time. We must, however, avoid the paternalistic temptation to prevent people on low incomes from gaining access to credit, as they need it as much as the rest of us. We must ensure that lending is responsible so that those people do not get into difficulties.
Mr. Drew : I have made this point before, but I should like to reinforce it. We could provide genuine access to credit by ensuring that credit unions can be accessed through the postal network. Some hon. Members have tried to persuade local post office branches of that case, but there would be a dramatic improvement in lending practices if such access were available more widely. Does the hon. Gentleman agree?