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(a)   vetting applications for credit or applications that can result in the giving of credit or giving of any guarantee, indemnity, or assurance in relation to the giving of credit;

(b)   verifying the identity of the debtor or any applicant for credit, for the purpose of or in connection with an application for credit, or for any other purpose relevant to the financial standing of the debtor, including the prevention of money laundering;

(c)   managing credit accounts including debt tracing and recovery;

(d)   preventing, detecting or apprehending crime, and for the enforcement of criminal law whether in England and Wales or elsewhere including the tracing and recovery of any sanctions imposed thereunder;

(e)   statistical analysis of credit risk assessment in a case where no individual is referred to by name or necessary implication;

(f)   any other purpose to which the debtor subsequently consents; and

(g)   any other purpose specified in an Order made by the Secretary of State for the purpose of this subsection (4).

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(5)   In this section—

'application for credit' includes an application to refinance or reschedule an existing credit agreement;

'credit reference services' means the furnishing of persons with information relevant to financial standing of individuals, which is information collected by the person furnishing the purpose of so furnishing it.".'.—[Norman Lamb.]

Brought up, and read the First time.

12.21 pm

Norman Lamb (North Norfolk) (LD): I beg to move, That the clause be read a Second time.

As we have discussed many times, the Bill contains much that commands broad support. On Second Reading, I said that two specific issues were absent from it. The first is the problem of the calculation of interest. I note that an amendment on that has not been selected but it needs to be resolved. The second is data sharing. I know that the Under-Secretary shares my concern and that of many others, including the Conservative spokesman, that there is a long way to go in resolving the problem.

In a sense, it goes without saying that the best decisions about whether to lend are made when both parties—the lender and the borrower—have access to full information on which to base a judgment about whether it is appropriate to lend and about the amount to lend in the circumstances. However, at the moment, all too often, only the borrower has access to the full information. For many reasons, borrowers may be in denial about their capacity to service a loan or the amount borrowed on a credit card. We must therefore find a way of ensuring that both parties have access to the full information to make objective and wise decisions based on the principle of responsible lending.

Often, people build up unsustainable debt from several different sources. We are told that that is one of the prime causes of the crises that occur when people suffer health problems and sometimes worse. Increasingly, consumers shop around, obtain different credit cards, spend on them and also take out loans. Perhaps there is no defaulting for some time on any of those products, but unbeknown to each lender, borrowers are building up unsustainable debt and the crisis ensues.

There are two broad problems. First, data sharing generally takes places only when there has been a default—when someone has not paid on time or exceeded an overdraft limit and so on. When no default has occurred, but an unsustainable debt might be building up, information is not shared.

The second problem is historic and I shall describe it in a little more detail shortly. Before I reach the core of the new clause, I make a plea to the Under-Secretary to use his authority to sort out the whole problem. The new clause deals with part of it. It is permissive, not mandatory and therefore enables fuller data sharing. However, there is another side to the difficulty: ensuring that the industry does its duty and takes the opportunity that the new clause provides to make sure that data are shared. The Department of Trade and Industry, the Department for Constitutional Affairs, the industry, the office of the Information Commissioner and the Inland Revenue should get together urgently and set a timetable for achieving full data sharing. Even if the
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Under-Secretary opposed the new clause, I would welcome a commitment from him to ensure that that happens.

The Treasury Committee's inquiry showed that there is a feeling that the talking has gone on for a long time but there has been a lack of action. Part of the responsibility for that lies with the Government in legislative reform, which we are providing today, and in facilitating and putting pressure on the industry to respond. I know from discussions with the industry that, for example, APACS, the British Bankers Association and FLA are up for it and keen to discuss the matter with the Government to get it resolved.

Let me deal with the historic problem, which the new clause tackles. The Data Protection Act 1998 requires lenders to notify individuals that their data will be shared and the purpose for which they will be used. That legislation led in due course to the industry including standard clauses in the application process to ensure the consent and knowledge on the part of the consumer for any new agreement after data protection legislation came into force. There is no problem for new agreements; consumers have given their consent. However, there is no provision for any account opened or agreement made before the introduction of the standard clauses in contracts. Nothing provides for consumers to agree to their data being shared. Many accounts—credit cards and current accounts—have a long life. I have had my current account all my adult life.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Gerry Sutcliffe): A long time.

Norman Lamb: Thank you. Many people's credit agreements will predate the introduction of the standard clauses and thus fall outside the scope of the new provisions for ensuring that data can be shared. The industry estimates that some 40 million accounts—42 per cent. of the market—fall into the category where there is no data sharing. How can the Government be serious about sorting out the problem of the lack of data sharing if there is no such sharing on 40 million accounts? Yet the industry says that it cannot share data unless there is a legislative change.

Chris Bryant (Rhondda) (Lab): I am sympathetic to the hon. Gentleman's argument but I wonder whether that is where the problem lies. There have been genuine problems in my constituency of people accumulating debt that they could never afford. The main problem was people starting with a set of new credit arrangements fairly recently. Surely the problem lies with shopping around on the internet or responding to the many millions of pre-approved applications for loans and credit cards. I wonder whether the measure is necessary when we should mostly be saying: caveat emptor.

12.30 pm

Norman Lamb: I am grateful to the hon. Gentleman for that intervention. As I said earlier, there are two problems. There is the historic problem, which the new clause addresses. There is also the problem that there is generally no data sharing in relation to modern accounts in circumstances in which the borrower does
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not default. A default triggers the sharing of information. The industry says that it is extending that provision, and that by the end of the year, it will have introduced much broader sharing of information, so that it will be sharing the good data as well as the bad data. If that actually happens, we will see a real advance. I am not suggesting that the new clause will resolve all the problems. We need a combination of legislative reform and pressure on the industry to deliver a much wider sharing of information from the kind of new credit agreements that the hon. Gentleman has described.

Mike Penning (Hemel Hempstead) (Con): The industry has a wide knowledge of people's credit. One area that is very dangerous is the transfer of credit card balances to new credit cards. There are some wonderful offers out there, but the problem is that the credit card companies know that a balance is being transferred to a new card, with a whole new credit limit, yet the existing credit card is not cancelled. So the borrower automatically gets double the amount of credit, and they can do that every six months. There is not one credit card company that cancels the card from which the balance is being transferred. Its credit limit remains in place. If someone with a £5,000 credit limit transfers that balance to a new card, they will find themselves with a combined credit limit of £10,000. They can do the same thing six months later. The danger is that the credit card companies have the information, but they are not using it to protect the consumer.

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