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29 Mar 2006 : Column 970

Consumer Credit Bill

Lords amendments considered.

Clause 7

Further provision relating to statements

Lords amendment: No. 1

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Gerry Sutcliffe): I beg to move, That this House agrees with the Lords in the said amendment.

Mr. Deputy Speaker (Sir Alan Haselhurst): With this we may discuss Lords amendments Nos. 2 to 5.

Mr. Sutcliffe: On Lords amendment No. 1, we believed that it was necessary to modify the wording of the proposed new subsection (2) in clause 7(3), to ensure no ambiguity in its meaning. It is a technical amendment that simply makes the wording clear and removes any potential for confusion by changing the word "his" to "the debtor's". I hope that hon. Members will support it.

On Lords amendment No. 2, the Government amended clause 20 in another place to remove subsection (4). Again, the amendment is technical. Clause 20(4), as it was, was intended to prevent the court from setting aside judgments previously made to give effect to the rule that a statutory jurisdiction to reopen a transaction does not enable the court to reopen one that has been subject to a previous judgment made by the court. It replicated a provision in the Consumer Credit Act 1974.

The Government reconsidered the impact of that provision in the light of current court rules operating in England and Wales, Scotland and Northern Ireland and concluded that subsection (4) would in practice serve as an impediment to the Government's policy intention—to enable consumers to access effective redress from the court under those provisions—and that the court rules should be allowed to apply to those provisions in the normal way. If we left the provision as it stood, before the Lords amendment, it would serve to lessen the benefits of the Government's policy on unfair relationships. Therefore, the provision is best left out of the Bill.

7.45 pm

Lords amendment No. 3 was tabled to clause 29, prior to Third Reading in the other place. Members of this House and noble Lords expressed their concerns about "irresponsible lending practices" during debates on this Bill. The Minister in the other place, the noble Lord Sainsbury of Turville, and I considered carefully the contributions of hon. Members and noble Lords on this issue. We thought hard about how the Government should respond. The Government believed that the wording of clause 29, as previously drafted, would allow the Office of Fair Trading to take account of "irresponsible lending practices". However, in response to the concerns expressed on both sides of both Houses, we concluded that there was merit in making explicit in the Bill the ability of the OFT to do that.

Given the interest expressed by hon. Members in the issue of "irresponsible lending practices", I should explain the amendment further. The Government
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believe that the most appropriate means of addressing "irresponsible lending practices" is in the context of the OFT's powers to monitor and enforce the fitness of licence holders. With this amendment, the OFT, which is best placed to monitor changing practices in a dynamic market, will be able to provide guidance to licence holders on lending practices which, on the basis of the OFT's knowledge and experience of the market—

Mr. Ian Liddell-Grainger (Bridgwater) (Con): As the Minister is well aware, one of the big problems, is the policing of all these provisions. Whatever this place decides, and whatever legislation we send out to Britain, we still cannot control it. Does he agree that we must somehow tighten the Bill even further?

Mr. Sutcliffe: I am satisfied that the amendments, which were discussed in the Lords at great length, along with the debate that we had in the Commons on the Bill, have produced a tightened position. There was considerable discussion about irresponsible lending and we believe that the amendment, with the role of the OFT, is the appropriate way forward.

Mr. Mark Prisk (Hertford and Stortford) (Con): Further to the excellent question from my hon. Friend the Member for Bridgwater (Mr. Liddell-Grainger), the key point is not the quality of the legislation but the effectiveness of its implementation. Does the Minister understand that, because I suspect hon. Members are looking for an assurance on implementation?

Mr. Sutcliffe: As I move on, I hope that I will be allowed the opportunity to talk about the implementation plan, which may allay some of the fears that hon. Gentlemen have. Throughout consideration of the Bill, we have said that we are keen to ensure transparency in terms of policy objectives. We need to work with the organisations involved, whether the industry, consumer groups or the OFT, to make sure that the implementation is what we intend.

Mr. Michael Fallon (Sevenoaks) (Con): The phrase "irresponsible lending" is included but not defined in the Bill. Is it to be left to the OFT to define the powers that it will exercise? Can the Minister assure us about how the definition will be drawn up?

Mr. Sutcliffe: The hon. Gentleman raises a fair question and if he lets me progress in my speech, I hope that I can answer that.

The OFT would perform this role through its fitness guidance. That approach will allow the OFT to provide business with an indication of what types of conduct are considered "irresponsible lending practices". Businesses would therefore have some guidance on what they ought to avoid, while not being discouraged from seeking out new ways of addressing customer demand. That will be backed by a sanction available to the OFT of reviewing a lender's fitness to hold a licence if the lender engages in such practices.

Mr. Peter Bone (Wellingborough) (Con): The clause refers to "deceitful" practices. Would a practical example
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be the sending out of statements by credit card companies during public holidays so that the recipient has no chance of paying the bill before the specified date and therefore incurs a penalty charge?

Mr. Sutcliffe: I have made great strides in ensuring that I do not determine the qualifications from the Dispatch Box. I feel that it is better to leave the OFT to decide what constitutes irresponsible practices. The hon. Gentleman knows that the three spokespeople on the issue have been dealing with APACS—the Association for Payment Clearing Services—and studying the banking code to establish the position in regard to consumer credit card cheques. We will keep the House informed about the progress of those deliberations.

Mr. Edward Davey (Kingston and Surbiton) (LD): The Minister's answer on how irresponsible practices would be defined seems to contradict what he said on 14 July last year. Then, he said, "The amendment"—a different amendment—

He went on to say that, ultimately, the courts would decide the definition of such tests and whether it was a question of irresponsible lending or of unfairness. Can he confirm that the definition will be decided by the courts, not the OFT, and that the OFT's guidance will ultimately have no legally binding effect on rulings?

Mr. Sutcliffe: The hon. Gentleman is right in the context of why I did not go into the definition of unfair lending and the unfairness test. As for the issue of guidance and support from the OFT, the response to points raised in both Houses was that it was thought best to give business some certainty about some of the practices that could be considered irresponsible lending practices, on the basis of the OFT's ability to develop a process in the light of its experiences and its responsibility for determining whether people are fit to hold licences.

I hope that Members in all parts of the House accept that the Government have listened and that we will discuss the issues with all the bodies that have helped to make this the Bill that it is—a Bill that is well respected and that has been subject to much consultation. I know that, given good will from Members, we shall achieve what we want to achieve.

James Brokenshire (Hornchurch) (Con): I welcome the introduction of the concept of irresponsible lending, which was debated in detail in Committee, but I have a question for the Minister. This provision relates to the granting of new licences on the basis of the "fit and proper purpose" test. Will he tell us more about ongoing monitoring? A new applicant may not have a track record, in which case it will be necessary to see what happens after a licence has been granted.

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