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Mr. Edward Vaizey (Wantage) (Con): My hon. Friend joins a long line of hon. Members who have tried to tease a definition of unfairness out of the Minister. Indeed, I made a speech in Standing Committee that cited extensive case law and judgments in a detailed definition of unfairness. The Minister said that the new definition in the Bill reflected the Government's desire to tackle "all types" of unfair relationships. I made the point that the lack of further guidance leaves dissatisfied debtors in a very difficult position.

Mr. Prisk: I did not participate in the Committee debates, so I am grateful to my hon. Friend the Member for Wantage (Mr. Vaizey) for clarifying the background.

As I said, we are concerned about the lack of clarity with the unfairness test. Constituents are worried that, if the industry is not clear about the lending practices that are acceptable, it inevitably will be more cautious in its lending practices, to the detriment of the borrower.
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Without a thorough understanding of their chances of success in the courts, some consumers may be deterred from pursuing cases that, if unsuccessful, would only add to their financial difficulties, stress and problems. I am sure that hon. Members from all parties will have had that difficulty brought to their attention by constituents who have experienced it.

It is not a sensible approach for either lenders or consumers to have to wait for case law to develop before they can be clear about the law's parameters. Moreover, the vast majority of cases are likely to be of relatively low value, so will be litigated predominantly in the lower courts. They are likely to go largely unreported as a result.

Even with the amendment under discussion, there remains the risk of inconsistency. When the Minister replies to the debate as a whole, I hope that he will tell us   what assurances he can give the industry and consumers that the new test will not prove unfair in implementation.

What safeguards will be put in place to ensure that courts give consistent rulings? That goes beyond ensuring that previous judgments are not set aside, and touches on the more important question of what the unfairness test comprises. Most pertinently, where will the burden of proof fall?

Concern has been expressed by a wide range of interest groups—including lenders such as Barclays bank and the Association for Payment Clearing Services, and consumer representatives such as the Consumer Credit Association—about the reversal of what some perceive as the normal burden of proof and the introduction of the premise that all relationships might be deemed unfair unless proved otherwise.

We are concerned that that might prompt many consumers to try their luck with a claim. Ironically, the consumers most likely to do that could well be those least able to afford to do so. That could be detrimental to them in the future.

Mr. Vaizey: My hon. Friend echoes the point that I made in Committee, which was that the absence of a definition of unfair is a lose-lose situation. Not only would lack of clarity harm the debtor, but it could also harm the creditor, because ambulance-chasing lawyers will try their luck.

Mr. Prisk: I am grateful to my hon. Friend. I was about to say that sometimes great minds think alike, but I am aware of how that phrase concludes.

Stephen Pound (Ealing, North) (Lab): Fools seldom do.

Mr. Prisk: I am grateful to the hon. Member for Ealing, Comedy—I am sorry, Ealing, North for reminding us.

On Report, we moved an amendment to provide that the Office of Fair Trading issue periodic guidance on what constitutes an unfair relationship. If definitions are not included in the Bill, will the Minister undertake at least to reconsider the scope for issuing guidance to clarify the situation for consumers, lenders and the
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courts alike? The key to an effective consumer credit regime lies in shared responsibility. Lenders have a duty to make responsible lending decisions, and data sharing, which the Minister and I have discussed both in the House and in his Department, is critical. Consumers also have to take responsibility for their borrowing and spending decisions but, sadly, many people do not have the financial literacy to enable them to do so. The Government thus have a responsibility to get the legislative framework right so that both lenders and consumers know where they stand.

Mr. Davey: Will the hon. Gentleman give way?

Mr. Prisk: I am just about to move on to amendment No. 3, but as there is a little time left, I will give way.

Mr. Davey: The hon. Gentleman is so generous.

Is not data sharing the key to greater transparency, as it would mean that irresponsible lending would be actionable and the provisions would actually work?

Mr. Prisk: The hon. Gentleman is right. Data sharing is crucial. His predecessor as Liberal Democrat spokesman had discussions about it with the Minister and me. The matter is proceeding, so perhaps cross-party consensus could be developed.

Moving from that consensual tone, I turn to amendment No. 3, which would amend clause 29 by inserting an additional subsection at the end of line 6, page 24. I shall not read it out as I am sure that Members have studied it. The amendment makes explicit the power of the OFT to take account of irresponsible lending when monitoring and enforcing the fitness of licence holders. As originally drafted, the Bill required the OFT to have regard to the

of any person applying for a licence in relation to consumer credit, consumer hire or ancillary credit services. It also required the OFT to bear in mind whether an applicant had

contravened any relevant law relating to consumer credit, engaged in discriminatory practices or business practices that the OFT judged deceitful—a point to which my hon. Friend the Member for Wantage (Mr.   Vaizey) referred earlier—oppressive, unfair or improper.

In Committee, several Members on both sides of the House supported amendments to include a requirement that creditors lend responsibly. The Government originally resisted those proposals. However, as the Minister told us, considerable concern has been expressed throughout the passage of the Bill about the fact that debt in itself is not the problem, but that irresponsible lending and, therefore, borrowing can be. Lending to someone who is already up to their neck in debt is neither sensible nor responsible. It is good neither for the customer nor, in the end, the lender. In previous debates, here and in the other place, the Government steadfastly refused our calls for a specific power on irresponsible lending in the Bill, on the grounds that it would be difficult to define irresponsible and that including such a specific duty would require guidance as to what did and did not constitute irresponsible lending.
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The Minister in the other place, Lord Sainsbury, stated:

He concluded:

We welcome the Government's willingness to recognise that that would not be the case in their U-turn on the matter. Does the Minister now believe that guidance on what constitutes irresponsible lending will not after all reflect on the concerns to which the Minister in the House of Lords referred and which were described as an inflexible tick-box approach? What particular aspects persuaded the hon. Gentleman of the change? He made some brief allusions in his opening remarks but he did not give us the full explanation. It would be helpful for us to understand the reasoning behind the decision.

As the Minister is aware, the Opposition expressed continuing concern in the other place that amendments may still not cover the irresponsible granting of credit; for example, where customers are offered further credit facilities for the purchase of furniture, kitchens or other big-ticket items, despite already being able to borrow thousands of pounds on credit cards. The Government's view is that the amendment will cover that issue as well as irresponsible lending. We hope that will prove to be the case.

The Minister is no doubt aware of the latest concerns expressed by industry representatives about the lack of definition. Members from various parties touched on that earlier. Only yesterday, I received representations from APACS—an organisation that will be at the heart of the Bill's implementation—that the lack of definition will give the OFT inappropriate power. Rosalind Sellers from APACS stated:

In previous debates, one of the Minister's arguments for excluding the provision was that it would be difficult to reach a definition. It would not be surprising if the Minister said that part of the problem is as much of our making as his, given that we pressed for inclusion of the provision. However, as he has conceded to our request, it is his duty as a Minister of the Crown to ensure that the Bill is workable. That, in essence, is my concern. So will he tell us his plans for issuing guidance to the OFT and creditors on the definition of irresponsible lending?

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