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Mr. Bone : Is the hon. Gentleman concerned that a licence may be granted and then, later on, unfair practices may come in? What are the powers to revoke the licence?

Mr. Davey: I thank the hon. Gentleman for that intervention. He makes an interesting point. I hope that the Minister was listening because he needs to provide the House with clarification on that point.

The concerns regarding the new provision—although it is widely welcomed—are about definition. We have heard that the hon. Member for Hertford and Stortford wants more prescription in the Bill. At least, he did at times, but in his reply to the hon. Member for Angus (Mr. Weir) he seemed to agree with the concern about being over-prescriptive. There is always a balance to be struck in legislation. The Government have sought to strike it by allowing the OFT to issue guidance. That is a settled view and I am not sure whether it will change as a result of tonight's debate. It is critical, in terms of the implementation of the Bill, that the guidance is timely and follows full and thorough consultation with the industry.

If the Minister says one thing in reply to my remarks, I hope that it will be that he will use every power that is open to him—I know that he does not have any strict legislative powers to command the OFT, given that it is an independent body under the Enterprise Act 2002—to ensure that the OFT hears loud and clear that this House wants to ensure that the consultation is comprehensive, thorough and engages with all the different players in the industry. It is important that the OFT is clear, as it plans ahead, in its consultation and in publishing the final guidance, because the industry needs to invest in IT systems. It needs to design, build, test and implement them. Although the Department of Trade and Industry has given an indicative timetable, as the hon. Member for Hertford and Stortford said, the industry wants greater clarity on that. The quicker the Minister and the OFT can provide that, the better. I hope that the Minister can say something on that tonight.

I would also like the Minister to be clearer about the role of future court judgments. Clearly, the definitions of irresponsible lending are ultimately testable in the
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courts. Although the OFT guidance will be the basis on which IT systems are implemented and new practices are developed, there could be a case in the courts in 12 to 18 months, or in two years, that overrides the OFT's guidance and changes the whole system.

Mr. Liddell-Grainger : If a subsidiary company of a main body did the lending, the OFT would have to follow that through the main company, the subsidiary company and all the way down. We have seen that with Barclays and many of the other big banks. Does the hon. Gentleman agree that one of the problems that the OFT will have will be enforcing the measure through subsidiaries? Who will it deal with?

Mr. Davey: The hon. Gentleman makes a good point. I hope that the Minister was listening. The question will be whether the licence is issued to the principal company or has to be applied for and then issued to all the different layers. I hope that the Minister can clarify that.

My point—the hon. Gentleman intervened to make a separate point—was about the role of future court decisions in defining what counts as irresponsible lending. I know that the Minister cannot pre-judge what the courts may say in a future case, but for the industry to make sure that it has some certainty and stability to invest, we need to make sure that the OFT's guidance and what the Minister says, tonight and at other times, assists that process.

Mr. Sutcliffe: We are running the risk of confusing the unfairness test and irresponsible lending. We want to be very clear that the courts will consider the concept of unfairness. The test of unfairness already exists within the framework of the financial services and affects many parts of the financial services regulations. The hon. Gentleman is talking about irresponsible lending, but we are not talking about a duty in relation to irresponsible lending. We are talking about the OFT considering irresponsible lending in relation to the fitness of purpose of a licence holder. There is a difference.

8.45 pm

Mr. Davey: I accept that, but let us imagine a situation in which the OFT has decided that it will not issue a licence to a particular credit institution because it believes that its previous lending was irresponsible. Presumably, the Minister is not saying that judicial review does not apply. I am sure that he would accept that if that credit institution was rather annoyed that the OFT had made that ruling and thought that it was unfair, it would surely be able to ask for a judicial review of the OFT. Perhaps I have misunderstood the 2002 Act. I hope that the Minister will reply to that point, because it is important.

I want to come back to the point that I made when I intervened on the hon. Member for Hertford and Stortford, because the issue of data sharing is particularly relevant to the point about irresponsible lending. If a credit institution were accused by the OFT of irresponsible lending, no doubt it would want to defend that to ensure that it got the licence. However, given that it will not have any powers—particularly in relation to people who had credit cards prior to the Data
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Protection Act 1998 coming into force—how will the OFT be able to say that it has been lending in an irresponsible manner? The credit institution will not have been able to have access to the other debts and borrowings of the applicant.

To make sure that the new factor—irresponsible lending—works, can be implemented and makes sense, I hope that the Minister will move forward, with the Department for Constitutional Affairs, on the issues relating to data sharing. My hon. Friend the Member for North Norfolk led that debate when we considered the Bill previously. He wanted to make sure that the Minister would push ahead on the matter, with his departmental colleagues. Lords amendment No. 3, which we will hopefully pass tonight, cries out for some real effort to go into that aspect because it is the missing piece of the jigsaw. If we pass legislation without that piece, there will be a concern that, although the provision is clearly a major improvement on what has gone before, it is still not quite there. Will the Minister give the House some detail about the future timetable for dealing with that issue?

Mr. Weir: I shall be brief. I simply want to make a couple of points. Obviously, we welcome the amendments, which are sensible. The Minister said that Lords amendment No. 2 was a technical amendment, but I am not sure that I agree. It is an important amendment. Prior to being elected to this House, I earned my crust as a solicitor and I often had people come to me who had got themselves into financial difficulties. One of the problems was that many people did not come forward to seek help until they were very well into those financial difficulties. In many cases, they had court judgments against them. It was well nigh impossible to do very much about the situation by that stage. The amendment will allow the courts to reopen some of the cases where there has been unfair lending. That is important and I congratulate the Minister on the amendment.

My other point relates to Lords amendment No. 3. As I mentioned in an intervention, I was concerned about some of the things that were coming from Conservative Members on this matter. I recognise the basic point being made: that both lenders and borrowers want some certainty. I accept that, but my problem with being too prescriptive is that those who indulge in irresponsible lending can be very inventive in how they do so. The danger with being prescriptive is that we will not hit many of those practices. The Minister has approached things sensibly by laying down a definition and leaving the matter to the OFT, so that there can be some flexibility. I note that it is more than 30 years since the last such Act was passed. The Bill is a piece of major legislation and if we find that we have to amend it, it could be a long time before we can do so.

Mr. Bone: I understand the hon. Gentleman's point. Does he agree that we have not been given a single practical example of what the Bill would catch? I would like some of those before the legislation passes into law, if it is to do so.

Mr. Weir: I understand the hon. Gentleman's point. I am sure that examples could be given, but I would not
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want them written into the Bill because it is important that the OFT is given the flexibility to deal with dynamic situations that can move quickly. People who indulge in such practices find inventive ways of dragging people into such schemes. The Minister's approach is sensible and I strongly support it.

James Brokenshire : It is a pleasure to be locking horns with the Minister again on the Bill. I made my maiden speech on its Second Reading and have followed its progress through the House ever since. As a non-practising solicitor with some background in consumer credit, I have maintained a general interest in its passage.

We have heard that many of the Lords amendments are technical, and I would agree with that analysis. Lords amendment No. 1 obviously just changes around the wording of clause 7, and I have no issue whatsoever with that legal drafting point.

It was interesting to hear the discussions on Lords amendment No. 2, which will delete wording to ensure that previous judgments cannot act as a bar. The intention behind the Bill has been to try to ensure that there was a retrospective effect regarding the unfairness test. I remain disappointed that we have not gained the clarity that we wanted on the meaning of "unfairness", even at this late stage. It is interesting that previous judgments will no longer be a bar on the redress that a creditor may seek due to an unfair relationship.

The most interesting amendment is that to clause 29, which returns us to the debate on irresponsible lending. The Minister's analysis that the provision essentially relates to licensing, and is thus distinct to provisions on the ombudsman or the court, was correct. The unfairness test deals with redress, rather than licensing. However, I wish to follow up a point that I raised with him about the continuing nature of the provision. The clause relates to the determination of whether an applicant is a fit person for a licence. The word "applicant" suggests that we are talking about new applicants who want a consumer credit licence from the OFT. My question remains of what will happen when a person has been granted a licence by the OFT, given that clause 29 relates to the issues that the OFT will consider when determining whether to grant a licence.

I am aware that other aspects of the Bill, such as clause 38, which will insert proposed new section 33A into the Consumer Credit Act 1974, give the OFT the power to give notice to a licensee for purposes connected with

I want an assurance that the interpretation of clause 38 will mean that the OFT will have the power to address matters in not just the context of new applications that it receives. Clearly, new applicants might not have much of a track record to show whether they satisfy the evidence test on engaging

Lords amendment No. 3 is effectively further clarification on what those words mean, so irresponsible lending is, in essence, deemed to be a practice that is deceitful, oppressive, or otherwise unfair.
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