Consumer Credit Bill

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James Brokenshire: Briefly, subsection (3) says that a person shall not be required under section 33A or 33B to compensate or otherwise make amends to another person. Could that provision be used to prevent a practice from taking place, for example, if there was an improper practice in place for a particular borrower? Could it be used to protect a borrower in those circumstances?

Mr. Sutcliffe: Yes, because that would be a matter of fitness and would concern unfair practice. We talked about default issues earlier on in the Bill. The borrower would not be able to collect anything because they had acted in an unfair way.

Question put and agreed to.

Clause 40 ordered to stand part of the Bill.

Clause 41

Procedure in relation to requirements

Question proposed, That the clause stand part of the Bill.

Mr. Sutcliffe: The clause relates to the OFT’s power to impose requirements on licensees, and supervisory bodies which hold a group licence. That power enables the OFT to respond proportionately to problems with a licensable business. When it is dissatisfied with certain matters, the OFT can impose a requirement on a licence holder to do something, to cease doing something, or not to do something in relation to that business.

The clause sets out the procedure for the OFT to impose requirements. It follows a similar pattern to other licensing decisions under the 1974 Act and it applies to both standard and group licences. If it is so minded, the OFT must issue a notice to the licensee to impose a requirement on him; to refuse to vary or revoke a requirement in the way that a person has requested; or to vary or revoke a requirement of its own motion.

That notice sets out the requirement the OFT intends to impose with the reasons why. The notice must also be issued to affected persons as defined in clause 40 of the Bill. Affected persons are the licensee, or the person who is referred to by name in the requirement who is prevented by the requirement from doing something connected with the licensee’s business.

Once a notice has been issued, the licensee or affected person has the right to make representations and to request an oral hearing under section 34 of the 1974 Act. If a person proposes a requirement to be imposed on himself, the notice procedure is not
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necessary allowing for a shorter, more convenient process. That means that if the OFT and the licence holder agree on the terms of the requirement, the licensee can propose the requirement and it can be implemented immediately without the period for representations.

The clause ensures a fair procedure for imposing requirements. It complements the implementation of other licensing determinations under the 1974 Act.

James Brokenshire: I have another quick question. The Minister mentioned that the clause reflects other drafting in the 1974 Act relating to the appeals structure. I draw the Minister’s attention to clause 32, which refers to revocation. In many ways, this clause follows the procedure on revocation of a licence. In clause 32 it says that a revocation shall not take effect before the end of the appeal period. Clearly, that protection is not built in here, and a requirement could be set and enforced even before the appeal had taken place. Would the Minister explain why that timing period has not been allowed for in this provision, while it is allowed if there is an appeal under section 32 of the Act?

Mr. Sutcliffe: I do not know the answer to that. If the hon. Gentleman will forgive me, I will come back to him.

Question put and agreed to.

Clause 41 ordered to stand part of the Bill.

Clause 42

Guidance on requirements

Question proposed, That the clause stand part of the Bill.

Mr. Sutcliffe: Continuing to be consistent, we are talking about the OFT powers to impose requirements on licensees and statutory bodies that hold a group licence. The power enables the OFT to respond proportionately to problems with a licensable business. When it is dissatisfied with certain matters, the OFT can impose a requirement on a licence holder for the reasons that we explained earlier. That is useful when the problem is not sufficient to warrant refusing or revoking a licence.

The clause requires the OFT to publish guidance on how it proposes to exercise its powers to impose requirements. The OFT must have regard to that guidance when exercising its powers under the clause. The Committee has been provided with a note about the OFT’s guidance. That note provides an idea of the scope of the guidance based on the clauses in the Bill. Clearly, once the Bill is passed, the OFT will consult on the guidance, as stipulated in subsection (4).

The guidance will give examples of requirements and more details of the procedure that the OFT will go through. The OFT is able to revise the guidance if new
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issues arise. The clause will help businesses and consumers to understand how the OFT will use its powers to impose requirements.

Charles Hendry: May I press the Minister for a little more clarification? In general, we support what is being suggested, but it seems that, in particular, the way in which the OFT will publicise the guidance is vague. Subsection (3) of the clause says:

    “The guidance shall be published in such manner as the OFT thinks fit for the purpose of bringing it to the attention of those likely to be affected by it.”

Clearly one must be vague when setting such a measure out in primary legislation, because the way in which the guidance might be published will change over time. Does the Minister have an idea in his mind of how that will be appropriate? Will publication on the OFT website be sufficient? Will the OFT need to write individually to all licensees? Would it be enough to advertise in the newspapers? It would be useful to have a clear understanding of what the Minister has in mind.

Mr. Sutcliffe: The Minister has in mind that the OFT acts in concordance with its normal rules and procedures on how it deals with issues relating to discussion and consultation. The OFT is responsible to the Cabinet Office concordat that sets out how best practice on consultation and discussion should be administered. I am sure that the hon. Gentleman has read the details of that concordat backwards. It is reasonable to expect that the OFT will consult with all relevant stakeholders, which has been the way in which we have dealt with the issue previously on all matters relating to the Bill and to the White Paper.

James Brokenshire: I return to the point that I raised earlier. I rehearsed the argument there and I will say it formally again. The issue is the lack of checks and balances in the form of the approval of the Secretary of State of any guidance published under section 33E. There is also the consistency point that I made earlier looking forward to clause 54 of the Bill. In that case, a statement of policy would not be published without the consent of the Secretary of State. I hear what the Minister said on my earlier comments, but I ask that the issue be considered again in the context of clause 42.

Mr. Sutcliffe: I do not know whether this answer will be helpful to the hon. Gentleman. One of the reasons is that this clause relates to the conduct and normal, regulatory function, which describes what the OFT should do. The requirement for guidance is subject to consultation. That may assist him, or not.

Question put and agreed to.

Clause 42 ordered to stand part of the Bill.

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Clause 43

Consequential amendments relating to requirements

Mr. Sutcliffe: I beg to move amendment No. 23, in clause 43, page 34, line 39, leave out from beginning to ‘(particulars’ in line 5 on page 35 and insert ‘( )   In section 35(1) of the 1974 Act’.

This is a technical amendment and I hope that the Committee will support it. It aims to avoid any confusion suggesting that people could be prosecuted twice for certain unlawful acts. Obviously that is not the intention. That is what the amendment makes clear.

Amendment agreed to.

Clause 43, as amended, ordered to stand part of the Bill.

Clause 44

Provision of information etc. by applicants

Question put, That the clause stand part of the Bill.

12 noon

Mr. Sutcliffe: The information provisions in the Bill give the OFT improved powers to obtain the information that it needs to assess and monitor fitness. The clause deals with the information that the OFT may require from licence applicants. The OFT will issue general notices to specify the information and documents that must accompany initial applications.

In the course of considering the application, it will also be able to request further relevant information from the applicants. The type of standard information required by it may change from time to time. For example, the OFT may decide that in future all applicants should submit evidence of their complaints procedure. It is possible that a change in the required information could happen while an application is being processed. If that is the case, the applicant would have to provide the extra information required by the OFT’s general notice.

I have covered the changes in the OFT’s information requirements. The next part of the clause deals with changes to the information provided by applicants. It is important that the OFT works on up-to-date information; for example, when assessing whether an applicant is fit to hold a licence. Therefore, if information submitted by an applicant changes between application and determination, they must inform the OFT within 28 days of the change occurring. If the applicant becomes aware of any errors in the information submitted, they must inform the OFT within 28 days of the error coming to light.

However, the Government do not want applicants to have to notify the OFT of every comma in the wrong place. That would be time consuming for the applicant and a waste of resources for the OFT. Therefore, an applicant is not required to notify the OFT of clerical errors or omissions that do not affect the substance of the document. Also, the applicant does not need to
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notify the OFT of anything they are required to give notification of for the public register under section 36 of the 1974 Act. Taken together, the provisions mean that the OFT will be able to assess applicants on the basis of up-to-date and comparable information.

Charles Hendry: My colleagues and I think that the provisions are sensible and we support them in general, but can the Minister clarify just one small aspect? What happens if a notification of a change or an error is not made within the 28 days as specified? What penalties can be imposed? Does the applicant have the right to appeal against a decision to impose a penalty or a fine in such circumstances? In general, we support the need for information to be up to date, but what would happen if somebody did not fulfil their obligations within the time scale? Does the OFT have any powers to shorten or lengthen the time if it felt that another time scale would be more appropriate?

Mr. Sutcliffe: I have tried to be very flexible about the arrangements for notification, but the information must be provided within the required time. Any delay may inform a decision on whether to grant a licence. There will be flexibility, but we have been very clear about the time scales. I appreciate the hon. Gentleman’s support for the clause.

Question put and agreed to.

Clause 44 ordered to stand part of the Bill.

Clause 45 ordered to stand part of the Bill.

Clause 46

Power of OFT to require information generally

Question proposed, That the clause stand part of the Bill.

Mr. Sutcliffe: The clause is key to ensuring that the OFT has sufficient powers to gather information so as better to monitor and enforce the licensing regime. The clause enables the OFT to require a person to provide specified information and documents at a specified time and place.

The OFT must give reasons for requiring the information and documents. It would be able to require such information or documents only if they were reasonably required for the exercise of the OFT’s functions under the legislation to undertake routine monitoring of licensees.

The OFT may also require information from third parties. To protect such third parties, the clause contains safeguards. The OFT can request information from non-licence holders only if certain acts or omissions have occurred, or if it believes that certain events have occurred. Such events must cast doubt on the fitness of a licensee, lead to a requirement being placed on the licensee or trigger a civil penalty. In the case of a group licence, the OFT must consider events that prompt questions as to whether the public interest is best served by the group licence remaining in place. Such requested information must also be
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reasonably required by the OFT to help it carry out its duties under the Bill. The clause ensures that there are adequate procedural safeguards for third parties.

Charles Hendry: The way in which the OFT will interpret its regulatory role and carry out its powers in practice remains relatively vague in many areas, despite the additional guidance. For example, the OFT guidance states:

    “From time to time the OFT may publish guidance on its interpretation of aspects of the Act and how it will enforce these. In some circumstances guidance is required by legislation . . . In other instances, OFT has the power to issue such guidance as it thinks appropriate. Guidance may be of a general nature . . . or it may relate to particular categories of activities or business.”

The extent to which and the circumstances by which the OFT will enforce its powers remains unclear. This is unhelpful both to the industry and to consumers and I should be grateful if the Minister clarified that. I should also be grateful if he talked further about the role of trading standards services because their duties will, to some extent, be carried out on behalf of the OFT. Does the Minister believe that trading standards services have the capacity to cope with their new work load? Will they be able to carry that out effectively and efficiently to fulfil the Bill’s commitment to improve the licensing and regulatory regime and to sift out unscrupulous lenders and those operating bad practice?

Can the Minister also clarify what additional resources will be made available to trading standards services? We need further assurances on that, despite his earlier comments. Does he accept that the delegation of responsibilities from the OFT to trading standards services will inevitably dilute accountability? That will run contrary to the Bill’s aim of improving transparency and will prove detrimental to consumers.

Mr. Sutcliffe: We shall come to the enforcement of the powers and the effect on trading standards services when we discuss clause 49, so it might be more appropriate to deal with that matter then.

Throughout our discussion, the hon. Gentleman has made the charge that the Bill is vague, but he will accept that under the parliamentary process the Bill sets out the framework and follows a White Paper that has been consulted on with all stakeholders. Discussion of the details takes place in relation to secondary legislation and guidance. That is necessary to enable people to understand fully the implications of the Bill.

That is how the details will be looked at. That will take place as soon as possible after the Bill receives Royal Assent. I accept that the hon. Gentleman feels that many aspects of the Bill are vague, but that is usually because of the parliamentary process that has stood us in good stead in much of the legislation that has been introduced. Secondary legislation covers the details and there is a great deal of negotiation before that secondary legislation is introduced. I hope that he
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will accept that explanation and my assurance that we will discuss the issues involving trading standards services and so on when we come to clause 49.

Question put and agreed to.

Clause 46 ordered to stand part of the Bill.

Clause 47

Power of OFT to require access to premises

Question proposed, That the clause stand part of the Bill.

Mr. Sutcliffe: The clause gives the OFT powers to enter premises to obtain information and documents and enables it to carry out routine monitoring visits when enforcement officers will be able to observe business operations. It also enables the OFT to investigate more effectively suspected lapses of fitness. The OFT must first issue a notice requiring a licensee to ensure that an authorised officer can enter premises at a reasonable time. The clause does not apply to premises used only as dwellings.

The notice issued must set out the reasons why access is required. The authorised officer may observe the business or inspect any documents on the premises that have been specified or described in the notice and are present. An authorised officer may also require anyone on the premises who is involved in the licensee’s business to help them in their duties.

The OFT can access the premises only of standard licence holders and the original applicant for group licences and may do so if that is reasonably required to help it to carry out its duties under the legislation. There may be times when the OFT needs to access premises of third parties. In such cases, the OFT may require access to the premises of someone other than the licensee only if he thinks that an act or omission concerning fitness has occurred. Such an inspection must be reasonably required to enable the OFT to take or to consider taking licensing action. Again, that does not apply to premises used only as dwellings.

With that explanation, I hope that the Committee will support the clause.

Charles Hendry: The clause provides distinctive powers for the Office of Fair Trading. We agree in principle that it should have those powers, but I would be grateful if the Minister clarified a couple of points of detail.

New section 36C(4) states:

    “The licensee shall secure that the required access is given at such times as the OFT reasonably requires.”

How does he define “reasonably”? For example, would it essentially mean working days and working hours or could it include weekends or the middle of the night? We need a clear definition.

New subsection (3)(b) states that it does

    “not include premises which are used only as a dwelling.”

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What happens if the premises are a dwelling? Do they come under clause 48, which gives powers to inspect premises under a warrant, or are dwellings more permanently excluded from such investigations? That would be rather surprising.

New subsection (8) states:

    “A requirement may be imposed under subsection (1) . . . only if the observation or inspection in question is reasonably required for purposes connected with the OFT’s functions under this Act.”

Again, can he define “reasonably” for us? That would provide us with the greater clarity that we are seeking.

Gordon Banks: To reinforce what the hon. Gentleman has said, I sought a definition of “reasonably” and “reasonable”, particularly with reference to new new section 36C(5):

    “The OFT shall give reasonable notice of”

times for inspection. What is considered reasonable and who is it considered reasonable by?

Mr. Sutcliffe: Sometimes notes are intended to be helpful, but not always. I am grateful for the acceptance of the hon. Member for Wealden that the clause is necessary to allow the OFT to carry out its functions in the way that we would all expect.

The reasonableness test applies to any other such licensing procedure, in the sense that it should be proportionate and reasonable. The OFT has to be effective in getting the required result and it has the discretion within the concordats that operate. Premises that are dwellings will come under clause 48, as the hon. Member for Wealden said—I now understand the nod that I was given. Dwellings fall under the warrant aspect of that clause, which we will discuss later. The OFT will be directed to maximise its opportunities to get the required results within the concordats.

Question put and agreed to.

Clause 47 ordered to stand part of the Bill.

Clause 48

Entry to premises under warrant

Question proposed, That the clause stand part of the Bill.

Mr. Sutcliffe: The clause covers the circumstances and procedures that allow an enforcement officer to enter premises under a warrant obtained by the OFT. In certain circumstances, the OFT can apply to a justice of the peace for a warrant to search premises; in Scotland, it can apply to the sheriff. It must have reasonable grounds to believe that information on those premises might be required under new section 36B and that, if a requirement to provide information were imposed, it would not be complied with or that the documents or information in question would be tampered with.

The officer responsible for carrying out the warrant would be able to enter and search the premises. They could seize and detain the information or documents of the description specified in the warrant and take steps to secure the protection of the information or
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documents in question and prevent interference with them, including the use of reasonable force. The officer may be accompanied by any person he thinks necessary and take any equipment that he thinks necessary.

Question put and agreed to.

Clause 48 ordered to stand part of the Bill.

Clause 49 ordered to stand part of the Bill.

Clause 50

Officers of enforcement authorities other than OFT

Question proposed, That the clause stand part of the Bill.

12.15 pm

Mr. Sutcliffe: In response to the questions asked by the hon. Member for Wealden, I will outline the clause for the rest of the Committee.

New sections 36C and 36D inserted by clauses 47 and 48 will enable the OFT to ask offices of other enforcing authorities to carry out information gathering on its behalf. In practice, those other local enforcement authorities are likely to be local authority trading standards offices. They should be able to act as the OFT’s legs on the ground, carrying out routine monitoring visits and executing search warrants obtained by the OFT.

Under new section 36F inserted by this clause, anything done by an enforcement officer in the course of this activity will be treated as though it has been done by the OFT. That will not apply if the enforcement officer does anything that results in criminal proceedings. The OFT will enter into an arrangement with the trading standards authorities to carry out such activities. Trading standards officers must not disclose any information obtained as part of the such activity without the approval of the OFT, although that does not apply if the officer is under a duty to disclose the information.

In Northern Ireland, the Department of Enterprise, Trade and Investment carries out the function performed by trading standards officers in England, Scotland and Wales. The Bill will enable the OFT to work with the Northern Ireland body to carry out information-gathering activity in Northern Ireland. Trading standards officers have both the local knowledge and the proximity to carry out information and investigation work on behalf of the OFT, and they already have the expertise to take on the role. However, the OFT will also provide training and support. Working in partnership, the OFT and trading standards officers will be able to monitor licensees to ensure that they remain fit to hold consumer credit licences. The new powers will mean that the resource is used more effectively. The OFT will remain the primary enforcement body under the legislation and licensing decisions will still rest with it. That will improve standards and result in better protection for consumers.

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Trading standards officers already enforce part of the 1974 Act, and they will work with the OFT to provide additional training. The OFT will fund trading standards activity under clause 50, and the OFT and trading standards staff will operate under appropriate agreements, so there will not be an on-cost to local trading standards authorities. We will debate later the role of trading standards in the wider context of the Hampton review. With that explanation, I hope that hon. Members will feel able to support the clause.

Charles Hendry: I am grateful to the Minister for that clarification. In the course of his comments, he said that it is likely to be trading standards officers who do the work. Does that mean that it will either be OFT officers or trading standards officers? Is there a third way?

Mr. Sutcliffe: There is always a third way.

Charles Hendry: The Minister says that there is always a third way. I thought that we had moved away from that concept.

Are there circumstances in which the work could be subcontracted out to other organisations? Could it be subcontracted to a private sector organisation? It would cause some anxiety if such work were done by people who were not regulated either by the Government or by local government.

Earlier, we spoke about the credentials that would be needed by those who provide credit. What credentials will the enforcement officers need, particularly if they are people who are outside the remit of the trading standards offices, and, once again, will they be people who will need to be checked by the Criminal Records Bureau?

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