Select Committee on Regulatory Reform Third Report

3  Cause of the draft Order

18.  The Explanatory Document states that:

"The issues all arise either as a direct or indirect consequence of provisions introduced into the 1974 Act by the 2006 Act. The proposals are therefore all corrective measures designed to achieve the original policy intention in each case".[11]

19.  This explanation is euphemistic. The basic reason why parliamentary time needs to be spent on this draft Order boils down to the fact that amendments made to the Consumer Credit Act 1974 by the Consumer Credit Act 2006 were not properly thought through.

20.  The Consumer Credit Act 2006 received Royal Assent on 30 March 2006. During consultations on the Consumer Credit (Exempt Agreements) Order 2007 (made under the Consumer Credit Act 1974 as amended by the Consumer Credit Act 2006) in the Summer of 2006 'creditors expressed their concern about the practical implications of this approach as this would not achieve a comprehensive exemption for buy-to-let spending'.[12] We are puzzled as to why this issue, identified within a few months of the Consumer Credit Act arriving on the Statute Book, was not picked up earlier.

21.  Section 77A(1) of the Consumer Credit Act 1974 was introduced by the Consumer Credit Act 2006. The Consumer Credit (Information Requirements and Duration of Licences and Charges) Regulations 2007 were made under powers conferred, amongst others, by section 77A. Paragraph 7 of Annex B in the Explanatory Document[13] explains: 'The effect of section 77A(1) and regulation 11 [of the 2007 Regulations], when taken together, is that [the] underlying policy intention has been defeated'. Further, the final sentence in the first bullet point of paragraph 10 of the Explanatory Document[14] states: ' The existing wording in the 2006 Act does not allow for the provision in the 2007 Regulations…'. We deprecate the fact that a situation has arisen whereby an Act is apparently contradicted by Regulations which purport to be made under powers conferred by it. Lessons must be learnt from the shortcomings (displayed by the need for the draft Order) in assessing the impact of the 2006 Act on the 1974 Act.

22.  In terms of a definition of 'payments' which is the cause of the third proposal in the draft Order, it seems to us inconceivable that the relevant meaning of a word which is capable of such wide interpretation was not properly made clear in terms of its applications in the 2006 Act.[15]

11   ED, p3, para7. Back

12   ED p3, para8. Back

13   P23. Back

14   P4. Back

15   See Q6 in Appendix, p15 Back

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