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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