Consumer Credit Bill

I am grateful to the hon. Gentleman for that intervention. The unfairness test, perhaps combined with guidance, on which the right hon. Member for Leeds, West and I agree, might make the interest rates to which he has referred unlawful and challengeable under the new unfairness test. Again, I call on the Government to provide clearer guidance. The unfair relationship provision repeals the old test of extortionate credit, under which only 10 successful prosecutions occurred. Although I accept that its influence goes beyond what might be suggested by having only 10 successful cases, it has clearly been inadequate in terms of providing protection, and most people accept that. It is right to raise concerns, as did the hon. Member for Wealden, about whether, without a further framework or guidance, it will be compatible with the human rights legislation. It is a vague test, inevitably, as there is a lack of a clear framework for applying it, and that, combined with the presumption that the relationship is deemed unfair until the contrary is proved, makes it potentially onerous. Also in respect of the human rights provisions, there are concerns about the powers of licensing and the sanctions given to the OFT. Again, the powers are very wide and unfettered—for example, the power to impose requirements on licence holders. The Joint Committee on Human Rights has expressed the concern that the"““entirely unfettered scope of this power””" may pose"““a significant risk of incompatibility””" with human rights legislation. I suggest that the Bill should set out the clear regulatory objectives that the OFT should apply in exercising its discretion. Although that proposal was put to me by the Consumer Credit Association, it seems to me that clarity is entirely in the interests of consumers, as well as of the industry. Subject to those concerns, I support the change in the test. It is right to be able to survey the whole relationship to determine fairness, considering all the relevant circumstances, including the terms of the agreement and, crucially, the conduct of the parties. An agreement that on the face of it can look entirely reasonable may, in fact, be entirely unreasonable if it has been forced on a consumer in entirely inappropriate circumstances. With regard to the enforcement powers of the OFT, and subject to the concern that I have expressed about the human rights legislation, we support wider, more flexible powers below the nuclear option of licence withdrawal. I note that the maximum fine of £50,000 can be changed by way of statutory instrument. It is sensible to provide such flexibility. We support measures to make it easier for consumers to pursue a complaint. The alternative dispute resolution scheme using the financial ombudsman service is an appropriate reform. I take on board the concerns of the hon. Member for Wealden about the capacity of the financial ombudsman service to cope, but that could be addressed and resolved—it is not a reason for not doing it. The alternative dispute resolution route is clearly preferable to consumers simply being left to expensive court action, and is a significant advance in consumer protection. The Bill seeks to improve the regulation of consumer credit businesses. It broadens the fitness test to assess the competence of the business to provide credit. That is a sensible reform, as is the introduction of indefinite licences, which should lift the burden on responsible lenders so that greater focus can be applied to rogue lenders. There are several other reforms, including annual statements and arrears notices. Like the hon. Member for Wealden, I suspect that it may be inappropriate to require the lender to serve a notice when the situation is being managed perfectly well between it and the borrower—for example, where there is an agreement whereby although the consumer has failed to pay for a certain number of weeks, the level of debt will not be increased by rising interest rates. In principle, however, the reforms are sensible. There will inevitably be a number of specific issues that we will debate fully in Committee, but the thrust of these reforms is good. The Bill, although overdue, is certainly worth supporting. I hope that it will lead to a change of culture in those parts of the industry where practices have been unacceptable. As I have tried to indicate, the industry still has a big responsibility to go further in all those areas that are not directly covered by the Bill. However, I guess that the objective of us all is to achieve a transparent and competitive market where businesses can be successful but the industry works in the interests of the consumer.