Consumer Credit Bill

moved Amendment No. 30:"After Clause 37, insert the following new clause—"    ““OFT’S GENERAL DUTIES    After section 1 of the 1974 Act insert— ““1A   OFT’S GENERAL DUTIES (1)   In discharging its functions under this Act to regulate the conduct of licensees, the OFT must, so far as is reasonably possible, act in a way— (a)   which is compatible with the regulatory objectives; and (b)   which the OFT considers most appropriate for the purpose of meeting those objectives. (2)   The regulatory objectives are— (a)   lender confidence to ensure the widest possible access to credit; (b)   the protection of consumers; and (c)   the national interest in having an efficient and innovative consumer credit sector. (3)   In discharging its functions to issue guidance and regulate the conduct of licensees the OFT must have regard to— (a)   the principle that a burden or restriction which is imposed on a person, or on the carrying on of an activity, should be proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction; (b)   the desirability of facilitating innovation in connection with regulated activities; (c)   the desirability of maintaining a competitive market in consumer credit in the United Kingdom; (d)   the need to minimise the adverse effects on competition that may arise from anything done in the discharge of its functions.”””” The noble Lord said: This new clause would set out the general duties and objectives of the OFT in the context of consumer credit. Before going further, I must reiterate my declaration of an interest as a director and controlling shareholder of a company that holds a consumer credit licence. The Minister in the other place stated at Second Reading that an aim of the Bill is to ensure that regulation is appropriate and measured. However, powers given to the OFT such as the"““right to monitor as it sees fit””," and to impose requirements on licensees to do or cease to do that with which the OFT is dissatisfied are instead both inappropriate and excessive. It is not just lenders who have represented those points to many Members of the Committee; Credit Action also is on the side of the borrower. Introducing an objects clause as proposed in this amendment will go some way towards ensuring that OFT regulation is measurable. We contend that no good reason has yet been given for not specifying the regulatory objectives of the OFT. The Minister in the other place, in response to comments by my honourable friend the Member for Wealden when debating this amendment in Committee, said among other things:"““The way the OFT should act with regard to its consumer credit functions is set out in sections 1 to 5 of the 1974 Act””.—[Official Report, Commons, Standing Committee D, 28/6/05; col. 149.]" But, actually, that Act only partly does the job and is out of date. That is why this Bill is before us. The Minister in the other place also said:"““the OFT is subject to the usual range of accountability measures such as scrutiny . . . and appearances before House Committees””.—[Official Report, Commons, 14/7/05; col. 1007.]" But we all know that committees do not have any power to affect what the OFT does. They may produce a damning report, but there is absolutely no guarantee of any resultant action. The Minister in the other place also said:"““The provisions of the Bill should be read in conjunction with the provisions of the Enterprise Act 2002 relating to corporate governance and the OFT board requirement for annual reports. The OFT’s general functions are set out in sections 1 to 8 of that Act””.—[Official Report, Commons Standing Committee D, 28/6/05; col. 149.]" But the Enterprise Act deals with different matters. It does not specifically contemplate the consumer credit field so, like this Bill, it contains nothing setting out the objects and purposes for which the OFT must act when regulating consumer credit. That must be put right. The provisions in the Enterprise Act are so wide as to provide little effective parliamentary control over the OFT. That may have been attractive to legislators at the time, since it was clearly in their mind that the OFT should be given greater independence. However, matters have changed with this Bill and with the Hampton report. Under the current wording of the Bill, the OFT would be given an extensive range of new and far-reaching powers. Examples include Clause 28, which would allow the OFT to define more closely the scope of businesses covered by a licence and so exercise more control over the activities of businesses; Clause 38, which confers the new power to impose requirements on licensees; Clause 52, which would enable the OFT to impose the civil fines of up to £50,000; and Clause 46, which would empower the OFT to require businesses or third parties to provide information. Those and other aspects of the Bill would make the OFT a different regulator to that contemplated by Parliament when it considered the Enterprise Bill. The Minister, in winding up at Second Reading in this House, said that the OFT was subject to parliamentary scrutiny and judicial review in the normal way. Of course, like other bodies the OFT is subject to the supervisory jurisdiction of the courts; judicial review should, however, be regarded as absolutely the last resort of control and supervision. Furthermore, the Wednesbury case says that a decision has to be irrational before the courts will interfere. It is not sufficient for the judge merely to say that he would have come to a different conclusion. Judicial review is therefore not a substitute for strict accountability by Ministers in a situation such as this; neither is it a substitute for having clearly defined rules. Further, regarding the Minister’s comment to the effect that it is subject to parliamentary scrutiny, it is of course one step removed from proper parliamentary scrutiny and accountability. As a regulator, it does not have the same accountability to Ministers and, through them, the electorate, as a department of state, such as the DTI. The Hampton report said of the accountability of regulators that they are not accountable for the way in which they carry out their work. While on the subject of the Hampton report, clearly if there is the possibility, as it suggests, that the consumer credit functions of the OFT could eventually be passed to the FSA, there are several things that your Lordships need to know. First, surely if the consultation on the Hampton report has now closed, the Government must have an indication already of which road they want to go down, in which case they should tell us, as it has an important impact on how the measures in the Bill will be enforced. Additionally, it would be important to know at this stage that the FSA has the capacity to handle the powers that are being granted to the OFT in this Bill. We ask that the powers to be granted to the OFT be considered in the broader changing structure of UK regulation, including the Enterprise Act 2002, and in the light of recent suggestions made by the Hampton report and the Better Regulation Task Force report for one super regulator, to avoid duplicate processes. To return to my main point, and in conclusion, providing excessive and unfettered powers to the OFT may result in the consumer ultimately suffering a lack of choice, accessibility and affordability as creditors withdraw products and the market shrinks. I beg to move.