Consumer Credit Bill

Clause 38 enables the OFT to interpose intermediate sanctions on licensees, and these sanctions are called requirements. Requirements are an important new tool for the OFT to ensure an effective and targeted licensing regime. Currently, the OFT’s powers are limited to refusal of an application, or granting a licence on different terms. They can also vary, revoke or suspend an existing licence. The effects of these sanctions can be severe as they can prevent people from trading. The OFT adheres to the Cabinet Office enforcement concordat, which means that the regulatory action it takes must minimise the costs of compliance to business by ensuring that any action be proportionate to the detriment caused. That, in turn means that the OFT is able to act only in the most serious cases, where a person is simply not fit to hold a licence. In many cases, the OFT is powerless to address consumer detriment because withdrawing a licence would be disproportionate. For example, if there were a problem with the sale of credit in one branch of a national company, it would not be justifiable to revoke the whole company’s licence. A similar situation occurs where one employee is intimidating customers when collecting debts. Those cases may not be serious enough to call into question the fitness of a person to hold a licence, but the OFT should be able to act to protect consumers. That is why we have proposed this power to impose requirements on licensees. The OFT has produced a note on requirements, which is in the House Library and gives more information on how the OFT intends to use this power. It states that dissatisfaction is dependent on the OFT having evidence that the conduct causes or could cause consumer detriment; and that it is directly linked to the activities covered by the licence or licence applied for. The note also gives examples of cases where requirements may be considered. Perhaps I may give some practical examples. The OFT could use this power to address a wide range of problems. For instance, if there were problems with certain employees explaining credit agreements to customers, a requirement for training employees could be imposed. It might provide that sales representatives in a named branch are trained to inform consumers how they can cancel their agreements. Or if a debt collector’s employees were unfairly pressurising customers by calling very late at night, a requirement could stipulate that they should call only between 8 am and 8 pm. A requirement may also refer to a person other than the licensee. However, it would be addressed to and binding on the licensee. And it can require that a particular person does not undertake a specific activity such as collecting debts in person. The amendment before us would severely limit the effectiveness and flexibility of the OFT’s powers to impose requirements on licensees by limiting the circumstances under which it could impose requirements. I have explained that we are not talking about fitness to hold a licence or breaching specific provisions in the Act, but about general conduct of a licensee that could cause consumer detriment. Neither of the examples that I have just given breach any specific provision in the Act, but I am sure that Members of the Committee will agree that they are likely to cause considerable consumer detriment, and that something should be done to deal with that. That is what requirements are intended for. The amendment would prevent those cases being dealt with because of the way in which it limits the circumstances in which requirements could be imposed. That would reduce consumer protection as the OFT’s ability to improve the conduct of licensed business would be curtailed. However, there are already sufficient safeguards built into the Bill to prevent the OFT abusing the powers in Clause 38. The OFT will publish guidance on how it will use those powers. An OFT note on requirements has already been lodged in the House Library. The OFT will have to let licensees know that it is minded to impose requirements, explain why and give them an opportunity to make representations on the proposal. Moreover, requirements can be appealed to the new appeals tribunal, which provides a safeguard against OFT exercising any powers unreasonably. As regards the concern expressed by the Joint Committee on Human Rights over the OFT’s powers to impose requirements, we are considering the Joint Committee on Human Rights’ concern that,"““there is a significant risk of incompatibility . . . because it fails to satisfy the requirements of legal certainty and gives rise to a risk of disproportionate use of power in practice””." We are considering its comments carefully, but remain convinced that provisions in the Bill are compatible with the European Convention on Human Rights, and have said so. That power does not enable the OFT to tackle the fitness of a licensee and is not therefore about depriving him of a possession—the licence—but about ensuring the proper use of the rights that he enjoys under the licence. There is, therefore, a very good argument that those powers fall within the exception to Article 1 Protocol 1 of the convention; that is, they are not about taking away assets from people, but about controlling the use of those possessions, which is why it is compatible with human rights legislation. We believe that the OFT’s powers contain sufficient procedural safeguards, which I have set out, and give due protection. So I urge the noble Lord not to weaken the extra consumer protection that the Bill brings, and hope that he will agree to withdraw his amendment.