Consumer Credit Bill

The amendment seeks to address concerns over the so-called half rule, which enables a debtor to hand back goods at any point in a hire purchase agreement without further liability, provided that they have paid or pay at least half of the total price. I am aware of the concern that the noble Lord refers to, expressed in particular by the motor industry; that is, the arrangement disregards principles of fair recovery and results in a significant amount of lost revenue. I am also aware that industry is concerned that the effects will be exacerbated by the removal of the financial limit, as was noted. However, the Committee may be aware that, in response to industry’s earlier representations, the Government issued consultation in September 2004 to gain a clearer understanding of the extent of the concerns and explore the case for change. One of the options considered in the consultation included altering the threshold, so that the right to terminate voluntarily would apply only once a higher percentage of the credit had been paid off. Not surprisingly, that consultation revealed no consensus for change—as the noble Lord, Lord De Mauley, noted—with the motor industry favouring repeal and consumer groups arguing equally forcefully for retention of the provisions. The consumer groups are resistant to change because the right to voluntary termination is the key safeguard that a consumer has in a hire-purchase agreement. Given that context, it is clear that the change intended by the amendment would not be universally welcomed. Moreover, I doubt that it would do more than provide a partial solution to industry’s concern, but it is not the only option available to industry. For example, there must be scope to explore different structures of finance products to ensure that the repayments keep pace in a better way with the rate of depreciation, which is surely the underlying problem. I hope that I can reassure the noble Lord that we have thought carefully about the issue and concluded that the amendment would not be desirable. Accordingly, I respectfully ask that he withdraw it.