Consumer Credit Bill

moved Amendment No. 19:"After Clause 7, insert the following new clause—"    ““PRIOR CONSENT OF DEBTOR    In section 78 of the 1974 Act (duty to give information to debtor under running-account credit agreement) after subsection (3) insert— ““(3A)   The creditor has a duty to ascertain information from the debtor that he has given prior consent before— (a)   the distribution of credit card cheques from the creditor to the debtor, (b)   the limits on a debtor’s credit card or equivalent are increased by the creditor.”””” The noble Lord said: The amendment provides for the insertion of a new clause, and again goes to the heart of consumer protection. I am obliged for the briefing and representations made by citizens advice bureaux on the issue. As I am sure that the Committee will agree, they are at the sharp end of what I might call sharp marketing practices, because they are the people who often have to deal with their victims. In their view one of the problems—which I believe the Bill touches on—is the need to discourage irresponsible borrowing and to encourage responsible borrowing by individuals. The hardship and the tragedies which result from irresponsible borrowing—which often end up in citizens advice bureaux—are often due to sharp practices on the part of irresponsible lenders leading to personal financial difficulties for the borrower. They argue strongly that no one should be sent an unsolicited credit card cheque and no one should be given an unsolicited increase in their credit card limit or its equivalent. Leaving aside the obvious point about forcing people often at the bottom end of the credit ladder into unnecessary debt, they make three specific points. First, additional charges levied by the card companies through higher interest rates are often charged on cheques rather than on card purchases because they are treated as cash advances which, for many lenders, carry a higher interest burden. For those at the bottom of the income ladder that is often an unknown charge that they then have to bear. Secondly, it is all too easy for consumers to see credit card cheques as the equivalent to cash in the bank rather than as an expensive and sub-optimal means of borrowing money. People simply think that they have cash in the bank and that they can write a cheque. When the interest rate charge comes in at the end of the month, it is unexpected. I am sure that Members of the Committee will be aware that the joint and several liability protection afforded to UK consumers under Section 75 of the Consumer Credit Act 1974 does not necessarily apply to credit card cheques in the same way that it does to credit card purchases. I move this as a probing amendment, but it is an issue that the citizens advice bureaux and others regard as important. I look forward with interest to hearing the Minister’s response. I beg to move.