Consumer Credit Bill

The amendment of the noble Lord, Lord Razzall, suggests that the Bill should include a notice on statements for running account credit agreements—which are agreements like credit and store card accounts—in relation to a ““duty”” to ascertain that the debtor has consented to the provision of credit card cheques and any increases to the debtor’s credit limit. The Government are giving careful consideration to the issues that the noble Lord raises and believe that while it is important that consumers have access to fair and affordable credit, it is imperative that lenders behave responsibly. First, I will discuss the part of the amendment that concerns the distribution of credit card cheques. The noble Lord is no doubt aware that the issue was raised during earlier stages of the Bill’s progress through Parliament and was also considered by the Treasury Select Committee’s inquiry on credit card charges and marketing. Since then the department has been engaged in discussions with a range of stakeholders. Following on from those discussions a consultation paper is due to be published shortly that will consider whether further steps should be taken concerning the regulation of credit card cheques. Among other things, the consultation will seek to find any specific evidence of consumer detriment as a result of the issuing and marketing of credit card cheques. If action is to be taken, it is important that we establish such a link to justify the need for legislative intervention. That is particularly necessary given that much of the debate to date has been concentrated on what I might call the ““irritation factor”” associated with such cheques. I do not want to prejudge the outcome of the consultation but I think that it is fair to acknowledge that the industry has recognised it needed to implement measures to improve best practice concerning credit card cheques. The Banking Code and its guidance for subscribers as well as the APACS best practice guidelines have been amended to try to address those concerns. A number of new requirements are now in place. In particular, credit card cheques are now to be sent only to qualifying cardholders. That means that they should not be sent out to customers who are in arrears or over limit; customers with a limited scope to borrow more; and accounts where there are problems of fraud or procedures pending to deal with lost or stolen cards. Furthermore, the Banking Code now provides a right for consumers to opt-out of receiving credit card cheques if they wish. I turn to the second part of the noble Lord’s amendment, regarding credit limit increases. That matter is also now dealt with in the Banking Code and the APACS best practice guidelines. In particular, the latter provide that lenders should carry out appropriate checks on customers’ ability to repay before increasing credit limits and that any increase should always be in proportion to the customer’s risk profile. Nor should credit limit increases be offered to customers who are in arrears or to those who fall below credit scoring thresholds. That issue was discussed by my honourable friend the Parliamentary Under-Secretary of State when he met with APACS—the industry body representing card issuers—in July of this year. My honourable friend also made it plain that the Government were watching industry’s progress on this issue with considerable interest. APACS is looking at ways of ensuring that all lenders covered by the Banking Code will adhere to the best practice guidelines to prevent increases being made to at-risk and vulnerable consumers. The Government recognise the issues raised by the noble Lord. In the light of the steps already taken by the credit industry and the forthcoming government consultation on credit card cheques, I ask him to consider withdrawing his amendment.