Consumer Credit Bill

moved Amendment No. 28:"After Clause 22, insert the following new clause—"    ““EXPIRY OF SECTIONS 19 TO 22 (1)   Unless the Secretary of State makes an order to the contrary under subsection (2), sections 19 to 22 shall cease to have effect at the end of the period of two years beginning with the day on which they are brought into force. (2)   The Secretary of State may by order provide— (a)   that a provision of sections 19 to 22 which is in force (whether or not by virtue of this subsection) shall continue in force for a specified period not exceeding 24 months; (b)   that a provision of sections 19 to 22 shall cease to have effect; and (c)   that a provision of this Part which is not in force (whether or not by virtue of this subsection) shall come into force and remain in force for a specified period not exceeding 24 months. (3)   Notwithstanding any orders made by the Secretary of State under subsection (2), sections 19 to 22 shall, by virtue of this subsection, cease to have effect at the end of the period of ten years beginning with the day on which they are brought into force.”” The noble Lord said: The amendment is grouped with Amendments Nos. 38 and 39, and I shall speak to Amendment Nos. 28 and 39. The first amendment results from the study that we have made of the Government’s practice on terrorism legislation when a difficult and rather troubling issue arises. In this case, it is how the definition of ““unfair relationship”” should be dealt with, with those on this side of the Committee arguing for it to be dealt with in one way and the Government resisting that. As the Government found on their Prevention of Terrorism Act, the easiest way to deal with the difficulty is to produce a sunset clause. Amendment No. 28 is an attempt to follow the Government’s normal procedure in these matters—to produce a sunset provision when we find that we cannot reach consensus on something where the objective is shared by all Members from all parties represented here. I hope that the Minister will treat this amendment in the spirit in which the Government move their sunset clause in the House of Commons tomorrow on the Terrorism Bill, as the point is exactly the same. We are clearly not going to agree with the Government on how unfair relationships should be dealt with in the Bill, and the substantive argument from the Government is that law practice and procedures need to develop. It seems sensible to us therefore to put a sunset clause on the provisions, so that they have to come back to Parliament for review in the periods prescribed. Bearing in mind their practice with the Terrorism Bill, I have no doubt that the Government will greet the proposal with eager anticipation. Amendment No. 39 is an amendment to Schedule 3. Although in the group, it raises a different point. The amendment modifies the transitional arrangements in respect of provisions relating to unfair relations. It is intended to represent a fairer and more balanced approach between the interests of lenders and consumers. That relates particularly to concerns that have been raised as to the impact of Schedule 3 on the annual securitisation market and the reputation of UK capital market generally. As Members of the Committee will be aware, securitisation normally involves the bundling together of finance assets which are sold to investors, who are often overseas investors. That has provided a very cost-effective means for companies in the consumer credit industry to raise capital and to offer competitive products competing with the traditional high-street lenders and a competitive market for consumer market and mortgages. The concern that has been expressed in a number of quarters is that the changes, as set out in Schedule 3, mean that lenders and investors face a financial exposure which was wholly unforeseen when the loans were written. In the original detailed consultation on the unfair relationships provisions, the DTI, in its policy statement of February 2004, said that measures dealing with unfairness would be applied in any forthcoming legislation to all existing agreements, but that lenders would have no financial liability in respect of actions taken before the law was changed. In respect of existing agreements, the legislation would apply only to"““payments demanded or sums charged after the Bill becomes law””." In other words, lenders would be given the opportunity to make necessary adjustments with the new legislation during the transitional period. I am told by those who have lobbied extensively on the issue that the lenders have been planning for this new regulatory framework on the basis of this approach to retrospection. However, as noble Lords will realise and as the Government know, the current draft of Schedule 3 contradicts the DTI’s policy statement of February 2004 and would permit challenges to agreements which would otherwise comply with the law at the time they were made. I am sure Members of the Committee from all sides of the House would accept that it is a fundamental legal tenet that people should not be punished for actions that they have undertaken in good legal faith, and in accordance with the law as it applied at the relevant time. So, when announcing its February 2004 policy the DTI said that the policy then,"““represented a balance between the interests of business and consumers””," and limited the financial exposure of lenders to potential challenges based on actions undertaken legally in the past. We agree with that policy statement and regret that the Government have seen fit to reverse it. Before it reached that conclusion the DTI consulted widely. Yet, I am told, at no stage has the DTI informed industry stakeholders of the change of policy represented by the drafting of Schedule 3 until the Bill was published. Indeed, as yet, no rationale or explanation has been given for the policy shift. In planning for the new legislative framework—as the Committee knows, we welcome this Bill in general and most of its specific provisions—the Government should provide, while providing protection for consumers, financial certainty for the financial services industry and allow business to plan for the future. I suspect that this policy has undermined the industry’s ability to plan for the future in this respect with any degree of confidence, particularly the securitisation market. I look forward to the Government’s explanation for the change of policy. The amendment is, I suppose, at the extreme end of proposals about how to deal with this difficulty. If the Government reject this amendment, I should be grateful if they would look to see whether there are any other ways in which they can deal with what clearly is an issue for that industry. I beg to move.