Consumer Credit Bill

On Amendment No. 28, as noble Lords will be aware, we have for the present withdrawn our amendments relating to the unfairness provisions. We take the position that the change in the test from ““extortionate”” to ““unfair”” is a step in the right direction in the field of consumer credit. For that reason, we would have preferred to improve the relevant clauses rather than to allow the option of removing them altogether, albeit after two years. Nevertheless, we see the amendment as a fall-back position, and, as such, we reserve our position to support it. Amendment No. 38, which is in the group, would exempt from the requirements of paragraph 14 of Schedule 3 those credit agreements that have less than two years to run at the end of the transitional period. Noble Lords will know that the new unfairness test as drafted will apply retrospectively to any credit agreement that continues beyond the transitional period, which is set at one year from the date of commencement of Clause 20. The amendment, which was first put down by my honourable friend the Member for Wealden in the other place, accepts an element of retrospection. The noble Baroness, Lady Clark of Calton, said in winding up on Second Reading:"““Some of the agreements are extremely long—15 or 20 years—and we cannot wait that long to protect consumers””.—[Official Report; 24/10/05; col. 1054.]" As was shown at the time of the consultation, the UK securitisation market, which has brought in some £235 million of new funds to the lending markets in this country, relies, as the noble Lord, Lord Razzall, mentioned, on investors being able to subscribe to a package of loans that are stable and consistent in their terms and conditions and for which a risk profile can therefore be established. Retrospective application of legislation cuts right across that principle, so we reserve our position to support the noble Lord, Lord Razzall, in Amendment No. 39 or to put down a wider-ranging amendment on Third Reading if this one is not accepted, because lenders should not be penalised for actions taken that were fully compliant with the law at the time. The Minister might like to contemplate, for instance, the possibility of exempting credit agreements that are currently subject to the Financial Service Ombudsman Scheme on the grounds that the real target of retrospective application ought to be the loan sharks rather than bona fide lending arrangements. However, in seeking a compromise, we support the amendment.