Consumer Credit Bill

moved Amendment No. 29:"Page 24, line 13, at end insert—" ““(   )   The OFT shall include within the guidance a duty of licence holders to lend responsibly.”” The noble Baroness said: I am moving the amendment in the absence of the noble Lord, Lord Borrie. The simplicity and ease with which some consumers can access credit is a major cause of concern. There have been a number of quite horrific cases of vulnerable people being lent sums that they will obviously be unable to repay. Last year, for example, Mr Stephen Lewis committed suicide after building up debts of £70,000, spread over 19 separate credit cards. There was also the case of Mr Scott Smith, who committed suicide after building up debts of £15,000. Even when it was known by his bank that he was in difficulty with credit card debts, he was nevertheless granted a personal loan by the same bank. Thankfully, those are extreme cases. However, they vividly highlight the risk of credit providers lending irresponsibly. Therefore, as part of the OFT fitness guidance to which lenders will have to subscribe as part of their credit licence, I should like to see a duty imposed on credit providers to lend responsibly. Most credit lenders now use an automated process to score credit applications using superficially sophisticated computer modelling. In doing so, however, they do not check by examining actual income and expenditure or whether credit repayments are or are not affordable to the borrower. Instead, they often rely on the information held in a customer’s credit reference file which includes only payment records of past credit and loans. Those, of course, prove nothing about the future. Therefore, someone with no past record of defaulting on payments will be regarded as having a good credit rating regardless of their current income and number of outstanding credit commitments. Last year, a journalist from the Observer, in one morning’s work, managed to accumulate a dozen credit cards with a total value of more than £100,000 without any of the credit providers questioning whether he had the capacity to repay the money. I do not know the average salary of an Observer employee, but it surely cannot be right that so much debt can be taken out in such a short period of time without any serious questioning or checking being carried out. I trust that this minor, yet crucial, amendment to the Bill will improve what is already a fairly strong piece of legislation. While consumers in the UK have undoubtedly benefited from our competitive and flexible consumer credit market, the fact remains that there are still too many consumers being let down by bad practice. I hope that these amendments will offer them a better deal and I hope that the Government will feel able to support them. I beg to move.