Consumer Credit Bill

moved Amendment No. 9:"After Clause 37, insert the following new clause—"    ““OFT’S GENERAL DUTIES    After section 1 of the 1974 Act insert— ““1A   OFT’S GENERAL DUTIES (1)   In discharging its functions under this Act to regulate the conduct of licensees, the OFT must, so far as is reasonably possible, act in a way— (a)   which is compatible with the regulatory objectives; and (b)   which the OFT considers most appropriate for the purpose of meeting those objectives. (2)   The regulatory objectives are— (a)   the protection of consumers; (b)   the promotion of an efficient and innovative consumer credit industry; (c)   maintaining a competitive market in consumer credit; and (d)   avoiding unnecessary and disproportionate burdens on business. (3)   In discharging its functions to issue guidance and regulate the conduct of licensees, the OFT must have regard to the principle that a burden or restriction which is imposed on a person, or on the carrying on of an activity, should be proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction.”””” The noble Lord said: My Lords, as I said in Committee in the context of the equivalent amendment that was tabled there, this amendment would set out the general duties and objectives of the OFT in the context of consumer credit. Before going further, I must reiterate my declaration of an interest. Let me briefly go through our reasons for originally proposing this amendment and explain how we have addressed concerns raised in Grand Committee. I explained that, in our view, powers given to the OFT, such as the,"““right to monitor as it sees fit””," and to impose requirements on licensees to do or cease to do that with which the OFT is dissatisfied were both inappropriate and excessive. I said that introducing an objects clause as proposed in the amendment would go some way towards ensuring that OFT regulation is measurable. I said that no good reason had yet been given for failing to specify the regulatory objectives of the OFT. The right reverend Prelate the Bishop of Worcester, who is not in his place, objected to our amendment in Committee on the grounds that he considered it unbalanced. We looked again at the amendment and to an extent saw his point. He said, however, that he would be open to the type of regulation suggested if the need to keep in check the explosion of the credit market was addressed in the amendment. We therefore felt that we should go back to the drawing board to see what was really necessary. We have concluded that a balance is needed, as the right reverend Prelate implied—that is, a balance between the interests of consumers and the interests of lenders. Accordingly, we have removed as a regulatory objective the words ““lender confidence to ensure the widest possible access to credit””. Although that was not the intention, we felt that that could have been interpreted as promoting the explosion of the credit market about which the right reverend Prelate was so concerned. We have placed the protection of consumers first in the order of regulatory objectives. Our amendment to Clause 19 would have gone further in the direction that the right reverend Prelate would like. We hope that we have gone sufficiently far in addressing his concerns. In raising his objections, among other things, the Minister said:"““The amendment simply duplicates provisions already in the Consumer Credit Act 1974 and the Enterprise Act. The way in which the OFT should act in regard to its consumer credit functions is set out in Sections 1 to 5 of the 1974 Act””.—[Official Report, 16/11/05; col. GC 307.]" He also referred to Sections 1 to 8 of the Enterprise Act. When I spoke to the amendment before the Minister said these things, I had already acknowledged that the Minister in the other place had previously given those exact reasons, and I had explained why in our view they were not valid. These earlier Acts make no mention, for instance, of the protection of consumers in the context of consumer credit, or of the importance of competition which, as your Lordships know well, plays a, if not the, fundamental role in protecting consumers. Rather, the sections of the Acts to which the Minister referred busy themselves with annual reports and otherwise very general matters which, while important, do not lay down even in broad terms the parameters or regulatory objectives within which the OFT should operate in relation to consumer credit. We regard that as of vital importance. It is an inappropriate concept of management that any person in any walk of life, including a regulator, should set their own objectives. In this case, it is for Parliament. In his comments on the amendment in Committee, the Minister said that it suggested that there were concerns about the burdens that might be imposed on business and how those would be constrained. In response to this point he said that the OFT is under an obligation to ““act proportionately””, as a signatory to the Cabinet Office Enforcement Concordat where it is committed to minimising the costs of compliance for business by ensuring that any action it requires is proportionate to the risks, taking account of the circumstances of the case and the attitude of the operator. In response to that, I have to say that the concordat is voluntary and more honoured in the breach than in its observance. Those are the views of the better regulation people in the Cabinet Office themselves, as well as Hampton. Because of this and other problems with the concordat, it is being revised by the Government and, indeed, we are promised a draft regulatory compliance code imminently—it was supposed to have been at the turn of the year. We cannot leave something as important as this to a possible rewrite of a possible document that few people observe. The Minister also said:"““The Hampton footnote has been considered separately from the main Hampton recommendations and we shall be consulting in the first half of 2006 on that point””.—[Official Report, 16/11/05; GC 307.]" With respect, that makes it sound as if the Government are proposing that we send off the cart, pursued in a rather desultory fashion by the horse. I reiterate that providing excessive and unfettered powers to the OFT may result in the consumer ultimately suffering a lack of choice, accessibility and affordability as creditors withdraw products and the market shrinks. I beg to move.