Consumer Credit Bill

moved Amendment No. 10:"Page 32, leave out lines 12 to 19 and insert—" ““(   )   This section applies where the OFT has reasonable grounds for believing that a licensee or an associate or a former associate of a licensee— (a)   has engaged in conduct which breaches any provision of, or under, the 1974 Act; (b)   is engaging in such conduct; (c)   is likely to engage in such conduct.”” The noble Lord said: My Lords, as I explained in Committee, this amendment introduces the concept that any use by the OFT of what are called intermediate powers under the licensing provisions must be capable of being objectively justified. I said that while we supported the broad thrust of the reforms to the licensing regime, we were concerned with the wide discretion given to the OFT under Clause 38. Amending Clause 38 so that the OFT had reasonable grounds to impose requirements on licensees, as opposed to being dissatisfied with a licensee’s conduct, would provide some of the consistency and clarity that the industry should expect from the OFT when discharging its functions under the Act. The key provision in Clause 38 allows the OFT to take action against a business when it is dissatisfied with any matter in connection with that business, whether or not it relates to a licensing issue. I have explained at length that in our view that gives far too wide a discretion to the OFT. The discretion should instead be restricted to circumstances in which there has been a breach of the licensing criteria, which themselves should be objectively set. I have pointed out the concerns raised by the Joint Committee on Human Rights, which among other things went to the broad drafting, the lack of specificity in relation to the conditions in which the OFT’s powers were exercisable, and the entirely unfettered scope of such power, which failed to satisfy the requirements of reasonable legal certainty and gave rise to the risk of the disproportionate use of power in practice. In responding to our concerns with the discretion allowed to the OFT in the event that it is ““dissatisfied””, in the debate on this amendment in Grand Committee, as in the case of the previous amendment, the Minister pleaded the Cabinet Office enforcement concordat. We respond, as we did to the previous amendment, that the concordat is voluntary, is widely ignored and is more honoured in its breach than its observance, and that because of this and other problems it is well acknowledged that it needs to be revised. The Minister also said that,"““the OFT should be able to act to protect consumers. That is why we have proposed this power to impose requirements on licensees. The OFT has produced a note on requirements, which is in the House Library and gives more information on how the OFT intends to use this power””.—[Official Report, 16/11/05; col. GC 311.]" The note is helpful but it does not resolve our concerns. Much of it is vague. Other sections repeat parts of the Bill and focus on procedural matters. Key issues on where the boundary lies are not discussed in great detail. There is one part of the guidance that we find particularly helpful, however. It states:"““The OFT will normally be dissatisfied with a licensee or applicant’s conduct if the OFT has evidence that the conduct: causes or could cause consumer detriment and is directly linked to the activities covered by the licence or the licence applied for””." Why, though, could we not have had that in the Bill? It is a vitally important principle. In Grand Committee on this amendment the Minister gave two examples where the OFT might take action if it were dissatisfied: one was where there were problems with certain employees of a lender explaining credit agreements to customers; and the other where a debt collector’s employees were unfairly pressurising customers by calling very late at night. He said:"““The amendment before us would severely limit the effectiveness and flexibility of the OFT’s powers to impose requirements on licensees by limiting the circumstances under which it could impose requirements. I have explained that we are not talking about fitness to hold a licence or breaching specific provisions in the Act, but about general conduct of a licensee that could cause consumer detriment. Neither of the examples that I have just given breach any specific provision in the Act, but I am sure that Members of the Committee will agree that they are likely to cause considerable consumer detriment, and that something should be done to deal with that. That is what the requirements are intended for. The amendment would prevent those cases being dealt with because of the way in which it limits the circumstances in which the requirements could be imposed. That would reduce consumer protection as the OFT’s ability to improve the conduct of licensed business would be curtailed””.—[Official Report, 16/11/05; col. GC 311.]" Of course the Bill would allow the OFT to deal with the two examples to which the Minister referred—that is what Clause 19 on unfair relationships is meant to deal with. So the Minister’s objections to it are unconvincing. The Minister, in responding to the quote from the JCHR in Grand Committee said:"““There is, therefore, a very good argument that those powers fall within the exception to Article 1 Protocol 1 of the convention; that is, they are not about taking away assets from people, but about controlling the use of those possessions, which is why it is compatible with human rights legislation””.—[Official Report, 16/11/05; col. GC 312.]" In the opinion of one of the most eminent lawyers in this area, Michael Beloff QC, which many of your Lordships will have seen, on the contrary, there is indeed a significant risk of incompatibility with Article 1 Protocol 1. Whether he or the Government are right, this is clearly a grey area. Surely, if only to obviate the considerable legal costs that will undoubtedly be incurred should the legislation proceed as drafted, it would be simply irresponsible not to do all that reasonably can be done to remove that risk. That is what the amendment seeks to achieve. I beg to move.