Consumer Credit Bill

My Lords, Clause 38 enables the OFT to interpose intermediate sanctions on licensees. These sanctions are called requirements. As was explained by my noble friend the Minister in Grand Committee, requirements are an important new tool for the OFT to ensure an effective, targeted licensing regime. Currently the OFT’s powers are limited to refusal of an application or granting a licence on different terms. They can also vary, revoke or suspend an existing licence. The effects of these sanctions can be severe as they can prevent people trading. The OFT adheres to the Cabinet Office enforcement concordat. It might be voluntary, but I stress that the OFT adheres to it. This means that the regulatory action it takes must minimise the costs of compliance to business by ensuring that any action be proportionate to the detriment caused. This in turn means that the OFT is able to act only in the most serious cases, where a person is simply not fit to hold a licence. In many cases, the OFT is powerless to address consumer detriment because withdrawing a licence would be disproportionate. For example, if there were a problem with the sale of credit in one branch of a national company, it would not be justifiable to revoke the whole company’s licence. A similar situation occurs where one employee is intimidating customers when collecting debts. These cases may not be serious enough to call into question the fitness of a person to hold a licence but 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 was acknowledged and is in the House Library. It gives more information on how the OFT intends to use this power. It states that dissatisfaction is dependent on the OFT having evidence that the conduct causes, or could cause, consumer detriment and is directly linked to the activities covered by the licence or licence applied for. The note also gives examples of cases where requirements may be considered. The OFT is statutorily obliged to have regard to its guidance in exercising the requirements power. Again I refer to practical examples, although they may have been pre-empted to a certain extent by the noble Lord, Lord De Mauley. The OFT could use this power to address a wide range of problems. I state again that if there were problems with certain employees explaining credit agreements to customers, a requirement for training employees could be imposed. It might provide that sales representatives in a named branch are trained to inform consumers how they can cancel their agreements. If a debt collector’s employees were unfairly pressurising customers by calling very late at night, a requirement could stipulate that they should call only between 8 am and 8 pm. A requirement might also refer to a person other than the licensee. However, it would be addressed to and binding on the licensee and it could require that a particular person did not undertake a specific activity, such as collecting debts in person. The amendment would severely limit the effectiveness and flexibility of the OFT’s power 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 I have just given breach any specific provision in the Act, as they would need to before requirements could be imposed under the amendment before us, but I am sure that your Lordships will agree that they are likely to cause considerable consumer detriment and that something should be done to deal with this. Indeed, the noble Lord said that there is general agreement on the principle of intermediate sanctions. That is what requirements are intended for. Unfortunately, the amendment would prevent these cases being dealt with at all because of the way in which it would limit the circumstances in which requirements could be imposed. That would reduce consumer protection as the OFT’s ability to improve the conduct of licensed businesses would be curtailed. I still believe that sufficient safeguards are built into the Bill to prevent the OFT abusing the powers in Clause 38. The OFT will publish guidance on how it will use these powers. As I have indicated, an OFT note on requirements has already been lodged in the Library. The OFT will have to let licensees know that it is minded to impose requirements, to explain why, and to give them an opportunity to make representations on the proposal. Moreover, requirements can be appealed to the new appeals tribunal. This provides a safeguard against the OFT exercising these powers unreasonably. I urge the noble Lord not to weaken the extra consumer protection which the Bill brings and hope that he will agree to withdraw his amendment.