Clause 4 - Exemption relating to businesses
Consumer Credit Bill
9:45 am
Mr Laurence Robertson (Shadow Minister, Economic Affairs; Tewkesbury, Conservative)
I thank the Minister for explaining why clause 2 is valuable. I admit that I am slightly confused, because it seems that business agreements that are worth less than £25,000 will continue to be regulated, whereas those that are worth more than that will not. I do not follow that logic.
Having considered the clause long and hard, my main reason for wanting to strike it out is that, as I understand it, an incorporated company can borrow more than £25,000 and not be covered. In many cases there is little difference between an incorporated company and an unincorporated association, a partnership or an individual trader. When I was in business a few years ago, anyone could set up a company for around £100, often getting the protection that forming a company would give them, such as limited liability. However, in many other cases, the director of that company would have had to give a personal guarantee for many of the business transactions that were carried out. The director might have had to borrow money to keep the business going, would probably have had to give a director's guarantee for that loan, and quite often would have had to put his house up as surety.
That situation is not very different from that of the man next door who might carry on in business without the protection of that limited company. My point is that the protection of a limited company often does not exist. The sensible clauses of the Bill should therefore protect someone in that situation. For example, if a person were to take out credit with an unscrupulous lender or someone who fires off letters to him every time he misses a payment and charges him £30 or £40 for the privilege, his business would quickly get into serious difficulties. If that person has been given a director's guarantee, he could find himself in exactly the same situation as an individual who has borrowed money for a world cruise. I do not see a huge difference.
Will the Minister explain why those two situations are different? The fact that the borrowing is for business purposes does not change the matter. We are still talking about individuals, and if the Bill is worth passing, which in general terms it is, everyone should be protected by it. Otherwise, the suggestion is that the Bill is flawed. Before I am happy to accept the clause, the Minister will need to explain it in more detail and answer some of my points.