Mr Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations, Competition and Consumers), Department of Trade and Industry; Bradford South, Labour)

The next few clauses deal with the issue of interest payable on judgment debts. In England and Wales, money creditors' agreements include a term that allows them to continue to charge interest after they have obtained a judgment for a debt owed. That continues until the debt has been paid in full by the debtor. The term is included because the courts are prevented by law from awarding statutory interest on consumer credit debts.

Most creditors never make use of those terms, but some do. The problem is that debtors and hirers are often unaware of such terms, and do not appreciate that further interest may be accruing even though they are dutifully paying off the judgment debt. This is not an issue in Scotland and Northern Ireland. In those jurisdictions the court is empowered to order interest on judgment sums at rates specified in legislation. We are not banning the practice of seeking interest—creditors should be entitled to charge interest on an amount that is owed—but debtors and hirers should also be told what they might have to pay.

We are not introducing a requirement for statutory interest in England and Wales. Few lenders seek post-judgment interest, and a statutory interest regime would mean that many people who are not required to pay interest now might have to in future.

Clause 17 requires creditors or owners to notify debtors or hirers about the interest that continues to apply after the judgment has been made. Once the judgment has been made by the court, if the creditor or owner wishes to claim interest on the amount to be paid, they must notify the debtor or hirer and continue to do so at least every six months. The notice may be incorporated into any other required statements or notices under the 1974 Act. The debtor or hirer does not have to pay the interest if the creditor or owner has not complied with this proposed new section. This provision does not apply where a court has the power to order interest to be payable on a judgment sum.

Question put and agreed to.

Clause 17 ordered to stand part of the Bill.