New Clause 3 - Duties of lenders and debtors
Consumer Credit Bill
4:15 pm

Mr Laurence Robertson (Shadow Minister, Economic Affairs; Tewkesbury, Conservative)

It may be helpful, to present this clause as clearly as possible, if I explain to the Committee the mischief that I seek to remove. I want to give an example, but it is by no means a single example; it happens all too frequently. A school in my constituency had been   dealing with a company that supplied photocopiers. The company had a change of personnel and told the school that it could offer a new deal on a new photocopier. The school agreed. The company said that there was no need to fill in any forms, as there was a signature. The company said that it would sort everything out. The company duly supplied a new photocopier.

The problem was that the photocopier was not financed by the company; it was financed by a third party, Abbey National. It turned out that the agreement for the photocopier had been fraudulently drawn up—the police are investigating the matter as we speak. The problem was that Abbey National, which had no part in the fraud but which had supplied the money, asked for its £14,000 back. The school is a primary school, and £14,000 would have put a huge hole in its budget. I got involved and I got the police involved. Eventually, to Abbey National's credit, it reduced the amount to be repaid to a more realistic £4,000.

The difficulty was caused by the school's dispute with the company that supplied the photocopier. That company was acting as a credit agent for Abbey National, to which the school owed money. That is not an unusual situation; it often happens with hire purchase agreements. Problems can, however, arise. For example, let us suppose that the Minister is a car dealer from whom I purchase a car. Let us also suppose that you, Mr. Benton, finance that purchase. In that situation, I have an ongoing relationship with the financier—whom I have a duty to pay—rather than with the car dealer. Were I to cease my payments, you, Mr. Benton, as the financier have a legal redress, and may be able to seize the car. I, however, have no such comeback with the Minister, the supplier of the car. Such relationships are subject to agency law, which must be re-examined.

I seek to put a duty on the lender, not to go into minute detail, but to take all reasonable steps to ensure that his or her agent—who provides people with perhaps several thousand pounds—acts in a proper, professional, reasonable and legal manner. It is not unreasonable to expect that. Were we to turn it on its head and say that the downside for Abbey National—to return to the case I cited—would be that it would lose business, are we thus saying that most of its dealings are with crooks? That is not the case. In English law credit providers or financial services sellers are heavily regulated—they have to give best advice among other requirements. There is a difficulty in that those who act as their agents do not have to give the same duty of care to the people they advise. As a result, some people can get into terribly complicated situations.

I return to the example of the car dealer. There may be a way to get back to the initial dealer, but it is almost necessary to go nuclear. Agency law must be re-examined. I should be interested to hear whether the Minister explored that area of law. 

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

I am going to surprise the hon. Gentleman: I agree with his argument.

Mr Laurence Robertson (Shadow Minister, Economic Affairs; Tewkesbury, Conservative)

There is not going to be a vote, then?

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

There may still be a vote.

The hon. Gentleman eloquently set out the case for what is required. The 1974 Act already covers the points he raised. Section 56 determines the accountability of the lender for representations made by certain persons supplying goods and involved in negotiations to get consumers to enter into credit agreements. It makes lenders responsible for things said or done by such persons or agents.

The existing provisions go further than the hon. Member's new clause in that they apply not only to an actual relationship of agency, but in cases where a relationship can be inferred from the behaviour of the supplier. An agreement will be void if it purports to exclude any person, including the lender, from liability for any act or omission by the credit broker or the supplier acting as agent on their behalf.

In addition, section 75 of the 1974 Act provides that where a connection exists between the lender and the supplier of goods and services, the creditor will be ''jointly and severally liable'' for any misrepresentation or breaches of contract by the supplier. That would apply, for example, to purchases made with a credit card.

Given that the protection already offered to consumers under sections 56 and 75 of the 1974 Act not only covers but goes beyond the hon. Gentleman's points, I hope that he will see that his new clause is unnecessary. However, I understand the nature and detail of his argument.

Mr Laurence Robertson (Shadow Minister, Economic Affairs; Tewkesbury, Conservative)

My problem is that when we looked into the situation involving the school and the photocopier, we seemed to be unable to move the case forward at all. That was despite taking legal advice, and, indeed because a school was involved, the legal department thoroughly examined the case. I will look at the case again and see whether the legal bods missed something. As I have often said, I am not a lawyer and cannot be expected to advise on the law. However, I want to re-examine the case, and perhaps we could return to it on Report, or consider it in another Committee.

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

I will help to facilitate meetings with the officials and lawyers who advised me. That may help the hon. Gentleman to make progress with the case.

Mr Laurence Robertson (Shadow Minister, Economic Affairs; Tewkesbury, Conservative)

I am extremely grateful to the Minister for his helpful response. I do not want to make this matter purely about me and my constituency. Many schools in Gloucestershire fell foul of that company in that particular situation. Any clarification will help at a national level, but it will also help those schools. The matter is not too small to be important so I am grateful to the Minister for his sympathetic response. With that in mind, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.