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.