New Clause 4 - Liability of debtor on termination of hire-purchase etc. agreement
Consumer Credit Bill
4:30 pm
Mr Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations, Competition and Consumers), Department of Trade and Industry; Bradford South, Labour)
The hon. Gentleman is right; I shall not be able to satisfy him, despite his valiant efforts and despite the many amendments that have been tabled even at this late stage. However, he is right to raise the matter, which was principally highlighted by the motor finance sector. It feels that financially savvy customers exploit the provisions by walking away from car finance agreements. One half of the amount has been repaid when such customers become aware that the remaining repayments exceed the residual value of the vehicle. Therefore, in handing the car back, they leave the finance company holding the loss.
The industry's views about the provisions are well known to the Government. That is why, at the end of last year, we consulted on its future. We hope to publish that consultation shortly. Hon. Members and the hon. Gentleman might not be surprised to learn that the responses vary greatly, depending on who gave them.
Whereas the lenders and the motoring industry fear the abolition of the provisions, groups that represent consumers and enforcers were equally adamant that those provisions should be retained. Having assessed the responses, we have concluded that section 100 and the right voluntarily to terminate should be retained. There are three main reasons why we have concluded that. The first is the lack of consensus, which I outlined. Views were polarised, and in such circumstances it would be difficult to justify the change.
The second reason is the compelling argument that we would need to remove an existing element of consumer protection. The right voluntarily to terminate is an essential provision of the hire purchase provisions—it is the consumer's key safeguard. Given that we cannot remove that right without calling the whole concept of HP into question, we do not believe that that argument has been made. Thirdly, the industry's economic evidence that it produced to support its claimed losses is open to interpretation.
The job of industry is to lobby hard, but we wonder whether changes in, for example, marketing practice and product design, which require large deposits, might alleviate the problem. We carefully considered the amendments—that is why we consulted—but on balance the responses to the consultation did not make an arguable case for repeal. In those circumstances, we believe that we should not remove those forms of consumer protection, and in the light of that explanation I hope that the hon. Gentleman will withdraw the motion and the new clause.