Clause 59 - Financial services ombudsman scheme to apply to consumer credit licensees
Consumer Credit Bill
2:45 pm
Mr Paul Farrelly (Newcastle-under-Lyme, Labour)
I apologise for missing the start of the debate.
I welcome the extension of the ombudsman's jurisdiction to hear complaints against the holders of consumer credit licences and many of their nefarious, oppressive and exploitative practices—I do not intend to mince my words, Mr. Benton. The ombudsman will not be a panacea, but it will provide an alternative forum for consumers and another fount of bad publicity for bad behaviour. Regulatory competition might spur people on to improve their act. I do not include the Minister in that statement; he has done a great job in piloting the Bill. In particular, however, I do include the Office of Fair Trading. Let me tell my hon. Friend why I say that, and why I called for better enforcement during our discussions on Tuesday. I shall also tell him why I support additional powers and the involvement of the financial services ombudsman.
In various guises—as a business adviser, journalist and financial editor—I have had 20 years' experience of dealing with the OFT. Year after year, I have seen Sky television run rings around competition regulators. The only recent notable high-profile success by the OFT that I can remember was its busting up—wait for it—a price-fixing ring for replica football shirts. From the press, I now note that it is the Serious Fraud Office, not the OFT, that is pursuing alleged cartels of multinational drugs companies that are involved in the altogether more serious issue of fixing the prices of medicines.
The OFT started to examine penalty charges in 2004, after publication of the Select Committee's first damning conclusions. The OFT has now written to eight major credit card providers as part of that ''investigation''. The director-general of Fair Trading, Sir John Vickers, wrote to the Committee in October. His letter stated:
''We found that different card issuers use different accounting policies and bases for charging, some of which, in our preliminary analysis, are of questionable validity under the regulations on unfair terms in consumer contracts.''
In January 2005, in response to enquiries from The Guardian, the OFT said that it was still investigating the issue. Today, in response to enquiries from my office, the OFT said, again, that it was still investigating. It had contacted the eight companies, but it could not comment any further. It could not say how long the investigation would last, nor when a report might be drawn up or any announcement made.
Like other hon. Members, I appreciate the need for time and confidentiality to undertake serious inquiries such as this one. However, these well-known practices have dragged on for years. Only yesterday, Seymour Fortescue, the chief executive of the Banking Code Standards Board, condemned the charges as being indefensible. Have we seen, however, any conclusions or action from the OFT?
In 2004, one of the credit card companies, the US-based MBNA, told its shareholders that it might have to reduce late-payment charges in the UK, and that that might affect its profits. That was more to do with stringent reporting requirements in the USA, where they know a thing or two about cracking down on unfair trading practices, than the prospect of any imminent action by the OFT.
I understand the need to take proper legal advice, particularly when confronted by batteries of highly paid City lawyers and barristers from the banks on the other side. However, there is plenty of good free legal advice, and that has been the case since the 1974 Act. With regard to that issue, I draw the attention of Committee members to an article in The Guardian in August 2004 by the eminent barrister Richard Colbey.
We all remember, before 1997, how well the old Securities and Investment Board, as part of the City's self-regulation, kept the perpetrators of pensions mis-selling firmly under wraps, until this Government got in, and my right hon. Friend the Member for Airdrie and Shotts (Mrs. Helen Liddell) forced the board to do a U-turn on naming and shaming, and we all know what an effect that had.
That is the sort of spine that I want the OFT to have. It is the sort of spine the financial services ombudsman will have in dealing with consumer credit issues, and I hope that some regulatory competition from the ombudsman will do the OFT and consumers the power of good.