Clause 6 - Statements to be provided in relation to fixed-sum credit agreements
Consumer Credit Bill
9:30 am
Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)
I welcome my hon. Friend the Member for Ochil and South Perthshire (Gordon Banks) to the Committee and I thank him for his probing amendment, which he outlined in his speech. It is a very important issue and I thank him for the way in which he presented the amendment.
The Government have considered carefully the question of providing consumers with clear and relevant information in some detail. We need to strike a balance in this area between providing information and the practical issues involved in lenders complying with the requirements. I believe that we have found a balance between that concern and the practical issues associated with providing the required information.
Agreements for periods of less than one year are generally for smaller amounts of money and are unsecured. Consumers with such agreements often use credit products that provide information about the loan in the form of account books that the consumer retains.
In relation to larger loans over longer periods, there is a particular problem that in many cases no information is provided. We recognise that someone may not receive all the information they need, particularly at critical points when they are at risk of problems. For that reason, the Bill requires all lenders to give consumers early information about arrears and default sums. As I said earlier, the Government believe that that policy recognises a balance between providing information and the administrative burden on lenders.
The amendment would require lenders to repeat a lot of the information that consumers already have in a different form. It would also require lenders, many of whose businesses are at the smaller end of the scale, to issue statements at a specific time in relation to the specific terms of each agreement. That could pose difficulties for some small lenders with limited administrative resources, which are particularly common in this sector.
Imposing such a burden could limit the range of products available to consumers by decreasing the flexibility of the product on offer and increasing the price, which could disadvantage those consumers who seek short-term credit. Lenders whose agreements last for more than one year will be required to provide annual statements. I agree with my hon. Friend that lenders should be transparent in all of their dealings with consumers and I strongly encourage that. I do not believe that the amendment balances the interests of consumers in receiving information with the administrative burden on lenders that would be created.