Again, the issue is about a lack of clarity; it is disappointing that we could not have had more detail and clarity. The explanatory notes state that
“Regulations made by the Secretary of State may require creditors to include specified information, e.g. about the consequence of failing to make repayments or only making minimum repayments, in statements issued under section 78(4) of the 1974 Act.”
We are being asked to approve that without knowing much detail about what is involved. We are clearly only months away from this information being put into the public domain and I do not find it plausible that the Minister has not already got information and guidance on what is intended to be included in this area. Will he give us more information on that and on whom is to be consulted before the document is produced?
I apologise to the Committee. It was not my intention to try to run this thing through. I was trying to be helpful to the Committee in moving the clauses formally; if there had been no questions, we could have moved on. The hon. Gentleman is right to raise the issues of the specific warnings, what we are going to tell consumers and what we propose.
On the question of whether we will introduce a specific warning to consumers about the implications of their not making more than minimum repayments, I should say that the clause is drafted in broad terms and could permit such a warning to be required. We considered whether we should specify a tailored warning of the type suggested. Warnings tailored to the individual’s consumer circumstances would be expensive for lenders to implement as they would require extensive system changes and costs. However, the power is broad enough to allow us to specify a warning of that sort in future, when systems may be capable of doing so more cost effectively.
What kind of warnings do we propose? We propose to require generic warnings on all statements about the implications of only making minimum repayments or not making the required repayment. To warn about the consequences of failing to make the minimum repayments, we are considering using this statement:
“Paying only your minimum repayment will substantially increase the amount that you must repay and the time that it takes to pay it. You may also incur additional charges, which may be added to your balance.”
To warn about failing to make a repayment, we are considering the following statement:
“Failure to make your minimum repayment can mean that you are in breach of this credit agreement and could result in the creditor bringing legal proceedings against you. This could have a detrimental effect on your credit rating and affect your ability to borrow in future.”
We shall consult on those statements and ensure that we get the form of wording precisely right and that the borrower understands the situation. With that clarification, I hope that clause 7 can stand part of the Bill.