Clause 9 - Notice of sums in arrears under fixed-sum credit agreements etc.
Consumer Credit Bill
10:15 am
Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)
We have to be consistent. I shall come to the point raised by the hon. Members for Wealden and for North Norfolk in a second.
Missing four payments is likely to be a significant problem for consumers who rely on that form of credit. It sends a warning sign, notwithstanding what has just been said. In many agreements, four weekly repayments can equal a significant proportion of the loan.
Our proposals mean that a notice must be provided within 14 days after the fourth missed period. That means that for an agreement with weekly instalments, the creditor will send a statement six weeks after the first missed repayment. The amendment would shift the onus to 10 weeks. We think that that is more harmful and would cause problems.
The purpose of the arrangement is to give consumers early notice of potential problems to allow them to deal with them. Consumers in this sector are often vulnerable, with limited incomes. For that reason, we do not believe that the debtor should be treated in the same way as other consumers. The amendment would treat them in the same way as lenders with monthly repayments. That would potentially mean that these consumers—whom we all agree are often vulnerable—are put at a disadvantage. At this stage we do not intend to prescribe the format of the notices in detail, but the content will be prescribed, and the lender will have to provide the notices in a clear and transparent way.
As for the concern about lenders potentially frightening consumers, and consumers being frightened themselves, we believe that there is scope for the information to be presented in a consumer-friendly way—for example, as a letter rather than as a formal notice. Again, the Department will consult on the issue after the Bill becomes law. So we feel that a safety valve is in place.