Clause 19 - Unfair relationships between
Consumer Credit Bill
2:45 pm
Charles Hendry (Shadow Minister, Trade & Industry; Wealden, Conservative)
The clause is without doubt one of the most important in the Bill. It determines the thrust of what we are trying to achieve—a better, fairer and more responsive system for consumers. On Second Reading, Members on both sides of the House expressed their support for the new unfair relationship test that will be instigated under the clause. We all accept that the current extortionate credit test is outdated and does not work. It offers little or no protection for consumers and it is biased in favour of the credit companies. The fact that it has hardly been used in more than 30 years is evidence of its unsatisfactory nature. We have to address that imbalance.
Notwithstanding my support for a new unfair test, the Minister will be aware that most hon. Members who spoke on Second Reading have serious reservations about the way in which the clause is worded. In particular, concern was expressed about the lack of definition of what will be deemed fair and unfair under the new legislative framework. Although the two sides of the House may be seeking to achieve quite different ends from the new test, at present none of us can be certain that it will deliver what we hope for. It is a chasm that, left unfilled, would prove damaging to lenders and consumers.
On Second Reading, the right hon. Member for Leeds, West (John Battle) talked eloquently of people's concerns about going to court. Even people who are not used to court recognise that they are up against a huge wealthy corporation with enormous resources; and without a thorough understanding of their chances of success, consumers will be deterred from pursuing cases that, if unsuccessful, would not only add to their financial difficulties but cause them tremendous stress. That view is held by the credit lenders and the consumer organisations.
Without a thorough understanding of what lending practices will be considered inappropriate, the credit industry remains unaware of the changes it may need to make to ensure that its consumers are protected. As a consequence, the industry will become more cautious in its lending practices, and that will hit the most vulnerable the hardest. That will do more than anything else to drive those people to loan sharks. Moreover, the vagueness of the provisions gives rise to concern about their compatibility with human rights legislation. We spoke about that on Second Reading.
I hope that the Minister will agree that the approach to tackling unfairness in lending must be targeted and consistent. Lenders must be certain from the outset that their contracts are secure, and consumers with genuine cases must be clear about where they stand. The amendments that we have tabled are aimed at providing that certainty.
Amendment No. 12 gives greater clarity to the balance in the relationship between the lender and the debtor by introducing the concept of consumer detriment. For too long, consumer credit law has been biased in favour of the credit industry, and it is important that the emphasis is shifted back to the consumer.