Clause 28 - Applications for standard licences
Consumer Credit Bill
10:15 am
Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)
The clause gives the OFT the power to manage the application process more efficiently. It requires people to specify what businesses they want the licence to cover in the application for licences. That means that the OFT will be more easily able to identify and scrutinise higher risk sectors and monitor them more closely while reducing the burden on low risk sectors.
The clause will also enable the OFT to specify sub-categories, which is what is meant in the clause by “descriptions of business”. The clause also divides up the current licence categories of consumer credit, consumer hire, and ancillary credit business. Applicants can apply for a whole category licence, or one or more sub-categories. A whole category licence might cover consumer credit businesses. Within that, a sub-category licence might cover issuing secured loans of up to £10,000. The type of licence depends on the range of activity that the applicant is planning to carry out.
Licensees will be required to demonstrate fitness only for the sub-categories for which they have applied, rather than whole categories as now. Someone who undertakes only a very limited type of credit activity will in future only have to apply and be assessed for fitness within that limited category.
Charles Hendry (Shadow Minister, Trade & Industry; Wealden, Conservative)
Why is this matter being included in the Bill and not being dealt with through regulation? It is constantly evolving. One of the aspects relates to debt adjusting, an issue that was not known about 30 years ago. In 30 years’ time, new types of business will have been set up, but we simply do not know what they are at this stage. It appears that they will not be covered by this area of the Bill. Subsection (5), on the OFT powers, states that the OFT
“shall by general notice specify the descriptions of business which can be set out in an application”
and implies that the OFT may be able to bring forward new definitions. However, that appears to relate to descriptions of businesses rather than types of business. The Bill lists a number of types of business, which appear to be set in stone. Would it not be more sensible to deal with this through regulation instead?
Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)
I understand where the hon. Gentleman is coming from, but I do not think so. We must be clear about the change in the licensing regime from the Consumer Credit Act 1974 to what we are trying to achieve. There will be the whole licence and then the sub-categories, as set out clearly in the clause. We arrived at that through consultation and discussion with the stakeholders to ensure that we were very clear. I do not think that the scenario that he mentioned will happen. The descriptions that we have given are clear. He is starting to confuse me now because he keeps saying that the Bill is too general, but when we are very descriptive about what we mean, he picks me up on that. I hope that the confusion will clear up as the day goes on.
Charles Hendry (Shadow Minister, Trade & Industry; Wealden, Conservative)
I shall try to assist the Minister immediately. We are calling for greater clarification of all parts of the Bill, but we have asked for that to be done in regulation in most cases so that there can also be flexibility. We have been trying to get a better understanding of what he wants to achieve so that there is no doubt about what the Bill aims to do.
Let me be clear: will the OFT have the power to deal with a new types of business? Subsections (4)(a) to (i) list several types of business. If a new type of business were to develop, would the OFT have the ability simply to change the list and add to it; would it have to try to fit the business into the list, even if that was inappropriate; or could we end up with a situation in which a new type of business would not be regulated because it could not be added to the list?
Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)
No, the OFT could not add to the list. That is why the Bill is drafted as it is. It has been set against consideration of the fact that there have been only two new categories in 30 years. The list will protect consumers and what we are trying to achieve will be clear to the industry. I therefore hope that the Committee supports the clause.
Charles Hendry (Shadow Minister, Trade & Industry; Wealden, Conservative)
That is quite disturbing. It means that we expect the Bill to be on the statute book for 30 years because it is not a natural area of business for Governments to come tumbling back to for reconsideration. The Minister says that two types of business have developed in the past 30 years, which means that it is quite possible that two significant areas of business to emerge in the next 30 years will be unregulated. Surely it is better to allow for that possibility in regulation or to give the OFT the power to add to that list of businesses so that we ensure that all new types of business are regulated as we want.
Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)
My confusion is growing. We have consulted the industry and stakeholders, and only two new types of business have emerged in 30 years. The hon. Gentleman is right, although we intend to review the workings of the Act regularly because of the maturity of the market and the effects of it on the sector and our constituents. I believe that 30 years is too long, but the rate of change and what has appeared in the sector are important to the economy. In addition, the types of business are broad. We believe that we have provided the opportunity for new businesses to fit into the types of business defined in the Bill. I hope that that satisfies the hon. Gentleman and that he is able to support the clause.
Charles Hendry (Shadow Minister, Trade & Industry; Wealden, Conservative)
I shall have one more go. Will the Minister reconsider that and determine whether it is appropriate to table an amendment on Report which says that the list of types of business should be reviewed, say, every five years? I know that he has tremendous foresight and vision, but even he might not understand all the ramifications of new types of business that might develop in the next 30 years. So will he reconsider the clause and see whether it would be appropriate to build in such a review?
Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)
I am prepared to do that because the hon. Gentleman obviously has something in mind that I clearly have not thought about. What types of business does he think should be covered that are not covered, given the broad range of definitions that we have included? If he can answer that, I might do as he asks.
Mr. Edward Vaizey (Wantage) (Con) rose—
Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)
It looks as if someone else might be able to give me an answer.
Edward Vaizey (Wantage, Conservative)
In our debate on clause 19 in the previous sitting, the Minister said:
“we are not operating in a vacuum, and things can change dramatically.”—[Official Report, Standing Committee C, 23 June 2005; c. 50.]
That is the point that my hon. Friend the Member for Wealden is making. To quote the Secretary of State for Defence in the United States Administration, there are things that we know and there are things that we do not know, and there are things that we do not know that we do not know. My hon. Friend’s whole point is that we do not know what businesses might emerge in the next 30 years, which is why it is better to list them in regulations rather than in the Bill.
Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)
I congratulate the hon. Gentleman on trying to support his Front-Bench spokesman so admirably because he was starting to confuse most of us. The point is that the definition clarifies the types of business that will be in place because we have the standard licence and the sub-categories. The guidance on clause 30 sets out a further definition that may help the hon. Member for Wealden.
Michael Fabricant (Whip, Whips; Lichfield, Conservative)
In a spirit of helpfulness, I wonder whether subsection (6), which states:
“The power of the OFT under subsection (5) includes power to make different provision for different cases or classes of case”,
answers the question asked by my hon. Friend the Member for Wealden, or whether it is meaningless.
Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)
It is certainly not meaningless—what an outrage to declare any part of the Bill meaningless. Before the hon. Gentleman so helpfully intervened—if, indeed, that is what he did—I was going to say to the hon. Member for Wealden that in the spirit of consensus, as we try to move the Bill forward—
Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)
I will.
John Battle (Leeds West, Labour)
I am amused that Opposition Members have moved from the mysticism of Donald Rumsfeld to the Bill. They should look at the explanatory notes. Helpfully provided under a clause that we have yet to come to—clause 30—they state:
“OFT may revise any guidance on fitness”
in the future. If the fitness test is open, it allows changing market circumstances and businesses, and assessment of the problem, to be taken account of. I do not think that there is a difficulty, although Opposition Members may have just woken up.
Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)
It is a bit unkind to say that Opposition Members are not awake. I hope they know that I will chastise my hon. Friends if they attack their awareness.
Charles Hendry (Shadow Minister, Trade & Industry; Wealden, Conservative)
If the Minister had said five minutes ago what the right hon. Member for Leeds, West (John Battle) just said, we would not have had to have this discussion. I am grateful to the right hon. Gentleman for clearing up the problem, and on that basis we are happy to accept the clause.