Clause 29 - Issue of standard licences
Consumer Credit Bill
10:30 am
Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)
The clause introduces a broader fitness test that the OFT will use to decide whether someone is fit to hold a consumer credit licence. The current fitness test puts the emphasis on past behaviour. Under the new test, the OFT will assess skills, experience and expertise in relation to consumer credit. Applicants must have in place the practices and procedures to ensure that they remain fit.
The clause builds on the current fitness test. The OFT will continue to consider an applicant’s past behaviour, which might include evidence showing that a licence applicant or an associate has committed an offence involving fraud or violence. It may consider evidence that an applicant or associate has contravened any consumer credit law, including the Consumer Credit Act 1974, part XVI of the Financial Services and Markets Act 2000, or any equivalent consumer credit law in another European economic area state. Evidence that an applicant has practised discrimination or engaged in unfair business practices will also be considered. All that evidence demonstrates fitness from past behaviour, which is an important element of the current test. The Bill will not prevent the OFT from taking such things into consideration.
The new broader fitness test gives the OFT explicit power to require evidence of future competence to provide credit. For example, it may require an applicant to give evidence to show how he would ensure that his employees understood what was required of them. Evidence might also show that the employees understand their credit products and can explain them to consumers. The OFT will not require evidence of expertise to demonstrate fitness. Applicants will be required to demonstrate a base line of competence.
The OFT will be required under clause 30 to produce guidance on how it will assess fitness. That will be done as soon as possible after the clause commences. Hon. Members will have seen the draft guidance and information packs. The guidance will be subject to full consultation after Royal Assent and will be available to applicants and licensees in good time.
The ability to require evidence on future competence to provide credit will better enable the OFT to regulate licensed businesses. It will drive the rogues out of the market and enable more effective and fairer competition.