John Battle (Leeds West, Labour)

I beg to move amendment No. 38, in clause 30, page 24, line 7, at end insert—

‘and that guidance shall include a duty on licence holders to lend responsibly.’.

As in any Bill, it is necessary to refer to previous clauses. This clause comes in a cluster of clauses that deal with the fitness of a business to hold a licence in the first place. It inserts proposed new section 25A after section 25 of the 1974 Act. That requires the OFT to prepare and publish guidance on how it determines the fitness of a person to hold a licence. In light of the previous debate, I would add that the OFT may revise the guidance on fitness at any time. That opens up the question of who is fit to hold a licence. That will be an evolving process, and it will keep pace with market developments.

However, I want to turn the telescope around and suggest that the reference to fitness concerns the person holding the licence. There is an ambiguity because on first reading

“whether persons are fit persons as mentioned in section 25”,

one could be forgiven, having glanced through the Bill, for thinking that it refers to the poor lender, but it is the person who receives the money who has to be in a fit position to survive the loan that he has received. It seems that we are more concerned about the fitness of the coach than we are about that of the athlete to keep up, or the team member to play. If all the emphasis is on the fitness of the coach, there could be a case in which the team is of no use, but the coach is perfectly fit and all the athletes are flogged to death. That is what worries me, and that is why I drive the analogy. The lender could lend to people who are not able to pay back, and who might well know that and carry on regardless.

Lenders are eager to assert that they are responsible. We have had briefings from banks and lenders who say that they are good people. Most are. Their purpose is not—to coin a euphemism and to use language that I am sure is not parliamentary—to screw people for the sake of it. Yes, they want to make a fair income, but the majority believe that they are doing it in a fair way. However, how do they go about their business and how do they check repayments?

To give a practical example, there is plenty of evidence that it is easy to gain credit. We had this debate in Committee in the previous Parliament, and there were plenty of examples across the board. I have   made it clear that my primary concern is with doorstep lending, but credit is easy even in the credit card market. Cards in an envelope fall through one’s letter box and a PIN is supplied; just sign and go. We all know about that, but what checks are made? Most lenders now use an automatic process to score credit applications. They use sophisticated computer modelling but do not check whether the person can afford the credit repayments.

Lenders do not carry out a full income test, as they do for mortgages. One can borrow more than the amount of their mortgage through credit companies without even a fraction of the checks that are done when papers are filled in for a mortgage. That is irresponsible lending. Lenders do not examine the borrower’s income and expenditure to check whether they can afford the credit repayments but tend to rely on information held in credit reference files, which usually involve the payment records of past credits and loans. If someone pays back loans and keeps up with payments, they are a good creditor and can borrow more. Lenders do not ask whether borrowing more will push the payments out of the reach of the borrower but simply ask whether they will keep up the payments. They do not ask whether that will mean not being able to live or keep one’s family. If they simply repay the money, they will have a good record.

Someone with no past record of default will be regarded as a good credit risk whether or not their outstanding credit commitments are beyond their income. They might have to find the money in other ways. As long as they are paying back the loans, they will be a good credit risk.

Unfair sales techniques are often used. We could go into that in more detail. I am sure that all hon. Members are aware of such techniques from their ordinary constituency casework, from the press and so on. Sometimes people are pushed to take further credit without any checks at all on their ability to repay.

The key question should be whether a person has the ability to pay back without going deeper and deeper into debt. I make this point again; those on doorstep loans are not likely to go to court because, at any hint that they cannot repay, the companies offer them another deal or an extension. They will even advise other companies that can give another loan. The borrower is pushed further and further out without any checks as to whether they are able to repay the loan.

In the previous Parliament, I referred to the Lord Chancellor’s advice to the magistrates courts. They are under an obligation to check whether a person who has been fined for non-payment has the ability to pay the fine. It is not only illogical but a ludicrous economic situation to fine people on top of money that they owe but cannot possibly pay back. People are driven into debt that is totally unsustainable and that they cannot get out of, and it must be dealt with in a different way. There is guidance to the courts to ask whether people have the ability to repay.

We need to tackle what I would describe as irresponsible lending that drives people who borrow into deeper and deeper debt and desperation. It is not   enough for the companies to say that they have checked the credit rating, that the person has paid their instalments and that therefore they are okay. All that that means is that the company is okay because it is getting interest. The person’s ability to manage their budget at the other end is not taken into consideration.

I simply suggest to the Minister that he ask the OFT to include in its guidance a duty on licence holders to lend responsibly. We must get that phrase into the legislation. It is fairly bland and vague. Like the unfairness test itself, it is open-ended, but it would give the OFT a handle on changing marketplaces and new kinds of companies. I recommend it to the Minister and look forward to a positive response.

Charles Hendry (Shadow Minister, Trade & Industry; Wealden, Conservative)

I congratulate the right hon. Gentleman on introducing the amendment. He raised the matter on Second Reading and asked us to consider it sympathetically. He has made a powerful case for it so far.

It is also a particularly appropriate time to discuss the issue, in the light of yesterday’s headlines on consumer debt. For example, The Independent carried a story about the level of unsecured debt having doubled in the past eight years. The average unsecured debt per head is 42 per cent. of average earnings now compared with 29 per cent. in 1997. The rise in unsecured lending was 16 per cent.; the largest annual rise in eight years.

We are considering a matter of great concern, and indeed the Bank of England issued a warning yesterday about the risk to the UK’s financial system from the surge in consumer borrowing and from people defaulting on debt when those who have borrowed money simply cannot afford to repay. We have also tabled two new clauses, one dealing with credit card checks and one with credit limits, that try to deal with some of the abuses that we feel are apparent. I hope that the Minister will be able to respond in due course.

There are too many examples of lending that has not been carried out responsibly. One of my colleagues has written to me with a letter from a mother in her constituency, in which she writes:

“My son...aged 45 suffers from schizophrenia and is in receipt of anti-psychotic medication for this illness. He has built up a credit card debt of over £30,000 for which he pays interest of about £500 per month. I do not know the exact amount because he will not show me the credit card statements. The incapacity benefit he receives can just about service the interest on the credit card debt. He does not want to go bankrupt and he threatens suicide. In view of his illness it is very difficult to reason with him and he is very reluctant to give up the cards. I would be most grateful if you would contribute to this Bill now before Parliament to help him and people in similar circumstances to overcome and prevent this serious and tragic problem.”

That is not a unique issue; all of us have seen constituency cases like that. On Second Reading I referred to Stephen Lewis, a person with an income of £22,000 who ran up debts of £70,000 on 19 different cards and ultimately took his own life when he could not afford to repay those debts.

Those issues link into data sharing, and we are tabling a new clause on that as well. There should be a case for lenders to lend in a way that would be seen to be evidently responsible. We have described cases that do not involve responsible lending because in part the financial institutions did not know from where else the people were borrowing. More needs to be done to address the problem, and I will be interested to hear how the Minister responds to the amendment.

Michael Jabez Foster (Hastings & Rye, Labour)

I very much support the principle behind the amendment tabled by my right hon. Friend the Member for Leeds, West. I seek the Minister’s view about how he could, if not accept the amendment, provide for the balance of responsibility that must form the basis of any credit agreement. As we discussed during our debate about clause 19, some of us believe that that clause may be the place for a definition of an unfair agreement or relationship in a form that we understand, without having to leave matters to the judges. That debate has passed, so if we could deliver something at this stage, it would provide guidance about what is an unfair deal. If a creditor lends irresponsibly, that in itself is an unfair relationship and should be taken into account.

I want to press further the point that my right hon. Friend made about the inability of the courts to mitigate situations in which over-lending has occurred. Cases that finish up in the county court frequently mitigate the repayments and, indeed, the very small repayments often made after taking full account of the debtor’s means. However, the nature of those debts is that often they do not reach the courts and for that reason, it is important to provide some sort of fairness for people at that stage.

If the amendment is not acceptable to the Government, I hope that an alternative will be in place to introduce to the legislation the principle of responsibility on the part of the lender.

Gordon Banks (Ochil & Perthshire South, Labour)

I should like to pick up on the point made by the hon. Member for Wealden, who said that extended data sharing was absolutely vital to the delivery of responsible lending. The extension of data sharing must be the way forward to deliver the amendment tabled by my right hon. Friend the Member for Leeds, West.

Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)

I congratulate my right hon. Friend the Member for Leeds, West on the amendment. I hope to be able to prove that it may not be necessary, but we will see how we go. I say to the hon. Member for Wealden and my hon. Friends the Member for Hastings and Rye (Michael Jabez Foster) and for Ochil and South Perthshire (Gordon Banks) that I know this was the core element on Second Reading for all hon. Members in relation to our concern that lending was not responsible.

The whole purpose of the White Paper, the Bill and the wider Government strategies is to try to create greater transparency to ensure that people who lend money do so responsibly and appropriately and have everything in place to ensure that there is transparency. The consumer has to know what he is   letting himself in for in any agreement and that is why we brought into play the regulations relating to adverts for loans, the greater transparency and the calculation. I agree that the issue of data sharing is important and I shall return to that later on in the debate.

We have seen tragic cases, and it was my experience to meet Mrs. Lewis and go through with her the issues affecting her husband with regard to how he was able to borrow so much money given his income. I did not find it a very pleasurable experience. There are too many of those cases. I note what the hon. Member for Wealden has said about the figures and the announcements yesterday. We are all concerned about the level of debt. The only qualification I would make—I do not intend to score any particular points—is that when the economy is doing well, people feel more able to borrow.

In most circumstances, people can handle credit well. I do not think that the Committee is trying to say to anyone that credit is not a good thing if handled and used in an appropriate way. However, when it is not and people are put into a very difficult position, that is not acceptable. All of us, in our constituency casework, have examples of where things have gone horrendously wrong. Suicide is tragic, but many other people’s lives are affected for a period of time by the debt they get themselves into.

To turn specifically to the amendment that my right hon. Friend has tabled, we all agree that lenders have to be responsible when lending to consumers. It will come as no surprise to my right hon. Friend that I have tried to resist definitions throughout our deliberations, which was the reason for the principal argument on clause 19 regarding the unfairness test. If we are very specific about an issue, we could undo what we are trying to achieve. For many, responsible lending imposes a requirement that lenders do certain things before extending credit. However, the things that a lender may take into account in the case of one debtor may be very different to those of another. It will depend on a debtor’s circumstances.

Any duty to lend responsibly would mean defining what is, and what is not, responsible lending. That is the point I made earlier about defining the position, and I explained that point when we discussed the unfairness test. I do not think that a list of things that lenders must do is enough. It would encourage them to think that as long as they have complied with a list, they have lent responsibly, but that cannot be so in all cases. The OFT guidance cannot impose a duty: it is guidance.

However, the draft OFT guidance on fitness, which I provided to hon. Members before the Committee, makes clear the sort of issues the OFT will look at when considering the fitness of an applicant for a licence. Page 4 of the draft guidance says:

“Fitness takes into consideration any matter which may have a bearing on your ability to deal with consumers, including credit competence and evidence of trading practices”

Page 9 of the draft guidance lists examples of specific unfair practices that I am sure hon. Members would agree go to the heart of responsible lending, as do the practices in relation to non-status lending listed in the   annex to the draft guidance. The OFT will, of course, consult on its draft guidance and will update it from time to time so that account can be taken of other examples of irresponsible lending that may come to light.

James Brokenshire (Hornchurch, Conservative)

The interesting thing here is the lack of willingness to embrace the concept of responsibility, which is what lies at the heart of the amendment that has been put forward by the right hon. Member for Leeds, West. The Minister talks about subsequent amendments to the OFT guidance if it is felt that things are not being conducted in a reasonable fashion. In many ways, one of the weaknesses of the structure that is set out in clause 30 is the lack of influence from any outside body. It is interesting that this provision differs from certain other provisions later in the Bill, such as clause 54, subsection (3) of which states:

“No statement of policy shall be published without the approval of the Secretary of State.”

There is no such measure in clause 30, but if there were it would introduce some sort of check or balance in terms of the guidance or direction that will be given. It is interesting that there is reluctance about introducing that element of reasonableness, despite what the Minister may say about the guidance.

Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)

I am grateful to the hon. Gentleman. I understand what both he and my right hon. Friend the Member for Leeds, West are trying to achieve. I argue that the OFT guidance may be of assistance, but if I do not satisfy the Committee of that, I am prepared to reconsider the issue.

It might assist the Committee if I first talk about some related OFT issues. As we have discussed, the OFT will from time to time take into account examples of irresponsible lending that come to light. It also has guidelines on non-status secured lending, which involves the sector of the market that lends to people with poor credit histories or limited means. The OFT encourages lenders who offer unsecured products in that sector to comply with the guidelines, which set out a series of principles to which lenders should adhere when lending to non-status consumers.

If I may, Mr. Conway, I shall go through the guidelines. They state that

“there should be transparency in all dealings with potential and actual borrowers, with full and early disclosure and explanation of all contract terms and conditions and all fees and charges payable

there should be no high-pressure selling, and adequate time should be allowed for the borrower to reflect on the terms and conditions of the loan and to obtain independent advice before signing

advertising and other promotional material should not mislead, and there should be no cold-calling or canvassing off trade premises without the borrower’s prior consent

brokers should disclose at the outset their status with regard to the borrower and the lender, and the extent of the service offered to the borrower, together with any brokerage fee or commission payable by the borrower or the lender

lenders should take all reasonable steps to ensure that brokers and other intermediaries regularly marketing their products do not engage in unfair business practices, or act unlawfully, and that they serve the best interests of the borrower

contract terms and conditions should be fair, and should be written in plain English to ensure as far as possible that borrowers understand the nature of the loan agreement and their rights and responsibilities under it

there should be responsible lending, with all underwriting decisions subject to a proper assessment of the borrower’s ability to repay and taking full account of all relevant circumstances

any ancillary charges (for example, on default or early settlement) should be brought to the attention of the borrower before the agreement is entered into and should reflect as closely as possible the costs reasonably incurred by the lender and not already recovered at the time when the charges are made.”

The guidelines make it clear that:

“Lenders should comply at all times with the principle of responsible lending”,

and that all underwriting decisions

“should be subject to a proper assessment of the borrower’s ability to repay, taking full account of all relevant circumstances”.

The OFT will revise the guidance once the Bill becomes law. With that explanation, I hope that my right hon. Friend will withdraw his amendment. However, I give the Committee the undertaking that, if we can strengthen the position on Report, we will look at that.

John Battle (Leeds West, Labour)

I am grateful to the Minister for his response, and I welcome his sentiment that he understands what I am trying to do. We have come some way, but I should like to go a little bit further. The concept of responsible lending focuses on the lender doing the right thing and—I am being harsh—on the lender covering their back by doing everything according to the spirit and letter of the law. That is good, and should be done, but I want there to be more focus on the borrower.

I want to respond to something that the Minister said. I thought, “Oh my God, the word ‘responsible’,” as I do not want to have a great row about the definition of that word. I defer to colleagues with legal expertise, but I imagine that a massive issue in most court cases is whether a person was responsible for their actions when they carried out a crime.

Someone tried to take me on in a big way because they said that I was not a responsible MP. He had written to me, so I was responsible and responded. I am always conscientious in replying to my constituents, but I received the answer, “Yes, but you did nothing. You didn’t solve the problem.” The problem was that someone else’s cat was infringing on his property, but I did not think that I could solve that very easily. We get all kinds of cases, but I went around for days afterwards wondering whether I was a responsible person. I do not want to go there with the amendment. I do not want courts asking how we defined “responsibly”. I want to focus on people’s ability to pay back.

Reference has been made to the wider economy, and the Opposition spoke about lending. The House has a consensus on lending; we all worry about it when the economy is doing well. The Minister said that people handle credit well when the economy is doing well, but I suspect that they take greater risks and that they push the boat out further. For instance, people now borrow   fives time their annual income with their mortgage; it used to be two and a half times. People may say that the bubble in the south-east pushed the figure up to five and that it will all come out in the wash, but I am not so sure. As we all know, if the economy declines and people’s boats are too far out, they could find themselves in incredible financial difficulties.

We should not go down the road of responsible lending but focus instead on people’s ability to pay back. Some might accuse me of saying that the lenders should consider not just the terms and conditions of loans, with their agreements and hidden clauses, but the budget of those to whom they are lending. Some hon. Members might then say, “Ah, if you want a full outlay of their income and outgoings, that is means-testing.” I understand the stigma of means-testing, but it could be argued that tax forms are a type of means-testing—they assess people’s income and their ability to pay; that is how their tax bills get sorted. I suggest that, if we can ask for tax returns, we might consider people’s incomes and be a bit more open about their ability to manage their money.

I warmly welcome the Chancellor’s announcement this morning, but I want the money to be available not only to those in difficulties, whose boats are right out and who cannot pay back. We have to do a heck of a lot to educate people. Indeed, the hon. Member for Wantage (Mr. Vaizey) spoke about the need for financial education and the most basic money management skills. We could all improve our circumstances with a little more of that. We could include the subject in adult education courses. We should be more user-friendly, not simply telling everyone how to manage on a low budget and assuming that everyone is poor, but being a bit more open about financial management and household budgeting. People are not catching on to that as an innate form, and many are falling further and further behind, and that will build up into a debt bubble.

The ability to repay, the ability to pay back, is important. It will enable people to be part of a conversation, instead of lenders simply saying to those who have so far paid their loans and who therefore have a good credit rating that they will lend them more, which will mean borrowers getting further out and wanting more. I cannot think that that is responsible. The letter of the law may say that it is responsible. It may be responsible under the Companies Acts for companies to tell people their terms, to make clear the hidden clauses and to send regular letters letting them know how they are getting on, but I suspect that it is not enough. However, I warmly welcome the Minister’s offer to continue a conversation on the subject.

I shall push a little further in those conversations rather than drive further in a debate about what is meant by responsible. I do not want to go there. If the Government can help by looking at the problem in a more positive way, one that will ensure that the OFT’s guidance is absolutely clear and that it includes information on people’s ability to repay, I shall happily withdraw the amendment.

Charles Hendry (Shadow Minister, Trade & Industry; Wealden, Conservative)

I, too, am grateful for the Minister’s comments, but I join the right hon. Gentleman in encouraging the Minister to go that bit further. One has only to look at the wording of the amendment. If the words were changed around, the amendment would become a motherhood and apple pie thing. If companies were to be allowed to lend irresponsibly, we would all say that it must be wrong. Therefore, the thinking behind the amendment is something that we should all support instinctively.

The Minister quoted from the guidelines and highlighted one guideline that said that there should be responsible lending. It is not far from that to saying that we should put in the Bill—in primary legislation—a requirement to lend responsibly. It would make lenders think that we were serious if there were not just guidelines but a measure enshrined in an Act of Parliament.

We all recognise that we cannot take account of all circumstances. We know that some people will not tell the truth about their circumstances—they will not admit to other sources that they have borrowed from. By not telling the truth, they will still be able to build up debts that they cannot afford. Even with better data sharing, I do not think that we could expect lenders to know when people are not telling the truth. We also know that people’s circumstances will change, so that what may be affordable for them when they take out a loan becomes unaffordable in due course. Again, as long as the lending was responsible at the time of lending, the lender would have fulfilled these criteria.

We need to be aware that we live in a world in which advertising is designed to make us think that we can afford anything. The motor pages of our local newspapers contain adverts that say, “You can have a Jaguar for £200 a month”. We might think, “Whoopee! A Jaguar for £200 a month”. The Deputy Prime Minister has probably taken up many of those offers. It is only when one looks at the way in which the loan is structured that one comes across a colossal payment at the end and suddenly realises, “Actually, I can’t afford that and it will cost more than if I went to the garage and bought a car outright.” The advertising is designed to make us all think that the debt is something that we can afford more easily than we can.

We are looking for greater clarification in the Bill. There should be an onus on people to make sure that they lend responsibly. In most cases, they do. In most cases, there is not an issue. However, in too many cases, lenders do not act responsibly. That must be our priority and our concern.

James Brokenshire (Hornchurch, Conservative)

I emphasise again the points made by my hon. Friend the Member for Wealden and the sentiment that lies behind the amendment that was tabled by the right hon. Member for Leeds, West, which is the concept of responsibility. On Second Reading, I highlighted the case of a refinancing transaction in which somebody borrowed some money and was offered additional credit by another provider, which worsened the problem that they got into. The question is: was the person who lent them the money fit to lend? Arguably, they were. Did they act responsibly or reasonably? Probably not, considering   the circumstances and the borrower’s ability to continue to repay. It is the concept of responsibility that we want to press the Minister to embody further.

It is all very well saying, “Okay, we’ve set out guidance on whether somebody is fit to obtain a licence”. However, we also need to address and to push further the concept of competence. I hear what the Minister said about that. We also need to push the concepts of responsibility and of demonstrating whether a person will act in a responsible fashion.

In conclusion, this has been an interesting and instructive debate. I hope that the Minister will hear the message from the Committee about people acting responsibly and will follow the matter through.

Edward Vaizey (Wantage, Conservative)

I support the remarks of my hon. Friends and the amendment that was tabled by the right hon. Member for Leeds, West. It is an exciting amendment. Perhaps that is an unhelpful adjective to use, because, when a Minister or his officials hear the word “exciting”, they run for the hills.

In the past few years, the concept of corporate social responsibility has gained ground and credibility in this country. Many trees are felled in order to produce environmental reports showing that a company is socially responsible. As far as I am aware, no legislation enshrines the need for a company to behave responsibly. In my view, there is no more important need for a company to behave responsibly than in the area of consumer credit.

It strikes me as bizarre that someone who applies for a mortgage must jump through several hoops to secure the funds, even though there is a property as security, but that to obtain an unsecured loan there are barely any hoops to jump through. Lenders come knocking on the door. One can, normally, barely open the front door for the amount of junk mail and direct mail that lenders have sent, offering credit cards and loans. It is not possible to drive down a motorway now without seeing an ad-van parked in a field, offering a loan, yet no hurdles have to be jumped so that credit lenders can assess whether the person to whom they are lending has accumulated too much debt, has too many credit cards, or is simply trying to manoeuvre debt along into the never-never. To enshrine the amendment in the Bill, and then in law, would be a wonderful, forward-looking step that the Government could take to send a clear signal to financial institutions that they should start to behave responsibly.

As the right hon. Member for Leeds, West so eloquently put it, although the lenders can look to their own back office functions and tick all the boxes, they must look outwards and check whether they are flogging their customers to death.

Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)

I congratulate all the hon. Members who took part in the debate, because I understand their sincerity in pursuing their aims. I hope that they do not doubt my sincerity in trying to accommodate those aims in a framework that will allow the Bill to be successful. Relevant to that is the consensus that we discussed at the beginning of our exhaustive   discussions on improving the Bill generally, with regard to transparency and undertakings. Aspects of the matter include putting pressure on companies to be more transparent and open about their procedures, and the giving of advice and support to people who are in debt, through the financial inclusion money and through other aspects of what we are doing.

I heartily agree about financial education and support for citizens advice bureaux and all the agencies that pick up the pieces when people have problems. We are trying to pursue that course throughout. However, I got the feeling from the debate that hon. Members think that the OFT lacks teeth and that going along with what it says is almost optional. It is not. Not complying with OFT guidance raises questions about a lender’s fitness and could lead to licensing action, so there are teeth. As to the guidance on non-status lending, concern was raised about the proper assessment of a borrower’s ability to repay; taking full account of all relevant circumstances is the key concern. The OFT guidance includes that, as well as the concept of responsible lending.

In the spirit of what my right hon. Friend the Member for Leeds, West wants to achieve, we shall consider the matter and try to make the provisions clearer. I do not want to play the definition game and talk about what is “responsible” or “reasonable”, or what is unfair or not unfair. The unfairness test is all a matter of relevant circumstances and it could be argued that relevant circumstances include the ability to repay.

Charles Hendry (Shadow Minister, Trade & Industry; Wealden, Conservative)

I am grateful to the Minister, particularly for letting me interrupt him in full flow. May I get this clear? He talked about the guidelines that say that lending should be responsible. He has implied that his objection to the amendment is that it is unnecessary because the matter is dealt with in the guidelines. He has not, I think, said anything about why he believes the amendment is flawed. I should be grateful to know any particular reasons for his thinking that the requirement for lenders to lend responsibly should not be included in the Bill.

Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)

For the very reason that we do not want to get into an argument on definitions. There would be a definition of “responsible” and people would be able to hide behind that, because it might not be wide enough to cover all the relevant circumstances. Perhaps the discussion that we should continue is about how to develop the matter. It is in that spirit that I hope my right hon. Friend will withdraw the amendment, on the undertaking that we shall discuss the matter further and see what we can come up with.

Mr. Vaizeyrose—

Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)

I will give way to the hon. Member for Wantage, but the words “exciting”, “visionary” and so on cause me some concern.

Edward Vaizey (Wantage, Conservative)

If the Minister is happy for the word “unfair” to appear unfettered in the Bill and to allow the courts to define it, surely it should be possible to have the word “responsible” in the Bill and to allow the courts to define that.

Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)

I hear what the hon. Gentleman says, but I must, unfortunately, disagree with him. We are worried that the amendment would not be workable because guidance cannot impose a duty. I want to discuss that further with my right hon. Friend.

Despite the sincere attempts to persuade me to accept the amendment at this stage, it is not possible for me to do so. I hope that my hon. Friend will recognise that we are trying to be clear about what we mean. I repeat my offer of further discussions to see what we can do and to return to the matter on Report.

John Battle (Leeds West, Labour)

My greatest fear is that the whole business will go to the courts and remain there for years so that people will not receive the basic justice that is in the Bill. I am reluctant for rows about the definition of “responsible” or “responsibility” to clog up the courts for years and for people not to have a good working relationship with lenders. My aim is to protect people who suffer from unscrupulous lenders who should be driven off the park by the OFT. When it comes to the fitness test such lenders should not allowed anywhere near the park to start with and I hope that that will start to happen as a result of the Bill.

However, other lenders are doing a reasonable job and I do not want to drive out all lenders. We need people who lend money to other people. I do not want the problems to go to the courts. I want a reasonable conversation between lenders and borrowers so that things work out for both parties. I want a fairer balance for borrowers. Rather than driving lenders to the courts to discuss whether they have been responsible, I want the OFT to be clearer and more forceful in explaining to lenders that the issue is not about protecting their backs, but about having a decent relationship—it might not be just on paper—with borrowers.

I do not mean that when final payments are due the lenders send a man with a dog to threaten a young woman with a child on the grounds that the arrangements have changed and her loan charges have increased because they forgot to tell her about the extra charge they added, saying, “We have come for an extra £20. Did you not realise that it was due? By the way, my dog barks ferociously so watch your child.” Such conversations are out of order and we want to drive those people out of the marketplace. That puts the onus on those left in the marketplace to have a better and stronger relationship with the people to whom they responsibly lend. In that spirit, I am prepared to withdraw the amendment and to continue the conversation.

I beg to ask leave to withdraw the amendment.

Hon. Members:

Object.

James Brokenshire (Hornchurch, Conservative)

I wanted to follow up a point that I briefly alluded to earlier. The Minister might have addressed it, so I apologise if I missed it. The clause inserts proposed new clause 25A into the 1974 Act, but is different from where similar language crops up elsewhere in the Bill. For example, clause 54 inserts into the 1974 Act proposed new section 39C, subsection (3) of which states:

“No statement of policy shall be published without the approval of the Secretary of State.”

No such provision is included in clause 30. Some forthcoming amendments concern the perhaps unfettered nature of the OFT’s powers. Can the Minister explain why that thought process is adopted elsewhere in Bill, but not in clause 30?

Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)

We had an excellent discussion about the amendment that my right hon. Friend the Member for Leeds, West tabled, but it would be useful to set out the basis of the clause. Clause 29 introduces the broader fitness test, which the OFT uses to decide whether someone is fit to hold a consumer credit licence. Clause 29 requires the OFT to prepare and publish guidance on how fitness will be determined. The OFT will be required to consult on fitness guidance before the new fitness test comes into effect. If the OFT revises its fitness guidance, it must publish and have regard to the most recent version. Hon. Members will see the draft guidance in the information packs which will be subject to consultation after Royal Assent. The basis of that is to explain that the policy decision that comes later is clear and precise about what we are trying to achieve.

The only part of the legislation that requires the OFT to obtain ministerial clearance concerns a statement of policy in relation to civil penalties. That is a special case, which allows the OFT to impose fines for breaches under the licensing regime, which goes beyond its normal role as a market regulator. The Secretary of State’s approval is required in relation to civil penalties. That is the difference. I hope that that helps the hon. Gentleman.

James Brokenshire (Hornchurch, Conservative)

I wonder if I could press the Minister. I suppose that in some respects I am looking for consistency. There is a clear inconsistency. I hear what the Minister says about the distinction between a regulatory and a quasi-judicial approach. However, I   think that I am right in saying that three other clauses contain similar provisions. The next one that we shall come to is clause 42, which would insert a new clause 33A into the 1974 Act, in relation to which I shall in all likelihood raise the same issue, as the same point about consistency applies.

That is particularly so as, in clause 30, proposed new section 25A(3) of the 1974 Act says:

“The guidance shall be published in such manner as the OFT thinks fit”

and proposed new subsection (4) says:

“In preparing or revising the guidance the OFT shall consult such persons as it thinks fit.”

That is the concept that I am trying to get hold of. The OFT’s powers are quite wide and the idea of the Secretary of State having a role, which is accepted in subsequent clauses, could be helpfully applied in clause 30 and the other example to which I have referred. I ask the Minister to consider trying to rein in the OFT’s powers and to maintain checks and balances.

Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)

We will return to the issue in further discussions on the OFT’s powers. If the hon. Gentleman has time, it might help to look at the issues arising from the Enterprise Act 2002; the differences between responsibilities and the reasons the Government tried to prevent Ministers from interfering in pure competition issues. That is where the different roles come from. In the context of the Bill, ministerial involvement relates to civil penalties and similar matters that a regulator should not be able to impose unilaterally. It should come back to the Government for guidance.

The OFT is not unfettered. As I said to the hon. Member for Wealden, it is responsible in terms of the concordat on how it should operate. There is the annual report and the OFT can be challenged. It has regular meetings with the Secretary of State and other Ministers and there is an opportunity to question what it does. It must act reasonably and proportionately.

The difficulty with the clause is that there is clearly a fundamental difference between us, as was proved by the fact that the amendment was pushed to a vote. Whatever I say about this clause will not convince Opposition Members. I hope that I have explained to the hon. Member for Hornchurch why the differences exist and how the issues relating to the Enterprise Act 2002 might be helpful.

James Brokenshire (Hornchurch, Conservative)

I thank the Minister for his comments and I will probably take his advice on the 2002 Act. I am grateful for his guidance and assistance, but I reserve my position on the consistency argument. It is a matter of when something strays between a regulatory function and a penalty-type function. In some ways, that may relate to the second example in terms of requirements, which we will debate later.