Clause 38 - Power of OFT to impose requirements on licensees
Consumer Credit Bill
11:30 am
Charles Hendry (Shadow Minister, Trade & Industry; Wealden, Conservative)
I beg to move amendment No. 16, in clause 38, page 31, line 32, leave out subsection (1) and insert—
‘(1)This section applies where the OFT has reasonable grounds for believing that a licensee or an associate or a former associate of a licensee—
(a)has engaged in conduct which breaches any provision of or under the 1974 Act;
(b)is engaging in such conduct; or
(c)is likely to engage in such conduct.’.
Improving regulation is, of course, a central aim of the Bill. Indeed, improved regulation is essential if we are to eliminate rogue lenders and unfair lending practices, which are the cause of financial difficulties for too many people. We need to recognise that the overwhelming majority of companies act responsibly and with consumers’ interests in mind. However, a minority do not, and those are the ones that we want to get rid of.
Expanding the powers of the OFT to deal with licensees is a major element of the way in which the Bill is intended to improve regulation. As I said on Second Reading, many hon. Members on both sides of the House have reservations about how much those increased powers will achieve the intended aim. Clause 38 is central to our concern.
The clause sets out the powers of the OFT to impose requirements on licensees where it is dissatisfied—the key word—with any conduct of business that is being carried out, or which it is proposed should be carried out, by
“a licensee, or associate or former associate of the licensee”.
It allows the OFT, by notice, to impose special conditions on licensees to deal with such unfit conduct. Those special conditions, such as training, will be specific to a particular licence holder to ensure that the business is meeting its fitness requirements. The breach of a condition could lead to the OFT imposing a financial penalty on a licence holder or, ultimately, revoking, suspending or varying his licence.
In the right circumstances, the powers will be necessary and effective, but as with earlier problems, the clause is vague as drafted. The only guiding principle against which the OFT must consider imposing requirements is whether it is “dissatisfied” with a business or its conduct. That extremely vague description could cover absolutely anything. Indeed, there is no concept of objective justification whatever.
Dissatisfaction is not a term found elsewhere in law. By definition, anything less than full satisfaction involves some element of dissatisfaction. Dissatisfaction is certainly not the same as finding something unsatisfactory, but that is much closer to what we are considering and concerned about. It is not a term that distinguishes adequately between major and minor infringements, but surely it is essential that these actions are to be pursued properly and effectively.
Without greater objectivity, the clause could be dangerous and it leaves us open to the risk of excessive and unnecessary regulation, which will stifle the development of the credit industry and what it can offer the consumer. Indeed, the provisions give rise to serious concerns about their compatibility with human rights legislation. When considering identical provisions before the election, the Joint Committee on Human Rights wrote in its 15th report that it was concerned at the
“entirely unfettered scope of this power”
and believed that the provision gave rise to
“a significant risk of incompatibility”.
Amendment No. 16 is designed to remedy that situation. It introduces the element of objective justification that is so necessary by introducing a test of “reasonable grounds for believing” that something has been done wrongly, and by linking matters that may give rise to the OFT exercising its powers to licensing issues, such as a breach of the 1974 Act, as amended by the Bill.
By increasing objectivity, we will have a better chance of achieving our aim of improving regulation and thus of achieving better protection for the consumer.