Clause 38 - Power of OFT to impose requirements on licensees
Consumer Credit Bill
11:30 am
Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)
Clause 38 refers to the powers of the OFT to impose requirements on licensees. It enables the OFT to impose intermediate sanctions on licensees. Those sanctions are called requirements. Requirements are an important tool for the OFT to use to ensure an effective targeted licensing regime. The OFT’s powers are currently limited to refusing an application or granting a licence on different terms. It can also vary, revoke or suspend an existing licence.
The effect of those sanctions can be severe. They can, for example, prevent people from trading. The OFT adheres to the Cabinet Office enforcement concordat, and any regulatory action that it takes must be proportionate to the detriment caused. Therefore, it is able to act only in the most serious cases in which a person is simply not fit to hold a licence. In many cases, the OFT is powerless to address consumer detriment without withdrawing a licence, which would be a disproportionate response. For example, if there were problems within one branch of a national company, it would not be justifiable to revoke the whole of the company’s licence. A similar situation would occur if one employee were to intimidate customers when collecting debts. Such cases are not serious enough to call into question the fitness of a person to hold a licence, but the OFT should be able to protect consumers. That is why we have proposed this power to impose a requirement on licensees.
The clause requires the OFT to impose requirements on licensees if it is dissatisfied with a matter relating to the business. The requirement takes the form of a notice requiring the licensee to do, not to do or to cease doing something. It must relate to the licensable business, it must address the matter about which the OFT is dissatisfied and it must ensure that the problem or a similar one does not arise again.
The OFT can use the power to address a wide range of problems. If the problem is with certain employees explaining credit agreements to customers, training for employees might be imposed. It might provide that sales representatives in a named branch be trained to inform consumers how they can cancel their agreements. If a debt collector’s employees are unfairly pressurising consumers by calling very late at night, the requirement could stipulate that they call only between 8 am and 8 pm. The requirement may also refer to a person other than the licensee. However, it will be addressed to and binding on the licensee. It can require a particular person to undertake a specific activity such as not collecting debts in person.
I should like to explain a few details to the Committee. The first is why subsection (1) refers to associates and former associates of a licensee as well as to licensees. That is because a person who is an associate of an unfit person might apply for a licence. For example, a second-hand car dealer might have been refused a licence. If his son then applied for a licence, the OFT might wish to impose a requirement restricting the father’s involvement in the provision of credit.
The second point is that the OFT may take steps to impose a requirement alongside the application process. That would allow a requirement to bite as soon as a licence was issued. It also explains why the clause refers to proposals to carry on a business as well as businesses already in existence. Requirements are a vital new tool for the OFT to ensure a targeted and proportionate licensing regime. I hope that, with that explanation, hon. Members will be able to support the clause.