Clause 52 - Power of OFT to impose civil penalties
Consumer Credit Bill
4:30 pm
Alan Reid (Shadow Minister, Trade & Industry; Argyll and Bute, Liberal Democrat)
I beg to move amendment No. 36, in clause 52, page 44, line 8, leave out from first 'is' to 'it' in line 10 and insert—'either—
(a) satisfied that a person (the ''defaulter'') has failed or is failing to comply with a requirement imposed on him by virtue of section 33A, 33B or 36A, or
(b) dissatisfied with the conduct of the licensee,'.
I am concerned that there is a loophole in the Bill. Amendment No. 36 was designed as a probing amendment to establish the Government's intentions. Under the Consumer Credit Act 1974, the Office of Fair Trading has the power to suspend or revoke a licence, but it was recognised that such a sanction might be too severe for certain offences, so the Bill is introducing a new sanction of requirements.
The clauses that we debated this morning include provisions that gave the OFT new powers to impose requirements on licensees in cases in which it is dissatisfied with the conduct of a licensee or any of his associates. The procedure for requirements is that the OFT must first identify the fact that the licensee is carrying out bad practice before it can take any action. An example of bad practice could be late-night doorstep pressure-selling. Having identified the fact that a licensee is carrying out a bad practice, the OFT will write to the licensee imposing a requirement that that bad practice be stopped. However, only if the licensee continues in that bad practice—the bad practice specified in the requirement—can the OFT impose a civil penalty. In other words, this is a two-stage process that involves handing out a yellow card first, and only if the written warning is ignored and the bad practice continues can a penalty be imposed.
I believe that there is a loophole in the procedure because there appears to be no sanction available to the OFT until after it has served the requirement. There appears to be no deterrent to bad practices committed before the OFT has identified the fact that the licensee has been guilty of bad practice and served the requirement. Civil penalties can be imposed only for continuation of the bad practice.
Without a deterrent for first offences, I can imagine the boss of a rogue credit business saying to his salesmen and collectors, ''OK lads, go out, twist arms and pressure-sell all you like. We've nothing to worry about until the OFT finds out and gets round to serving a requirement on us.''
In practice, it could take a long time for the OFT to identify the fact that a particular rogue agency is carrying out bad practices. It will have to identify the practices, collect evidence and serve the requirement. Moreover, victims may be too frightened to complain. The credit business will, of course, deny any allegation of wrongdoing, and so, in practice, it could take the OFT a long time to identify the pattern of bad behaviour, collect evidence and serve the requirement. Until that point, the rogue credit business would have nothing to worry about and it could continue with any bully-boy tactics it liked, without fear of penalty.
I therefore believe that there must be a deterrent to prevent such behaviour from occurring. Giving the OFT the power to impose a civil penalty for unsatisfactory conduct, as specified in the amendment, would plug that loophole. I accept that the amendment might not be sufficiently detailed to be added to the Bill, but it is intended to be probing so as to give the Minister the opportunity to respond to what we believe to be a loophole—the lack of deterrent against any bad practice before the OFT serves a requirement.