Orders of the Day — Consumer Credit Bill

Part of the debate – in the House of Commons at 1:36 pm on 13 January 2005.

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Photo of Gerry Sutcliffe Gerry Sutcliffe Parliamentary Under-Secretary (Trade and Industry) (Employment Relations and Consumer Affairs) 1:36, 13 January 2005

We think that the balance is right in the Bill. It will deal with burdens on business, and ensure that products that should remain in the marketplace are retained there.

Keeping consumers informed is an essential part of being a responsible lender. Consumers must know exactly what their debt is. The more informed consumers are, the more aware they will be of whether a product is appropriate for them. Improving the standard of regulation, however, will be of no use if regulation does not do the job for which it was designed. The Bill's third aim is to ensure that regulation is appropriate and measured, ensuring comprehensive protection for consumers while allowing industry the flexibility to innovate.

The Bill does ensure comprehensive protection, extending the protections in the 1974 Act to all consumer borrowing by removing the £25,000 financial limit above which consumer borrowing is not currently protected. It is appropriate and measured, maintaining the protections for business lending under £25,000. It allows industry the flexibility to innovate with an exemption for high net worth borrowers, enabling them to opt out of regulation. But lenders must also be confident that they are operating on a level playing field. The Bill makes the provisions in section 127 of the Act, on the enforceability of defective agreements, more proportionate. The remedy reflects the detriment.

Passing discretion to the courts will not remove consumer protection, because agreements can still be found unenforceable, but it will increase fairness across the sector and allow lenders to compete on the basis of best practice.

During our extensive consultations, we considered many other proposals. I am aware of campaigns to introduce an interest rate ceiling, which my hon. Friend Mr. Clelland mentioned earlier. The Government commissioned research on international practices, and decided not to introduce a ceiling in the UK credit market at this stage. We are not convinced that such ceilings help the consumers whom they are intended to protect. I stand by that decision, but as I told my hon. Friend, we are committed to keeping the matter under review.