I agree with the right hon. Gentleman that for many people, particularly those on low incomes, the prospect of going to court and taking on a major financial institution must be terrifying, so they will try to use any means to avoid that. One reason why the existing legislation on extortion has not been used more is that many settlements have been made on the steps of the courtroom, where people decide to settle before the matter gets to court. If we can get the detail into the Bill, we can avoid many of those problems.
Most importantly, this is not just an issue of concern to lenders; it is, as we have said, the consumers whom we seek to protect who will suffer most from the lack of detail. If the parameters are not clear, lenders will become more cautious in their lending to ensure that, some years down the line, they do not find that they have inadvertently operated in an unacceptable way. That extra caution is exactly what will drive people to more unscrupulous lenders. Moreover, that is not just a concern of lenders. As the charity Credit Action points out, on behalf of consumers:
"The presumption that all relations are 'unfair' unless proved otherwise is in itself unfair, excessive and contrary to normal British law."
We are also concerned by the way that the Bill will apply the unfair relationship test retrospectively, to those existing agreements that will continue beyond a transitional time frame. As yet, that time frame has not been decided, which leaves both consumers and the industry wholly uncertain about the extent to which the test may apply to their agreements. Without detail over what constitutes an unfair relationship test, neither creditors nor consumers are in a position to know whether their existing agreements could be open to reinvestigation.
We also have concerns about the extended scope of the financial ombudsman service. One of the Bill's fundamental aims is to improve redress for consumers, and that is right, but on the "Money Box" programme recently, the ombudsman himself said that he had real concerns about his office's capacity to cope with the volume of work. There is no question that the provisions in the Bill will add to that work, so we must question whether it has the capacity to achieve what it sets out to do.
The Bill, in its efforts to improve regulation of the credit industry, also proposes an expanded role for the Office of Fair Trading to regulate the conduct of licensees. Clause 38 provides for the imposition of requirements on licensees if the OFT feels unsatisfied with the licensee's work; clause 46 allows the OFT access to premises and documentation; and, ultimately, clause 52 allows the OFT to impose civil penalties, comprising fines of up to £50,000, on those who do not comply with its requirements.
My colleagues and I will support measures to improve the regulation of the credit industry—that is an important step towards protecting consumers' rights—but we will be able to protect their rights only if that regulation is transparent. Clause 30 states:
"The OFT shall prepare and publish guidance in relation to how it determines, or how it proposes to determine, whether persons are fit persons".
As yet, despite repeated calls, that guidance has not been published. How then, is Parliament supposed to agree that this measure is the right one to take, if it does not know how the measure will be carried out in practice?
Indeed, the Joint Committee on Human Rights, in its fifteenth report of the last Session, expressed its concerns regarding the power to impose requirements on licence holders. The Committee concluded that the
"unfettered scope of this power fails to satisfy the requirements of reasonable legal certainty and also gives rise to a risk of disproportionate use of the power in practice. We are therefore concerned that this provision as currently drafted, without greater specificity, gives rise to a significant risk of incompatibility with Article 1 of Protocol 1."
Whether or not that is the case, and I would be grateful if the Minister clarified the situation when he sums up, the fact remains that the accountability of the regulator is inevitably limited. If we hand more powers to a regulator, accountability must be decreased, and if we decrease accountability, we cannot be improving transparency. Without transparency, how can the Government ever claim to be increasing protection for the consumer?
As Credit Action makes clear:
"The role given to the OFT is very strong. In many ways they will be acting as both prosecutor and judge and this could easily lead to an un-level playing field. The detail of on-going monitoring obligations are not included in the Bill and will be left fully in the hands of the OFT, with further guidance being issued at a later stage. It is the view of Credit Action that the powers given to the OFT which includes 'the right to monitor as it sees fit, businesses being carried on under licences' are excessive."
We must also make sure that any regulations made under this Bill can stand the test of time and do not undermine innovation and progress in the consumer credit industry. Just as the nature of credit has changed beyond recognition since the introduction of the Consumer Credit Act 1974, it will change just as much in the years to come, especially as new technology provides more and more opportunities to do things differently. Many new ideas are emerging in the field of lending and borrowing at present, such as the work being undertaken by companies such as Zopa, which is using the internet in a manner that totally changes the way in which people borrow and lend money.
These changes could be of great benefit to both lenders and consumers, particularly those on lower incomes, and we have to be certain that excessive regulation does not stifle this type of innovation. The OFT's role must afford flexibility. The vast majority of consumers deal with credit sensibly and they should be granted the choice and freedom to handle their financial affairs how they choose.
Again, the issue stems from a lack of detail and a great deal of uncertainty about the consequences of the proposals in the Bill. Will the Minister ensure that the OFT guidance and publications are made available before the Bill goes into Committee? I simply do not see how otherwise we can fully address the issue of the OFT's extended role.
If the Bill is indeed about increasing transparency, then it should naturally also be about reducing unnecessary red tape. In certain places, however, I fear that it goes against that aim. In particular, the Bill will require lenders to send arrears notices to consumers when, in aggregate, a borrower, particularly one on weekly repaid credit, owes four weeks' worth of repayments. In principle, as the Minister said earlier, that sounds a logical measure, but in practice it may have some absurd implications for home credit borrowers. Some 3 million people borrow on a home credit basis, and on average each customer will miss four payments at certain points, in many cases at staggered points, in the course of a credit agreement. In doing so, however, they will not incur one extra pound of debt, as the repayment formula is designed to be flexible. The Bill could mean that all 3 million customers would have to be issued with formal, written arrears notices, when in reality they would not be in arrears at all. What a terrible waste of time, money and resources that would be. I hope that the Minister will comment on the fact that there could be no better way to frighten people, particular those on low incomes, than to tell them in writing that they are in arrears when they are not.
The final concern that I want to raise at this stage is that of the implementation timetable for the Bill—or rather the current lack of one. The 1974 Act took six years to implement fully, which is indicative of the substantial changes that regulatory measures represent for credit companies. Clearly, these measures are unlikely to take as long to implement, but there are nevertheless serious implications, particularly for IT systems, as a result of some of the proposals, especially those requiring regular information and statements to be sent to debtors.
Without a clearly defined timetable for commencement of the new rules, the credit industry is, at present, unaware of how long it will be given to implement the changes required. The lack of detail in the Bill only makes that worse. Without that detail, companies are unable to assess accurately and reliably what changes they will need to make to their processes and systems and how long they may take to introduce. There is little doubt that a short, unrealistic timetable will not be in the interests of the consumer. As Credit Action states:
"Undue rushes in attempted implementation could lead to corners being cut, staff not being properly re-trained, and thus the purpose of the Bill being somewhat undermined."
In the interests of the consumer, the Minister must give us a clear timetable for the implementation of the Bill, before it reaches the statute book, and ensure that a realistic period is allowed for the industry to adapt.
I have set out why the Bill is so timely and important. The credit industry has changed dramatically over the past 30 years and continues to change at an equally fast pace now. To protect the many millions of consumers who have products and agreements with credit companies, it is essential that a new legislative framework is adopted that offers more rights and means of redress, better regulation of businesses and a fairer and more efficient industry for all.
The Conservative party therefore lends its broad support to the Bill, but, as I have explained, not without reservations. There is insufficient detail, and failure to provide that could have a series of unintended consequences for consumers which could end up doing more damage than good. That would be a perverse outcome for the Bill. No one wants to see that happen, and I look to the Minister and his colleagues to work with us, rather than against us, in Committee—and I welcome his commitment to do that—and beyond, to ensure that we deliver a Bill that truly helps the consumer, without undermining the businesses that provide the service.