New Clause 1 — Data Sharing

Orders of the Day — Consumer Credit Bill – in the House of Commons at 12:00 pm on 14th July 2005.

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'After section 36F of the 1974 Act (inserted by section 50 of this Act) insert—

"36G Data Sharing

(1) In this section—

'authorised person' means a consumer credit business, or consumer hire business, or an ancillary credit business or any person acting on behalf of any such business.

'credit reference agency' means any person within the meaning of section 145(8) and who holds a licence in respect of such activities under Part III of this Act.

all reference to 'debtor' shall include a reference to hirer and all references to credit shall include a reference to hire.

(2) Any authorised person may, provided the conditions in subsection (3) below are satisfied, disclose to a credit reference agency, and the authorised person and credit reference agency may use, any information relating to the credit history or financial standing of any debtor of the authorised person, for the purposes referred to in subsection (4) below, notwithstanding any enactment or rule of law prohibiting or restricting the disclosure or use of, or authorising the withholding of, such information.

(3) The conditions referred to in subsection (2) above are that—

(a) the authorised person has notified the debtor that it may disclose the debtor's information under this section; and

(b) the debtor has not, within 28 days of the date of notification, informed the authorised person in writing that he objects to such disclosure of his information.

(4) For the purposes of subsection (2) above, the permitted purposes are—

(a) vetting applications for credit or applications that can result in the giving of credit or giving of any guarantee, indemnity, or assurance in relation to the giving of credit;

(b) verifying the identity of the debtor or any applicant for credit, for the purpose of or in connection with an application for credit, or for any other purpose relevant to the financial standing of the debtor, including the prevention of money laundering;

(c) managing credit accounts including debt tracing and recovery;

(d) preventing, detecting or apprehending crime, and for the enforcement of criminal law whether in England and Wales or elsewhere including the tracing and recovery of any sanctions imposed thereunder;

(e) statistical analysis of credit risk assessment in a case where no individual is referred to by name or necessary implication;

(f) any other purpose to which the debtor subsequently consents; and

(g) any other purpose specified in an Order made by the Secretary of State for the purpose of this subsection (4).

(5) In this section—

'application for credit' includes an application to refinance or reschedule an existing credit agreement;

'credit reference services' means the furnishing of persons with information relevant to financial standing of individuals, which is information collected by the person furnishing the purpose of so furnishing it.".'.—[Norman Lamb.]

Brought up, and read the First time.

Photo of Norman Lamb Norman Lamb Shadow Secretary of State (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Spokesperson (Trade and Industry) 12:21 pm, 14th July 2005

I beg to move, That the clause be read a Second time.

As we have discussed many times, the Bill contains much that commands broad support. On Second Reading, I said that two specific issues were absent from it. The first is the problem of the calculation of interest. I note that an amendment on that has not been selected but it needs to be resolved. The second is data sharing. I know that the Under-Secretary shares my concern and that of many others, including the Conservative spokesman, that there is a long way to go in resolving the problem.

In a sense, it goes without saying that the best decisions about whether to lend are made when both parties—the lender and the borrower—have access to full information on which to base a judgment about whether it is appropriate to lend and about the amount to lend in the circumstances. However, at the moment, all too often, only the borrower has access to the full information. For many reasons, borrowers may be in denial about their capacity to service a loan or the amount borrowed on a credit card. We must therefore find a way of ensuring that both parties have access to the full information to make objective and wise decisions based on the principle of responsible lending.

Often, people build up unsustainable debt from several different sources. We are told that that is one of the prime causes of the crises that occur when people suffer health problems and sometimes worse. Increasingly, consumers shop around, obtain different credit cards, spend on them and also take out loans. Perhaps there is no defaulting for some time on any of those products, but unbeknown to each lender, borrowers are building up unsustainable debt and the crisis ensues.

There are two broad problems. First, data sharing generally takes places only when there has been a default—when someone has not paid on time or exceeded an overdraft limit and so on. When no default has occurred, but an unsustainable debt might be building up, information is not shared.

The second problem is historic and I shall describe it in a little more detail shortly. Before I reach the core of the new clause, I make a plea to the Under-Secretary to use his authority to sort out the whole problem. The new clause deals with part of it. It is permissive, not mandatory and therefore enables fuller data sharing. However, there is another side to the difficulty: ensuring that the industry does its duty and takes the opportunity that the new clause provides to make sure that data are shared. The Department of Trade and Industry, the Department for Constitutional Affairs, the industry, the office of the Information Commissioner and the Inland Revenue should get together urgently and set a timetable for achieving full data sharing. Even if the Under-Secretary opposed the new clause, I would welcome a commitment from him to ensure that that happens.

The Treasury Committee's inquiry showed that there is a feeling that the talking has gone on for a long time but there has been a lack of action. Part of the responsibility for that lies with the Government in legislative reform, which we are providing today, and in facilitating and putting pressure on the industry to respond. I know from discussions with the industry that, for example, APACS, the British Bankers Association and FLA are up for it and keen to discuss the matter with the Government to get it resolved.

Let me deal with the historic problem, which the new clause tackles. The Data Protection Act 1998 requires lenders to notify individuals that their data will be shared and the purpose for which they will be used. That legislation led in due course to the industry including standard clauses in the application process to ensure the consent and knowledge on the part of the consumer for any new agreement after data protection legislation came into force. There is no problem for new agreements; consumers have given their consent. However, there is no provision for any account opened or agreement made before the introduction of the standard clauses in contracts. Nothing provides for consumers to agree to their data being shared. Many accounts—credit cards and current accounts—have a long life. I have had my current account all my adult life.

Photo of Norman Lamb Norman Lamb Shadow Secretary of State (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Spokesperson (Trade and Industry)

Thank you. Many people's credit agreements will predate the introduction of the standard clauses and thus fall outside the scope of the new provisions for ensuring that data can be shared. The industry estimates that some 40 million accounts—42 per cent. of the market—fall into the category where there is no data sharing. How can the Government be serious about sorting out the problem of the lack of data sharing if there is no such sharing on 40 million accounts? Yet the industry says that it cannot share data unless there is a legislative change.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

I am sympathetic to the hon. Gentleman's argument but I wonder whether that is where the problem lies. There have been genuine problems in my constituency of people accumulating debt that they could never afford. The main problem was people starting with a set of new credit arrangements fairly recently. Surely the problem lies with shopping around on the internet or responding to the many millions of pre-approved applications for loans and credit cards. I wonder whether the measure is necessary when we should mostly be saying: caveat emptor.

Photo of Norman Lamb Norman Lamb Shadow Secretary of State (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Spokesperson (Trade and Industry) 12:30 pm, 14th July 2005

I am grateful to the hon. Gentleman for that intervention. As I said earlier, there are two problems. There is the historic problem, which the new clause addresses. There is also the problem that there is generally no data sharing in relation to modern accounts in circumstances in which the borrower does not default. A default triggers the sharing of information. The industry says that it is extending that provision, and that by the end of the year, it will have introduced much broader sharing of information, so that it will be sharing the good data as well as the bad data. If that actually happens, we will see a real advance. I am not suggesting that the new clause will resolve all the problems. We need a combination of legislative reform and pressure on the industry to deliver a much wider sharing of information from the kind of new credit agreements that the hon. Gentleman has described.

Photo of Mike Penning Mike Penning Conservative, Hemel Hempstead

The industry has a wide knowledge of people's credit. One area that is very dangerous is the transfer of credit card balances to new credit cards. There are some wonderful offers out there, but the problem is that the credit card companies know that a balance is being transferred to a new card, with a whole new credit limit, yet the existing credit card is not cancelled. So the borrower automatically gets double the amount of credit, and they can do that every six months. There is not one credit card company that cancels the card from which the balance is being transferred. Its credit limit remains in place. If someone with a £5,000 credit limit transfers that balance to a new card, they will find themselves with a combined credit limit of £10,000. They can do the same thing six months later. The danger is that the credit card companies have the information, but they are not using it to protect the consumer.

Photo of Norman Lamb Norman Lamb Shadow Secretary of State (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Spokesperson (Trade and Industry)

I thank the hon. Gentleman for that intervention. He makes a good point. There is a big problem with the transfer of credit. Sometimes it can work in the consumer's interest, if they can get a genuinely lower rate of interest and use the system. However, there are real dangers involved. I am not suggesting that the new clause will be a panacea to resolve all the problems of irresponsible lending in the credit industry.

Further to the hon. Gentleman's point, the Treasury Committee noted that people often transfer their credit card balance having received a commitment of a nil rate of interest for perhaps a year. However, they are often not told that new purchases on the card will be charged at the full rate of interest, or that when they pay off some of the balance, it will be taken off the balance transfer, not the new purchases. They therefore find that they are paying interest when they did not expect to. So there are many problems, and they all come down to the practice of responsible lending. We still have a way to go to get the industry fully to understand the importance of that concept.

I am seeking to address one specific historic problem, which is that, in the view of the industry and the Information Commissioner, there cannot be a full sharing of data. The commissioner has advised the industry that it would be a breach of the Data Protection Act 1998 to share data without consent. Incidentally, the problem has got much worse because, as Chris Bryant pointed out, there has been a revolution involving people shopping around. In the old days, all our needs were met by one institution—a bank or whatever. Now, people shop around for the best value product, so the need to address the problem of data sharing has grown considerably.

The Information Commissioner has said that, under the old agreements in which there is no provision for data sharing, a lender would need the customer's consent to share such information. The only solution available at the moment, therefore, is for the lender to go to the customer and ask for their consent. Members will appreciate, having sent out political mailings to people, that the response rate to such requests would be tiny. The industry reckons that it would be less than 1 per cent. We cannot resolve the problem simply by seeking consent under the existing rules. New clause 1 seeks to address that.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith

I have sympathy with the objectives of the new clause and with the need to promote greater data sharing on an historical basis. Does the hon. Gentleman agree, however, that we need to be careful about forcing consent, as it were, on members of the public? The Data Protection Act is there for a reason, after all. The new clause would give fairly wide powers to credit reference agencies and other organisations to extract consent from individuals. Perhaps the hon. Gentleman should think about the implications of what could be quite a serious breach of data protection principles.

Photo of Norman Lamb Norman Lamb Shadow Secretary of State (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Spokesperson (Trade and Industry)

I fully accept that. I have thought about the issue, and I realise that there is a balance to be struck. We could simply say that this provision breaches the principles of the Data Protection Act; therefore there is nothing we can do. However, the consequence of doing that would be too serious, and I cannot accept that that is the right approach. So while I fully understand the hon. Gentleman's point, it is my judgment that we should reform the law in the way that I have proposed. The consequence of not doing so could be very serious. At worst, it could be a matter of life or death. We have all come across awful cases of people taking their own lives because of the mess that they have got themselves into. There is a responsibility on all of us to address the problem, and to ensure that judgments on offering credit are made with the fullest possible information available.

Some people have expressed concern that the new clause could lead to predatory lending. Other jurisdictions have suggested that, where there are provisions for data sharing, some unscrupulous lenders could use the information to target vulnerable consumers. However, the specific provisions of subsection (4) will address that concern, in that it sets out the conditions under which the information can be shared. It will prevent any risk of the information being exploited for the purpose of predatory lending.

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch

The information could be used to encourage more blanket mailings. More and more paper lands on our doorsteps each day, and we end up being offered credit for this, that and the other. This results in two problems. First, some of the offers are pre-approved, which can be a problem if that mail is intercepted. We all know from our constituency mailbags that people have had their information misused by others. Secondly, such offers can encourage people to take credit when perhaps they should not. Will the hon. Gentleman comment on the protection offered in the new clause to ensure that those things would not happen?

Photo of Norman Lamb Norman Lamb Shadow Secretary of State (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Spokesperson (Trade and Industry)

The hon. Gentleman raises a genuinely serious point. We all suffer from those mailshots, but some people are better able than others to identify the dodgy ones. There has been a revolution in the availability of credit, but there has not been a commensurate revolution in financial literacy and education. People are therefore often very vulnerable to such approaches. However, the conditions set out in subsection (4) ensure that the use of information to target mailshots at vulnerable groups would be prohibited. Lenders would not have permission to do that.

Data sharing is of value to both the lender and the consumer, but when we talk about breaching the principles of the Data Protection Act, we must remember that we are seeking to act primarily in the interests of the consumer. From the lender's point of view, it would enable better, more informed decisions. It would mean a reduction in credit losses and in the amount of time spent handling accounts. From the consumer's point of view, which for me is the most important, it captures those cases to which I referred in which unsustainable debts build up unnoticed, and helps to prevent such a crisis from occurring. It helps existing lenders to monitor what is going on with their customers—if they can see, through access to information, that their customer is building up an unsustainable debt elsewhere, it enables them to make an earlier intervention to warn their customer of the potential consequences. At the moment, the lender is completely ignorant of such looming problems.

Consumers who have a good credit record would also be helped. The acknowledgement of that fact, because of the lack of "dodgy data" through data sharing, improves their ability to shop around to get a good deal. There is also a problem with people who have what is described as a "thin file". Because such accounts might be historic ones going back a long time prior to the Data Protection Act, credit reference agencies might have very little information about many consumers. That in itself often makes it difficult to gain credit, and potentially makes it more expensive.

Therefore sharing of information seems to be in the interests not only of the consumer who is liable to get into real trouble but of the consumer who has a good record. Crucially, it also encourages responsible lending. There is interesting evidence that a reduction in arrears occurs when consumers are informed that their data will be shared. When consumers know that information about what they are doing in relation to one particular account will be shared, it does not half concentrate their minds—it ensures that they try to keep their account under control, and therefore encourages responsible behaviour on the part of consumers. According to some suggestions, arrears could be reduced by as much as 50 per cent. simply through the consumer being aware that their data could be shared, because they realise the knock-on effects in terms of access to credit if they get into difficulty.

The new clause is not mandatory—it does not require the sharing of data. It is permissive. Crucially, therefore, it is not just a panacea on its own—it requires the industry to respond by taking advantage of what it would provide and sharing the information. For example, the industry would need to ensure that its codes of practice establish the principle that data sharing is the right approach, and ought to be done as standard practice.

Photo of Adrian Bailey Adrian Bailey Labour, West Bromwich West

I have been following the hon. Gentleman's argument with interest. I feel that it is flawed in certain areas. He has put forward the argument that the publication of a person's indebtedness will provide a disincentive, but under his proposals such a person has the right to prevent the public disclosure of his personal indebtedness. Those two proposals seem contradictory, because anybody who is likely to run up cumulative debts has the right under his new clause to prevent that being public knowledge.

Photo of Norman Lamb Norman Lamb Shadow Secretary of State (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Spokesperson (Trade and Industry)

I do not think that that is contradictory in any way. A safeguard is provided that addresses some of the concerns of other Members. We have already established the de facto principle that all credit agreements these days provide a standard clause for the sharing of information—there is no opt-out, it is a fact, and that is what happens. If consumers want credit, they sign up to that arrangement. The new clause addresses the problem of all those agreements that predated the Data Protection Act, and therefore pragmatically helps to address a serious problem that cannot be resolved in any other way, because the response rate to any request for consent would simply be too low.

That is my new clause in a nutshell. It seems to me that there is a strong case for ensuring that there is full data sharing—not the partial data sharing that we have currently. We must do something effective to ensure that that happens. The time for talking is over, and it now seems to me that the Government should act. The new clause is the way of achieving that.

Photo of Charles Hendry Charles Hendry Shadow Minister (Higher Education and Intellectual Property) 12:45 pm, 14th July 2005

I am grateful to Norman Lamb for tabling this sensible and constructive new clause. I am pleased to offer the Conservative party's support for it. On several occasions in Committee, I raised the importance of making advances in data sharing. I also endorse what he said about asking the Government to sort out the issue in its entirety. A range of issues are involved and we are all looking for them to be dealt with together rather than piecemeal.

There is concern that a unique opportunity to protect consumers is being missed. The Bill does an enormous amount in that direction, but the Minister rejected our pleas in Committee for controls on credit card cheques, which was an issue raised by Chris Bryant.

Photo of Gerry Sutcliffe Gerry Sutcliffe Parliamentary Under-Secretary (Trade and Industry) (Employment Relations and Consumer Affairs)

I do not think that I rejected it. I said that I would deal with it through secondary legislation on credit card cheques.

Photo of Charles Hendry Charles Hendry Shadow Minister (Higher Education and Intellectual Property)

I accept the distinction that the Minister makes, but he still said no to our amendment, even if he could see where it was coming from.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

The Minister is good at saying no.

Photo of Charles Hendry Charles Hendry Shadow Minister (Higher Education and Intellectual Property)

The Minister is extremely good at saying no, as the hon. Gentleman says from a sedentary position. He is the natural heir to General de Gaulle and Margaret Thatcher in saying no so forcefully and regularly.

The Minister also said no to our pleas for measures to stop unsolicited increases in credit card limits and rejected the plea for a responsible lending test, even though it was articulately advanced by his right hon. Friend John Battle. We are therefore concerned that things that would greatly help the interests of borrowers are not being taken into account as fully as they might be in this Bill.

As I stated in Committee, we all agree that the nature of the credit industry has changed beyond recognition over the past 30 years, and particularly during the past 10 to 15 years. That is the whole point of the Bill—to bring provisions and consumer protection up to a level at which it can successfully respond to those changes. As Members on both sides of the House will know, in 1971 there was only one type of credit card. Today, there are more than 1,300. Thirty years ago, £32 million was owed on credit cards, but today that figure is almost £50 billion. In fact, there are now more credit cards than people in this country. With that, a range of new issues have arisen. As my hon. Friend Mike Penning said, when people transfer the balance from one card to another, the initial card does not get closed. Someone drew to my attention recently the fact that, although she thought that she had closed a card because she had transferred the balance, she then discovered that charges were being put against that initial credit card. She was told that that was because she had not reported the card lost or stolen—she could not just close it. To me, that shows a significant loophole in the current way of operating.

Competition within the industry and the ability of consumers to shop around with confidence for credit deals is greater now than ever before. Consumers can now apply for and open accounts over the telephone and the internet, which is relatively hassle-free. While the increases in competition and greater flexibility and access to the market for consumers are welcome, at the same time, the risks and dangers of accumulating debt have become all too apparent. Members will recall that, on previous occasions, I drew attention to specific cases of individuals who have run up multiple debts on numerous credit cards—debts that have been far beyond what their income allows them to repay. As a result, they borrow more and more to try to alleviate their difficulties, but all that that serves to do is to wind them further and further into unmanageable debt. It is a spiral of debt that we all know and many of us fear, which, in a number of the cases cited by Members, has led to tragic consequences.

On the day of the Bill's Second Reading, the Daily Mail reported the tragic case of Stephen Lewis, a 37-year-old production worker from Worksop in Nottinghamshire, who ran up debts of £70,000 on 19 credit cards despite earning only £22,000 a year. In the end, he felt that he could escape from that huge debt only by taking his own life, leaving a wife and two children.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

In all the examples that I have encountered in my constituency or read about in the newspapers, the issue has been new credit rather than any of the old credit arrangements. The new clause, however, proposes to punch quite a big hole in some of the principles of our data protection legislation. I wonder whether it is proportionate to the real problem. Does the problem really lie with the historic credit arrangements that many of us may have? Norman Lamb himself said that he had been with his bank all his life—quite some decades now.

Photo of Charles Hendry Charles Hendry Shadow Minister (Higher Education and Intellectual Property)

I think that if Stephen Lewis's data had been shared more generally, and if the lenders had known that he was already borrowing on a range of credit cards and was well beyond being able to repay the debt on the basis of his income, the lenders would have been more cautious about issuing new cards. That is the kind of case that concerns us.

I should point out to Mr. Bailey that the arrangements will not be mandatory, in that if someone says, "You cannot have access to my data", the lender will decide whether lending to that person is appropriate. The lender will have the extra information that he or she may have something to hide. Most of us would be quite happy for our data to be shared because we have nothing to hide, but when people do have something to hide and say, "You may not share that information", the lender should beware. The hon. Member for Rhondda mentioned caveat emptor. I am not sure of the Latin for "the lender should beware".

Photo of Adrian Bailey Adrian Bailey Labour, West Bromwich West

I understand the hon. Gentleman's point, but it seems to be based on the presumption that the lender will always act responsibly. I am sure that that is true of the great majority of the credit industry, but it does not apply to all of it.

Photo of Charles Hendry Charles Hendry Shadow Minister (Higher Education and Intellectual Property)

The hon. Gentleman had a chance to vote for the responsible lending test in Committee, but he voted against it. We certainly want more responsible lending and we had the opportunity to make that difference. It was disappointing that the Committee did not accept the amendment to which the right hon. Member for Leeds, West spoke so articulately.

I am grateful to my hon. Friend Justine Greening for drawing my attention to a constituency case that she had encountered. A mother, whose anonymity I shall preserve for understandable reasons, wrote:

"My son . . . aged 45 suffers from schizophrenia and is in receipt of anti-psychotic medication for this illness. He has built up a credit card debt of over £30,000 for which he pays interest of about £500 a month. I do not know the exact amount because he will not show me the credit card statements. The incapacity benefit he receives can just about service the interest on the credit card debt. He does not want to go bankrupt and he threatens suicide. In view of his illness it is very difficult to reason with him and he is very reluctant to give up the cards."

All Members of Parliament encounter such cases, which cause tremendous concern and distress. The data-sharing arrangements proposed in new clause 1 could help to deal with the problem.

The background to the new clause is a growing debt problem. The number of bankruptcies and repossessions increased by 25 per cent. last year, the number of appeals to the Consumer Credit Counselling Service increased by 60 per cent., and credit card arrears and bad debts are also increasing. Those problems could become worse. We should take the opportunity that the Bill presents and do all we can to prevent them from reoccurring. That means taking every possible step to ensure that lending is responsible. Lenders should be able to use information to ensure that borrowers can afford to enter into agreements.

We all realise that we cannot stop people borrowing too much when they wilfully give lenders incorrect information about their circumstances or other cards that they have, but we can do much more to make such activities more difficult. Data sharing is a crucial part of the process, which is why we support new clause 1. The new clause aims to make it easier for credit companies and credit reference agencies to share their data, so that it is easier to prevent people from entering into unaffordable agreements.

Most members of the credit industry already share, or are about to share, data on their credit agreements with the credit reference agencies, but some problems remain. Lenders first issued credit long before they would have seen a need to share data and, as a result, many credit accounts do not allow for sharing in their respective agreements. Accounts that were opened before lenders decided to share data are governed by the current legislation. They are not eligible for inclusion in credit files until the account holders consent to the sharing of their data.

In the case of accounts with a long life such as credit card or current accounts, decades may pass before the whole portfolio is available. The new clause seeks to solve that problem. As the number of agreements continues to increase because it is becoming easier to enter into them, and lenders seek more sophisticated means of risk management, data sharing becomes increasingly important.

It is beyond question that lenders have a vested interest in lending responsibly. Only a very few loan sharks make their money by preying on people and leading them knowingly into debt that they cannot afford. Responsible lending reduces credit losses, thus creating a financial incentive for the undertaking of credit agreements that do not place the borrower under financial strain. There is also the issue of reputation: lenders do not want to be seen to contribute to individuals' misfortune.

By entrenching in the Bill the credit industry's right to share data, subject to the protection offered to consumers by the Data Protection Act, we can help to prevent individuals from entering into agreements that they cannot afford. Protection of that kind is one of the fundamentals of the Bill, and as the industry evolves yet further over the next few years and decades, the new clause will help to ensure that the level of protection offered to consumers meets those demands.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

As ever, the hon. Gentleman is advancing a rational argument, but the new clause gives a very broad definition of the information that is available. Many people would be nervous about the amount of information that might be available as a consequence. A credit card contains a vast amount of personal information about how people live and many would find it worrying that it could be shared quite so readily. Subsection (4) moderates the position slightly, but nevertheless includes a very broad definition of the purposes for which information might be shared.

Photo of Charles Hendry Charles Hendry Shadow Minister (Higher Education and Intellectual Property)

A recurring theme in Committee was the lack of detail in the Bill. The Minister's response was usually that the issues concerned could be resolved in the courts. I should be happy to see an extra schedule or, alternatively, a provision allowing the Secretary of State to issue guidance in statutory instruments. The new clause, however, heads in the right direction. Of course we do not want information about where everyone spends their money to be available to a range of institutions, but if someone has 20 credit cards and has reached the borrowing limit on all of them, it is surely not unreasonable for a lender to have that information before issuing a further card. I agree with the hon. Gentleman that we should be cautious, though. One of the Conservatives' worries about the Identity Cards Bill is the amount of information that would be held and would be generally available.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith

I support the intentions behind the new clause, but may I pick up the point made by my hon. Friend Chris Bryant? The new clause allows the use of

"any information relating to the . . . financial standing of any debtor".

That could presumably cover details of personal relationships, such as a duty to pay moneys to a former spouse. We need to ensure that we are not giving more extensive powers to credit reference agencies than even the hon. Gentleman would want them to have.

Photo of Charles Hendry Charles Hendry Shadow Minister (Higher Education and Intellectual Property)

One could also argue that, if somebody is looking to take out a credit card or to borrow money, the question of whether they are paying thousands of pounds to a spouse is relevant and should be taken into account in assessing their ability to make repayments. Every time that we take out a mortgage or a loan, we are required to tell the lender about our other outgoings. If we are to encourage responsible lending, it is reasonable for lenders to be able to ask such questions.

The thrust of the new clause is supported by the industry and by organisations that exist to protect consumers, such as Which? The new clause enjoys support from both sides of the argument, which shows that we are moving in the right direction.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith 1:00 pm, 14th July 2005

We all want to reach the right solution, but under the terms of the new clause, people would have to provide not just financial information but any information. For example, they would have to disclose not merely how much they were paying to an ex-spouse, but any personal information that might have a bearing on their financial standing, such as whether or not they have an ex-spouse. The hon. Gentleman's new clause goes too far in seeking to reach an end about which we are all doubtless in agreement.

Photo of Charles Hendry Charles Hendry Shadow Minister (Higher Education and Intellectual Property)

We will all agree that we need to strike a balance between requiring the provision of information that is relevant to a lender's reaching a sensible conclusion about whether lending to a particular person is a fair and reasonable risk, and protecting that person's privacy. However, these issues can be resolved. If the Minister were to say that he accepts the new clause and will bring the Bill back in revised form in another place, but with the word "any" removed, we would be prepared to reconsider this issue.

Photo of Charles Hendry Charles Hendry Shadow Minister (Higher Education and Intellectual Property)

I had a feeling that the Minister might shake his head. We are of course willing to examine different ways of making progress on this issue.

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch

Data sharing is a particularly relevant issue to those on low incomes. Reports such as that produced earlier this year by the Joseph Rowntree Foundation show that it is difficult for them to access credit. A further problem, which is accentuated for such people, is credit assessment and the possibility that their circumstances might change. That strengthens the need for greater data sharing in some form or other. The new clause would enable such sharing and ensure that rational decisions are taken, particularly in respect of those on low incomes.

Photo of Charles Hendry Charles Hendry Shadow Minister (Higher Education and Intellectual Property)

My hon. Friend makes an extremely valid point. We are seeking to protect consumers and ensure that they do not get into vast and unaffordable debt. That must be one of the Bill's most important aims and data sharing is intrinsic to making that reasonable aim achievable.

The Minister will be aware that many people would like us to go much further. He will have seen this week's "debt on your doorstep" campaign, in the Daily Mirror, for an affordability test. We are not going so far as that, but I hope that the Minister sees scope for moving in this direction, that he understands that we have advanced these arguments because we genuinely believe that such measures will help to protect consumers and that, on reflection, he will accept the new clause.

Photo of Gerry Sutcliffe Gerry Sutcliffe Parliamentary Under-Secretary (Trade and Industry) (Employment Relations and Consumer Affairs)

I am delighted with the quality of our debate on new clause 1, but as Members have said, in discussing it we have to consider the wider context of the Bill, on which there is considerable consensus within the industry, among consumer groups and in all parts of this House. Interestingly, new clause 1 is a joint arrangement between the Conservatives and the Liberal Democrats—a new pact is emerging. That said, I thank the hon. Members for North Norfolk (Norman Lamb) and for Wealden (Charles Hendry) for tabling the new clause, the spirit of which I genuinely accept.

The new clause raises a very important issue that has been debated in the House and by the Treasury Select Committee, of which the hon. Member for North Norfolk was a member. The Government believe that data sharing is a necessary and important means of ensuring responsible lending, but the issues are wider than just those covered by the Consumer Credit Act 1974. They include other types of lending regulated in other statutes, such as the Financial Services and Markets Act 2000, and the important question of data protection, which is regulated by the Data Protection Act 1998. Members of the Association for Payment Clearing Services agreed data sharing principles in 2004 and, among other things, they committed to sharing all data that they are legally able to share.

The Department of Trade and Industry is discussing measures to improve current levels of data sharing with the credit industry, so we are taking the lead that Members have asked us to take. Such measures include working with the credit industry to determine the case for possible legal changes that would allow the sharing of data on accounts dating back to before lenders routinely sought permission to disclose data for credit reference purposes.

Photo of Norman Lamb Norman Lamb Shadow Secretary of State (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Spokesperson (Trade and Industry)

Is the Minister saying that he shares the objective of addressing the historical problem whereby agreements made before the Data Protection Act 1998 have no wording? Does he agree that we need to find a way to ensure that information and data on such agreements is also shared?

Photo of Gerry Sutcliffe Gerry Sutcliffe Parliamentary Under-Secretary (Trade and Industry) (Employment Relations and Consumer Affairs)

Yes, and it is important that we continue to discuss data sharing with the industry and with the various Departments. As I said in Committee and throughout our discussions, I do not want people to be able to hide behind the 1998 Act in cases where extreme detriment has been suffered.

We have to work with the industry and with the Department for Constitutional Affairs to determine the case for possible legal changes and to identify possible legal routes that allow for the sharing of data on accounts that date back before lenders routinely sought permission to disclose data for credit reference purposes. It is important, however, that the industry be able to show that the benefits gained from the sharing of these data are proportionate to the legislative measures involved. We all recognise how important it is that lenders have the best possible information to make responsible lending decisions, while ensuring that proper safeguards are in place on the use of personal information. Indeed, my hon. Friends have made such points in opposing the new clause.

Discussions are taking place and the DTI is taking them seriously. I am aware of the effect that getting into credit difficulties can have. We all know of tragic cases from our own constituency experience, and I was particularly saddened to hear about the case of the constituent of Justine Greening. The Bill's purpose is to ensure responsible lending and that people borrow wisely and when able to do so.

Photo of Charles Hendry Charles Hendry Shadow Minister (Higher Education and Intellectual Property)

How would the Bill prevent cases such as the Putney case from happening again? We have suggested measures that would help, but I am not sure how the Bill as drafted would help in such a case.

Photo of Gerry Sutcliffe Gerry Sutcliffe Parliamentary Under-Secretary (Trade and Industry) (Employment Relations and Consumer Affairs)

The unfair credit test—which can help if things begin to go wrong at the beginning of, or during, the loan period—would be an appropriate way of dealing with such a case. There is also the financial inclusion fund, and efforts are also being made to improve people's financial awareness and education. I understand the spirit of and intention behind new clause 1, but it is not the right way forward at the moment. We want to continue our discussions with the industry; indeed the hon. Members for North Norfolk and for Wealden and I are meeting the banks to discuss a range of issues, of which I hope this will be one.

Photo of Norman Lamb Norman Lamb Shadow Secretary of State (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Spokesperson (Trade and Industry)

I still do not understand why the Minister thinks that new clause 1 is not the right way to deal with this issue at the moment. It addresses directly a problem that he agrees needs to be addressed. Why is it not the way to deal with it?

Photo of Gerry Sutcliffe Gerry Sutcliffe Parliamentary Under-Secretary (Trade and Industry) (Employment Relations and Consumer Affairs)

The problem is that the new clause would narrow the scope of the Bill and there are wider issues that we need to discuss with the Department for Constitutional Affairs and other bodies.

I understand where the new clause is coming from, but notwithstanding the problems associated with access to personal and other information, its wording is inadequate. Further work needs to be done—not only in this provision, but in other aspects of the financial services industry—to achieve the objectives that the hon. Member for North Norfolk wants to achieve.

Photo of Norman Lamb Norman Lamb Shadow Secretary of State (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Spokesperson (Trade and Industry)

I am grateful to the Minister for indicating his agreement to the objective of dealing with the problem of historic agreements—I referred earlier to 40 million agreements—where there is no sharing of data. It is a start and it is good that the Minister has agreed to that, but it is not enough simply to say that we need more discussions with the industry.

Photo of Gerry Sutcliffe Gerry Sutcliffe Parliamentary Under-Secretary (Trade and Industry) (Employment Relations and Consumer Affairs)

The hon. Gentleman will know—we have debated it in Committee and elsewhere—that this is the first Bill to deal with the matter for 30 years. We introduced a White Paper and it was discussed with the industry and with consumer groups who welcomed the broad thrust of what the Bill is intended to achieve. I want to sustain that consensus. It is not a matter of simply wanting to talk more with the industry, as regulations will flow from the concept of the Bill and discussions will be necessary again before they are introduced. It is rather disingenuous to suggest that all we want to do is talk; we do not, we want to act.

Photo of Norman Lamb Norman Lamb Shadow Secretary of State (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Spokesperson (Trade and Industry)

I certainly commend the Minister for being responsible for getting the Bill to this stage, particularly for getting it back on course again when it was effectively lost before the general election. I give great credit to the Minister for achieving that, but Charles Hendry made the point that the Bill provides a golden opportunity to resolve these problems. The Minister has just made the point that it is a long time since our last opportunity, and if we miss this chance, we know what to expect. Discussions drag on and on between Departments, with the industry and so forth. If we are not careful, we will have missed the chance to act.

Photo of Charles Hendry Charles Hendry Shadow Minister (Higher Education and Intellectual Property)

Does the hon. Gentleman accept that what also makes the new clause special is that it is supported both by the industry and by consumer organisations? Some amending provisions have been supported by one side or the other, but on this occasion both sides are very keen to have the legislation in place because they believe that it will help them either to do a better job as lenders or to give greater protection to consumers.

Photo of Norman Lamb Norman Lamb Shadow Secretary of State (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Spokesperson (Trade and Industry)

The hon. Gentleman is absolutely right. I made the point in my opening speech that data sharing is in the best interests of the industry and the consumer. Self-evidently, that is why both sides have supported it. It seems right to press the new clause to a vote because it enshrines an important principle and people out there will wonder why on earth we are not taking the opportunity to proceed.

I should like to deal briefly with several points. Labour Members have asked whether it is proportionate to legislate in this way to deal with part of the overall problem of data sharing. Yes, I think that it is proportionate. First, we all know of the horrors that occur when things go wrong. The extent of the mischief that can be done is so serious that we need to be serious about finding ways of resolving the problem. We fully recognise that the new clause does not solve the problem in its entirety, but it is part of the solution. Crucially, proposed new subsection (3)(b) gives the consumer 28 days to respond to the notice that the information and data is going to be shared.

Photo of Gerry Sutcliffe Gerry Sutcliffe Parliamentary Under-Secretary (Trade and Industry) (Employment Relations and Consumer Affairs)

I understand the sincerity behind the hon. Gentleman pressing for a vote. However, both he and the hon. Member for Wealden have said that they enjoy the support of the industry and consumer groups. Have those hon. Members spoken to the industry about the wording of the new clause and, if so, does the industry accept it?

Photo of Norman Lamb Norman Lamb Shadow Secretary of State (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Spokesperson (Trade and Industry)

Absolutely. The British Bankers Association specifically contributed to the process. The wording is agreed absolutely. It seems to me that the opportunity that the new clause gives the consumer to opt out is the perfect way of dealing with concerns about proportionality and the breaching of the principles of the Data Protection Act.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith 1:15 pm, 14th July 2005

Will the hon. Gentleman tell the House which consumer organisations have given their agreement to the specific wording in the new clause—not the principle of taking action, but the specific wording?

Photo of Norman Lamb Norman Lamb Shadow Secretary of State (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Spokesperson (Trade and Industry)

I have spoken with Which?, but I cannot, in all honesty, rattle off a list of consumer organisations that endorsed the particular wording. I have carefully considered it and, for what it is worth, I am a lawyer—[Interruption.] I understand that that causes a problem for the Minister. I believe that the provision is proportionate and that it is right to put it to the vote.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith

The hon. Gentleman is speaking to the House with the carefully constructed words of a lawyer. He answered my earlier intervention, but it now seems that consumer organisations have not endorsed the specific wording. That is the whole point, because it is the specific wording that is causing problems today.

Photo of Norman Lamb Norman Lamb Shadow Secretary of State (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Spokesperson (Trade and Industry)

I accept that there has been no endorsement of the specific wording, but I am aware of no consumer organisation that objects to it—[Interruption.] The point that I am trying to make is that the new clause is proportionate. First, the consumer is given 28 days to opt out. Secondly, Labour Members complain that some new principle is being created that undermines the whole concept of data protection, but they need to understand that with respect to all the new agreements entered into—Chris Bryant referred to them—there is already a wide sharing of undefined data. The Government are not proposing to do anything about what is already a fact of life: a considerable amount of data is being shared in current agreements entered into since the Data Protection Act 1998 and the wording in those agreements provides for that data sharing.

If Labour Members believe that the new clause will undermine the principle of the confidentiality of information, they should be doing something to deal with what is already happening. That is the reality under existing agreements. Through a historic quirk, we are dealing with agreements entered into before the current legislation that triggered standard clauses to deal with the matter. The new clause is designed to address that historic problem.

Finally, it is no good us all wringing our hands and saying, "Data sharing is a good thing; we should all be doing what we can to ensure that it happens", without doing anything effective to make it happen. Unless there is provision such as the new clause or one that achieves the same objective, there will be no sharing of historic data: it is as simple as that.

Photo of Mike Penning Mike Penning Conservative, Hemel Hempstead

We have a golden opportunity here today—though I pay tribute to the Minister, who has dragged the legislation forward, kicking and screaming in some cases—to put in place the protections that the public deserve. That is why the new clause is so important.

Photo of Norman Lamb Norman Lamb Shadow Secretary of State (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Spokesperson (Trade and Industry)

I completely agree and, in a spirit of co-operation, I say that the hon. Gentleman is absolutely right. If we miss the opportunity that the Bill provides us with now, it could be years before we have a similar opportunity to resolve the problem again. The Minister is not committed to any time scale for sorting the problem out. Talking to the Department for Constitutional Affairs could drag on interminably and will not resolve the problem. That is why it is important for all of us to put pressure on the Government. We do so by pressing the new clause to a vote to get the problem resolved. Without legislative action, it will not be resolved.

Question put, That the clause be read a Second time:—

The House divided: Ayes 106, Noes 234.

Division number 43 Orders of the Day — Consumer Credit Bill — New Clause 1 — Data Sharing

Aye: 106 MPs

No: 234 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.