Clause 1 - Definition of ''Individual''

Consumer Credit Bill – in a Public Bill Committee at 9:25 am on 25 January 2005.

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Question proposed, That the clause stand part of the Bill.

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

Clause 1 amends the definition of ''individual'' in section 189(1) of the Consumer Credit Act 1974. The definition is important because an agreement is only a consumer credit agreement or consumer hire agreement as defined by the 1974 Act. The agreement is therefore capable of being regulated by the Act if the debtor or hirer under the agreement is an ''individual'' within the meaning of the Act.

As it stands, the definition in section 189(1) gives an extended meaning to the word ''individual'' that includes partnerships or other unincorporated bodies of persons of any size, as long as the members of the partnership or unincorporated body are not exclusively bodies corporate. Bodies corporate are not included in the definition of an ''individual''; they therefore receive no protection as debtors or hirers under the Act. Medium-sized and large partnerships, as hon. Members will know, are often highly sophisticated businesses, such as international firms of lawyers and accountants. They can look after themselves and do not require the protections afforded to ordinary consumers. That being said, the Government recognise the need to foster and protect small businesses to encourage enterprise in Britain.

In order that they might grow, many small businesses require access to ready credit, such as credit cards or hire purchase. Many people who are starting out in business operate with little distinction between their private and business lives. They also have the same, or similar, low levels of credit expertise and face similar borrowing risks to ordinary consumers. The clause will amend the definition of ''individual'' to include partnerships of three or fewer people, as long as not all of them are bodies corporate. That means that any small partnership including natural persons will continue to enjoy protection under the 1974 Act.

Hon. Members should note that sole traders are, and will continue to be, ''individuals'' within the meaning of the Act. They, too, will continue to be provided with the same protections they currently enjoy under the 1974 Act. The definition will continue to include unincorporated associations, provided that not all their members are bodies corporate, because the members of many of those bodies, which often perform valuable charitable and community work, are ordinary people. They, too, should continue to enjoy their current protection under the Act.

Question put and agreed to.

Clause 1 ordered to stand part of the Bill.