Clause 22 - Further provision relating

Consumer Credit Bill – in a Public Bill Committee at 4:45 pm on 25 January 2005.

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Photo of Laurence Robertson Laurence Robertson Shadow Minister (Treasury) 4:45, 25 January 2005

I beg to move amendment No. 24, in clause 22, page 16, line 6, leave out 'alleges' and insert 'demonstrates'.

I was concerned by the word ''alleges'', because it is easy to allege without substantiation. In discussing on the previous clause, I spoke at great length about being clear as to what was an unfair agreement. The subsection that I seek to amend states:

''If, in proceedings referred to in section 140B(2), the debtor or a surety alleges that the relationship between the creditor and the debtor is unfair to the debtor, it is for the creditor to prove to the contrary.''

The question is whether that shifts the burden of proof. I understand that the Minister will respond by saying that it does not, but it depends: if a creditor takes the matter to court, that is one thing, but for a debtor to take the matter to court is quite another with regard to the burden of proof. However, if the debtor   only has to ''allege'' that it is unfair in order to require the creditor to prove to the contrary, that is not a strong enough word. There must be some demonstration from the person who has taken the matter to court that it is unfair. Otherwise, there could be frivolous claims.

The Bill seeks not necessarily to achieve anything for consumers or for lenders, but to achieve fairness in dealings. To ''allege'' something is a bit weak, and I would rather replace that with ''demonstrate''.

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

Clause 22 (4) provides that debtors must allege unfairness on the part of the creditor before the creditor has to prove that no unfairness has taken place. Under the existing extortionate credit bargain test, the burden of disproving extortion is on the lender. The consumer must only make an allegation that the transaction is extortionate, and the consumer will succeed in his case unless the creditor can satisfy the court on the balance of probabilities that it is not.

There is, therefore, no change from the current law in the way that the existing onus on proof provisions works. That is essential to ensure that consumers do not find it prohibitively difficult to bring a case under the unfairness test. We are concerned that the unfairness test should remain accessible to consumers. There should be effective redress, too, against unfairness. The hon. Gentleman's amendment would place a higher burden on debtors to demonstrate unfairness before being able to bring a case.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

I am grateful to the Minister, but I understand that we are still keeping subsection (7), which refers to ''extortionate''.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

It would be better if the Bill was replacing subsection (8) with what was subsection (7) in the 1974 Act, because they are virtually the same, except that the 1974 Act refers to ''extortionate'' whereas in this case it refers to ''unfair''. However, there is no provision in the Bill to effect the replacement, so the two would stand next to each other.

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

That is not the intention. It that is the case, we need to put it right. If we need to make a consequential amendment, we will. I will write to my hon. Friend to ensure that what he has said is correct and then put it right.

Returning to the amendment of the hon. Member for Tewkesbury, it is not clear what is meant by ''demonstrate'' that a debtor will, in essence, have to prove his case. That raises the barrier when we are trying to lower it to make the unfairness test more effective. Lenders will be better able to confirm that their practices are not unfair.

Furthermore, consumers face problems such as access to relevant market information and documentation.

To raise the barrier is to head in the wrong direction. Unless the hon. Gentleman is clearer about   what he means by ''demonstrate'' he will fail to achieve his objective.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

I wish to correct my last intervention. Schedule 4 does repeal subsection (7) of the 1974 Act, which uses the word ''allege''. That will be helpful in rebutting the hon. Member for Tewkesbury. We are therefore not changing from the 1974 position.

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

I am grateful for that intervention. As I said this morning, it would take too long to go through the details of the Committee's experience of the issues raised, but I am grateful for my hon. Friend's explanation of how he got the first thing wrong and his ability to put the second thing right.

None the less, that bring us no closer to the meaning of ''demonstrate''. It is fair for the hon. Member for Tewkesbury to raise the issue, but on reflection he will find that it leads him down a path that he may not want to take as far as balance is concerned, because the existing tests will remain.

Photo of Laurence Robertson Laurence Robertson Shadow Minister (Treasury)

There is the case that it is quoted in the 1974 Act, and I accept that. However, my amendment was not based on that. Normally, allegations must be proved; there is a legal difference in this situation. It would be easy to allege something without having to produce evidence—for example, without having to show that a loan was taken out at X per cent. when similar loans are at X minus 10 per cent. However, in the interest of time I shall not press the matter. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 22 ordered to stand part of the Bill.

Clauses 23 and 24 ordered to stand part of the Bill.