Consumer Credit Bill – in a Public Bill Committee at 9:25 am on 27 January 2005.

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Photo of Laurence Robertson Laurence Robertson Shadow Minister (Treasury) 9:25, 27 January 2005

I beg to move amendment No. 46, in clause 38, page 30, line 30, leave out from first 'licensee' to end of line.

The clause gives power to the OFT to impose requirements on licensees. Proposed new section 33A(1)(a) will apply when the OFT is dissatisfied with any matter that is in connection with—

''a business being carried on, or which has been carried on, by a licensee or''— this is the crucial bit—

''by an associate or a former associate of a licensee.''

The implication is that if the behaviour of a former associate of a licensee has been inappropriate, the OFT can impose requirements and either rescind a licence or not grant it. That is possibly unfair and rather open   ended. If by ''former associate'' is meant one who was an associate a month ago, the OFT probably has a right and a duty to investigate the relationship and perhaps to act on it. However, if an association ended a year, two years or five years ago, should the OFT still be required to investigate it? Should the OFT be given the same power to rescind the licence because of a relationship that existed a long time ago?

I raised a point at our last sitting on clause 29(2A)(d) at the last sitting, which sets out some of the criteria for deciding whether people are fit to hold licences. One example that the OFT was considering was somebody who has practised discrimination on grounds of sex, colour, race or ethnic or national origin and so on. That is an all-encompassing subsection, and at the last sitting, I condemned such behaviour; however, I did not see the relevance of the provision.

Under this clause, not only could the licensee be held responsible for any malpractice in that sense, but it seems that his former associates could also be held responsible. Again, I am concerned about the power of the OFT in that regard, especially when the clause and subsection seem rather vague and open ended. I would appreciate the Minister's explanation as to why that particular wording is in the Bill. It is not the only instance of it, but this is probably where it is of most concern.

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

I understand the consistency with which the hon. Gentleman approaches the issue relating to the powers of the OFT. Amendment No. 46 would severely limit the effectiveness and flexibility of the OFT's power to impose requirements on licensees. It would reduce the considerable protection that goes to the heart of what we are trying to achieve, as the OFT's ability to improve the conduct of licensed business would be curtailed.

The clause refers to associates and former associates of licensees, as well as to the licensees themselves. This is because sometimes a person who is an associate of an unfit person applies for a licence. The definition of associate may be useful: it is found in section 184 of the 1974 Act and means a person's husband or wife, or his relative or their spouse, or a person in partnership with him, or that person's spouse.

Photo of Laurence Robertson Laurence Robertson Shadow Minister (Treasury)

I may have interrupted the Minister too early, as he might well explain what I am about to ask. This may sound ridiculous, considering the Minister's explanation, but can ''former associate'' refer to a former spouse? My concern is about the former associate.

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

The hon. Gentleman's question has been taken in the context of the comments about the roles and duties of the OFT to operate fairly and to give reasons why it has chosen a particular route. The words ''former associate'' give the OFT maximum flexibility as regards the powers to impose requirements for the licensee to improve the way that they operate.

One example is a second-hand car dealer being refused a licence. If his son then applied for a licence, the OFT might wish to impose a requirement restricting the father's involvement in the provision   of credit in his son's business. The power does not mean that the OFT can interfere with the business of an associate of a licensee; a requirement must relate to the licensed business. The OFT will publish guidance on how it will use those powers, and I understand that explanatory notes on that guidance have been given to Committee members.

The requirements can be referred to the appeals tribunal, which provides a sufficient safeguard against the OFT exercising those powers unreasonably. The safeguards are in place for instances where the OFT exceeds its powers. The amendment will not deliver what the hon. Gentleman wants and will actually weaken the consumer's position, which is not what he is trying to achieve. Safeguards are in place, and we ought to maximise them.

Photo of Laurence Robertson Laurence Robertson Shadow Minister (Treasury)

Given the Minister's explanation, I think that he has a point. However, the wording is still far too open ended, as a former associate who is still alive could, presumably, be a former associate of someone with whom they dealt previously. Will he undertake not to change the clause, but to consider a better way of wording it?

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

Yes, I will, provided that the hon. Gentleman accepts that we are not trying to limit the consumer protection. We are trying to strike a balance.

The hon. Gentleman made the point about former spouses. Another example would be a sole trader who applies for a licence to carry out credit services for a car showroom. The trader's spouse has recent convictions for car clocking under the Trade Descriptions Act, a history of failure to deal with consumer complaints, and had their licence revoked a year ago. However, the spouse is not involved in the business, and nor is it clear that the spouse is still co-habiting with the applicant. In such a case, the requirement may state that the trader will be granted a consumer credit licence on condition that they do not employ or involve their spouse in any capacity in the licence of the above business.

There are many examples that could be considered. However, in the spirit in which the hon. Gentleman outlined his amendment—although technically it would not achieve what he wants it to—I will consider a clearer definition. Therefore, I ask him to withdraw his amendment.

Photo of Laurence Robertson Laurence Robertson Shadow Minister (Treasury)

Given the Minister's willingness to consider a clearer wording to achieve what he rightly wants to achieve, I am prepared to withdraw my amendment. I am still a little concerned about the provision extending not only to business relationships, but to personal relationships. I can see the point of it, but I can also see the danger. I am unhappy about the open-ended wording but, given the Minister's undertaking, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

Photo of Sally Keeble Sally Keeble Labour, Northampton North

Welcome to the Chair, Mr. Benton. Will my hon. Friend the Minister clarify some issues concerning the workings of the clause, which is part of the section on the further powers of the OFT to regulate the conduct of licensees? I speak from two points of view. First, like other hon. Members I have many constituents who come to me about debt problems. I have seen the difficulties that people face when they get into unreasonable debt or have agreed to completely unreasonable terms because they have borrowed from loan sharks. Secondly, some financial services are available in my constituency, so I have also seen some good practice, and I hope that, through this legislation, that good practice will be extended.

I want to raise some questions about this clause in particular, because it obviously provides extensive powers to the OFT without completely defining all the terms. The last debate made that clear. On Tuesday, the Committee debated the subject of unfair relationships at some length. I completely understand why my hon. Friend did not define the terms of that, because that is down to interpretation and for the courts to decide. However, in agreeing clause 38 and later clauses, we are providing sweeping powers to the OFT without allowing for further scrutiny.

Often in such circumstances there would be secondary legislation, and we could examine the workings of the provisions in more detail. Legislation does not always work in practice, so the details are important. There is a general consensus that when legislation is passed before a general election, proper examination of the details is under pressure of time constraints. How does my hon. Friend expect the OFT to proceed under the provisions of this and other clauses? What discussions does he expect the OFT to hold with the financial services industry, which employs good practice in dealing with debt advice agencies—which have a particular interest in these matters—and with MPs, who may have strong views about how the powers should be applied? Could the Minister clarify the process, including the factors the OFT might be expected to take into account; how that body should consult before reaching a decision on an unfair relationship; and how it can meet and implement the requirements of the clause?

Photo of Gerry Sutcliffe Gerry Sutcliffe Parliamentary Under-Secretary (Trade and Industry) (Employment Relations and Consumer Affairs) 9:45, 27 January 2005

I am grateful to my hon. Friend the Member for Northampton, North (Ms Keeble) for raising that matter. She did so in the same spirit as the hon. Member for Tewkesbury in tabling his amendment on the powers of the OFT. Hon. Members are correct to point out that the Bill will give increased powers to the OFT. It might, therefore, be helpful to explain why the clause is necessary.

As my hon. Friend mentioned, the clause enables the OFT to provide intermediate sanctions on licensees. Those sanctions are named ''requirements'' for the purpose of the Bill. Those requirements are a new and important tool for the OFT to ensure an effective, targeted licensing regime. Currently, OFT powers are limited to refusal of an application, or the granting of a licence on different terms. It can also vary, revoke or suspend an existing licence. The effect   of those sanctions can be severe; they can prevent people from trading.

The Office of Fair Trading adheres to the Cabinet Office enforcement concordat in that the regulatory action that it takes must be proportionate to any detriment caused. I have copies available for Committee members should they wish to look at that exciting enforcement concordat, which sets out how the OFT should operate. Currently, the OFT is able to act only in more serious cases where a person is not fit to hold a licence. In many cases, the OFT is powerless to address consumer detriment in cases where withdrawal of a licence would be disproportionate. For example, if there were problems with the sale of credit in only one branch of a national company, it would not be justifiable to revoke the whole of that company's licence. A similar situation occurs where only one employee intimidates customers when collecting debts. Those cases may not be serious enough to call into question the fitness of a person to hold a licence, but the OFT should be able to protect consumers. The clause provides that the OFT may impose requirements on licensees if it is dissatisfied with a matter related to the business.

Photo of Sally Keeble Sally Keeble Labour, Northampton North

Would my hon. Friend elaborate on the processes and consultation that he would expect the OFT to employ in reaching decisions on how it can implement its new powers? Who will be consulted?

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

I shall come to that matter. It is worthwhile going through the clause before I come to that point.

The clause provides that the OFT may impose requirements on licensees if it is dissatisfied with a matter related to the business. Requirement takes the form of a notice requiring the licensee to do, not to do, or to cease doing something. That must relate to a licensable business. The requirement must also address the matter with which the OFT is dissatisfied, or it must ensure that the stated problem—or a similar one—does not arise. The OFT could use that power to address a wide range of problems.

Certain employees may have problems explaining credit agreements to customers, so a requirement for training employees could be imposed. That might provide that sales representatives in a named branch are trained to inform consumers of how they can cancel their agreements. For debt collectors whose employees unfairly pressurise consumers by calling very late at night, there may be a requirement to stipulate that they should only call between 8 am and 8 pm. A requirement may also refer to a person other than the licensee: for example, employees such as those in the examples I have just used. However, the requirement would be addressed to, and be binding on, the licensee, and it could require a particular person not to undertake a specific activity, such as collecting debt in person.

The OFT may take steps to impose a requirement alongside the application process, so that it will bite as soon as the license is issued. That also explains why the clause refers to proposals to carry on a business as well as to a business that already exists. Therefore requirements are vital new tools for the OFT in   encouraging a targeted and, I stress, proportionate licensing regime.

Returning to my hon. Friend's point, the OFT will publish the draft guidance on its website after the Bill has been passed. That guidance will be similar to the OFT's notes on requirements, which have already been provided to the Committee. The OFT will also send out the draft to interested parties, such as trade associations, consumer organisations and many other bodies that my hon. Friend will recognise as having been heavily involved in the consultation on the White Paper and the Bill. I am confident, therefore, that those who want to take a view on those drafts will be able to do so. That consultation will be in accordance with Cabinet Office guidelines, and there will be at least 12 weeks for comments. The OFT will be able to speak to people who have queries, so there will be opportunity for great debate.

The OFT will then take on board those comments and will publish the final version of the guidance. It will be able to justify why it has come to a particular conclusion. The OFT will also have the power to amend the guidance. Therefore if, following publication, it became evident that clarification were needed, the OFT could make that change.

Those safeguards are sufficient to allow the guidelines to be challenged and for consultation to have taken place. I resist again the temptation into which my hon. Friend has dragged me. I will neither decry nor describe unfairness. The Committee did so quite eloquently on Tuesday.

I hope that having heard the explanations, hon. Members will accept the clause.

Question put and agreed to.

Clause 38 ordered to stand part of the Bill.

Clauses 39 to 41 ordered to stand part of the Bill.