'After section 14 of the 1974 Act insert—

''14A Credit-token specification

A person carrying on a consumer credit business and providing a credit-token agreement to an individual must specify in the agreement the type of credit token that will be provided and may not provide other additional credit-tokens, including cheques, that may be used to draw on credit accounts without the agreement of the debtor.''.'.—[Mr. Plaskitt]

Brought up, and read the First time.

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

The purpose of new clause 1 is to end the unwelcome practice of the unsolicited issue of credit card cheques. I make it clear that the purpose of the amendment is not to end credit card cheques themselves, simply their unsolicited issue. At the moment credit card cheques are sent out to 16 per cent. of all households in the United Kingdom, which means that millions of people receive them. They are sent repeatedly, often in multiple issue, and they are virtually always unsolicited.

The Select Committee on Treasury has taken much evidence on this practice. That evidence suggests that those cheques are sent to a greater than average proportion of cardholders who are already experiencing some form of financial difficulties. I find it hard to see a justification for the existence of the cheques at all, but the new clause does not drive that far. Credit card cheques are not really an extension of the cards, as the industry argued when giving evidence to the Treasury Committee.

I recently met Detective Chief Superintendent Ken Farrow of the City of London police fraud squad, who is making a special investigation of the matter. He told me that criminals are able to use credit card cheques to commit fraud because cheques are not secure and because they are sent out unsolicited. That is a significant additional factor that must be borne in mind when considering the consequences of issuing those cheques.

I am sympathetic to most of what the hon. Gentleman has said about credit card cheques. However, there are circumstances in which they are relevant, and I am not sure whether his clause would cut against those. For example, one might purchase a significant item, within one's credit limit, for which the provider will not accept credit card payment. Presumably one could use the cheque and effectively get a credit card payment, which would suit one's purpose. I agree with most of the other strictures about credit card cheques. However, is that not a legitimate use, and would his clause adversely affect that?

The new clause would not adversely affect that type of offer, because I am not seeking to remove credit card cheques from the system entirely; I am simply trying to bring an end to their unsolicited issuing. In a moment, I shall address some of the issuers' arguments in defence of their practice, and I will test those arguments against the point made by the hon. Member for Gordon.

There is also a problem with regard to the repeat issuing of cheques. An examination of the marketing material that companies use when they issue the cheques is quite informative. For example, the leaflet that MBNA issues with its cheques, entitled ''Making the most of your credit-card cheques'' states:

''Credit card cheques make perfect gifts for family and friends and are a really clever way to use your MBNA credit card account''.

The Halifax also issues promotional material with its cheques and makes a series of suggestions as to how its customers might use them. For example, it suggests using them to pay for club memberships, holidays, home improvements, school and university fees, or to buy oneself gift or treats.

Has my hon. Friend received a copy of a letter that I received from the Association of Payment Clearing Services, which moaningly states:  

''Credit card cheques can be used to pay for goods and services where cards themselves are not accepted. For example, with tradesmen such as plumbers or decorators who do not accept credit cards.''

Surely that is one of the craziest ways to use a credit-card cheque.

Yes. Interestingly, when the Treasury Committee requested information from card issuers on how many times cheques are used in that way, they were unwilling to provide any reliable information. Instead, the issuers' material is very heavy on suggesting to customers how they should spend the cheques, but extremely light on information telling customers how much the cheques will cost them.

It is important to acknowledge that the cheques do not extend anyone's credit limit. However, they are used to prod consumers to spend up to their credit limit. Therefore the customer may have to apply for an extension of their credit limit earlier than might otherwise have been the case, or the card supplier may make an unsolicited offer of an extension to the credit limit. It may bring forward the time at which the customer has to resort to taking out another card and, hence, the process of accumulating cards begins. The Committee has discussed that problem. If a customer is using up their credit limit it also becomes more likely that they will incur penalty fees, and the Committee has also discussed the impact of that.

I am following the hon. Gentleman's argument very carefully—it is very persuasive. It is purely my ignorance that causes me to intervene; will he clarify how a credit-card cheque causes the customer to extend their credit limit. I thought that it was more a matter of transferring credit. I am not quite following that point.

Perhaps the hon. Gentleman misheard me. The use of a credit-card cheque does not extend anyone's credit limit. However, if a card-holder receives an unsolicited credit card cheque and is encouraged to use it, they will use up some of their credit limit, which may result in the need to extend their limit earlier than otherwise would have been the case. I accept that argument, which credit issuers use in defence.

I wish to highlight the consequences of responding to encouragement to use up credit card limit by receipt of the cheques. In October 2004, the four principal issuers appeared before the Select Committee on Treasury. I asked them to justify their practice of issuing these unsolicited cheques. Their responses were interesting. Mr. Varley, the chief executive of Barclays, argued that customers use the cheques to effect balance transfers from one credit card account to another, perhaps to take advantage of an introductory offer that would, for a time, reduce the interest payable on the balance. Sir Fred Goodwin, the chief executive of the Royal Bank of Scotland, suggested that the practice allowed customers to pay for goods or services that they might not otherwise have been able to pay for. That echoes a point raised by my hon. Friend the Member for Rhondda (Christ Bryant). Mr. Flynn, the   chief executive of MBNA, said that it gave people an opportunity to access their credit line. Mr. Geoghegan, the chief executive of HSBC, claimed that the practice was justified because people who do not have bank accounts find it easier to use a credit card cheque.

Interestingly, none of the four justifications addressed the word ''unsolicited'', which was included in my question. They were making an argument for the existence of credit card cheques, and I might be prepared to concede those points. However, they do not make convincing arguments for the unsolicited issuing of cheques. That is the purpose of my new clause.

My hon. Friend will remember that Mr. Varley's predecessor, Mr. Barrett—who is now chairman of Barclays—told the Treasury Committee that Barclaycards were a bad deal and that he would not recommend them to his relatives.

I thank my hon. Friend for reminding me of what I refer to as the famous ''Matt Barrett moment''. I am happy to tell my hon. Friend that Barclays chief executives continue the practice of being hideously honest. Mr. Varley had his own ''Matt Barrett moment'' when he appeared before the Treasury Committee in October 2004. I accused him of using credit card cheques to prod his customers into using up their credit card limit. His answer was: ''Marketing is prodding.'' Such honesty is revealing.

Many people think that credit card cheques are a menace and could be used fraudulently. Shredding is the only secure way to dispose of unwanted, unsolicited credit card cheques: the only positive achievement made by these cheques may be their contribution to the explosive growth of shredding machines in the home. Unsolicited issuing amounts to opportunistic marketing of the worst kind. If the issuers were honest about the reasoning behind such unsolicited issuing, they would have to confess that their hope is that their cheques drop on the doormat on the same day as the glossy holiday brochure. The customer puts two and two together and ends up paying six. It is a cynical ploy.

APACS has been lobbying hard to discourage Committee members from supporting my clause. APACS's brief arrived today, and I have read it carefully. I continue to be astonished by the line taken by the association. It argues against my new clause by stating that credit card cheques are

''typically treated as the equivalent of a cash withdrawal.''

That is not the case. Credit card cheques are nowhere near the equivalent of a cash withdrawal. If I were to make a cash withdrawal from my bank and put the money in my wallet, I would not pay interest on it while I carried it around.

However, if I were to lodge money in my account using a credit-card cheque, from the second that that money appears in my account, I would begin to clock   up interest. By no stretch of the imagination is APACS correct when it states that using those cheques is equivalent to a cash withdrawal; it simply is not.

The Consumers Association has lobbied hard for an end to the unsolicited issuance of those cheques, and the Treasury Committee has twice recommended the end of the practice. Earlier, we discussed my right hon. Friend the Minister's prowess on the football pitch and how good he was at stopping balls from going into the net. I am trying to get the ball into the same net as the Minister because in the White Paper—''Fair, Clear and Competitive''—the Government stated:

''The Household Survey identified certain lending practices which disproportionately affect people who are at risk of over-indebtedness and potentially make a bad situation worse. While it would be wrong to claim they cause over-indebtedness, they could be seen as being irresponsible.''

Those practices include the

''unsolicited issuing of cheques that can be used to draw on credit card accounts.''

The Minister and I are on the same team, aiming for the same net. I hope that he appreciates that my new clause is designed to be entirely helpful. I wish to bring about a modest but important change so that the customer must opt to receive credit card cheques. We can solve that problem and address the dangers of unsolicited issuance by altering arrangements so that if customers wish to avail themselves of a credit card cheque for any reason, they must initiate the process by which the credit card company issues those cheques. I wish to end the current opt-out arrangements that the industry considers adequate. I do not consider those arrangements adequate because they require customers to act to cease the flow of cheques; they must make a telephone call or write a letter. The onus should be on the customer to initiate that relationship, not to stop it.

The amendment aims to alter the current arrangements from customer opt out to customer opt in. If the industry is so confident that customers want these cheques, I do not see why it should resist. If the industry believes that, and if it is true, customers will simply initiate the process and the cheques will flow. Frankly, I do not believe the industry. Most people consider credit card cheques to be irritations that carry the risk of fraud. For all those reasons, I hope that the Minister will support the amendment and help the Committee to save people from that infernal nuisance, and do millions of card-holders a favour.

I have considerable sympathy with the points made by the hon. Member for Warwick and Leamington (Mr. Plaskitt) because his amendment sends an important signal. We are concerned that when we talk to constituents about their difficulties many say how easy it was to become involved and how quickly things started to go wrong. As I remarked earlier, it is taken for granted that credit is useful in a free-market society. We seek only to prevent the worst excesses of those who might use the credit system to exploit people.

The issuing of credit cheques is not dissimilar to the messages that people occasionally get on their mobile phones telling them that they have won a certain amount of money. All that they have to do is dial a number to find out about that prize. By the time that they have done that, they find that they have paid out quite a bit to win not very much at all, or, in some cases, absolutely nothing.

It is a process of enticement. It is easy to strike people at a vulnerable time and offer them that bit of extra money. Sometimes the money will be for a necessity; at other times it will be for an aspiration. The hon. Gentleman described how the credit cheque arrives at the same time as the brochure. The extent of advertising tempts people to do themselves a favour, give themselves a little treat or give themselves something that they deserve. That is increasingly hard to resist, especially for people who have difficulty in managing money. That temptation can be the thing that sets them off, making them take the loan.

The hon. Gentleman stated that the onus should be shifted so that if those instruments are to be workable, negotiable and helpful to the credit industry, they should be available, but only on application. Let us make it slightly less easy for people to get trapped.

I thank those who have offered us information on this subject. I have been impressed by what Which! magazine and the Consumers Association have said, and I offer my general support to the hon. Gentleman. I will be interested in how Gerry ''the Cat'' Sutcliffe responds to the ball that has been lobbed up and is now hovering dangerously above him in the six-yard zone.

I shall as brief as I can, but my Whip has reminded me that I am always long-winded, so I do not know how successful I shall be. Some of the points that have been made refer to Tuesday's conversations about the marketing processes that are used to encourage people to get into debt that they cannot necessarily afford, and they go to the heart of responsible marketing and lending. My hon. Friend the Member for Warwick and Leamington said that opting in or opting out was important. In their notes to us, the Association of Payment Clearing Services said:

''The APACS guidelines, which were first introduced in March 2004, cover transparency requirements and the facility for the cardholder to opt-out from receiving cheques.''

Is that, then, the end of the matter, and is all is fine and dandy?

As others have already said, this should be a question of opting in. If people have a real need to use those cheques and they fully understand the additional charges that such a loan will incur, of course they should be allowed to take one. However, they should request information rather than receive unsolicited offers.

''We advocate that self-regulation on credit card cheques through the Banking Code—coming into force in March '05—should be allowed the chance to 'bed down'.''

The last Consumer Credit Act came into force a long time ago, and my constituents would not look kindly on the idea of another 31 years of ''bedding-down''. The banking code is not strong enough. It does not say anything about opting in, and it does not attack the principal mischief, which is the unsolicited nature of credit cheques. The code states:

''Issuers should not issue unsolicited credit card cheques with a pre-completed amount''.

That is not the issue. This is not about cheques that stipulate an amount—say, £6,000—to spend; this is about blank cheques that one can sign up to the credit limit. That is where the real danger lies, and that is why we cannot rely on the banking code alone.

APACS, in its final argument, tries to convince us that there is not much of that sort of thing going on anyway. It says:

''Of credit card cheques issued, we estimate that less than one million will be presented for payment on a quarterly basis. This compares with some 470 million credit card purchases for a similar period.''

One million seems like quite a lot to me. However, if it were not such a large amount, APACS would not be so worried if that figure were to be curtailed by pulling the teeth of the issue.

Football is not my sport. Rugby is more to my taste, but the Minister and I are certainly playing in the same team. Even if the wording is not correct for what we want to achieve, I hope that we will get a try today that he can convert into a goal on Report.

I thank my hon. Friend the Member for Warwick and Leamington for moving new clause 1, and I have a great deal of sympathy with his objectives. Going by his record on the Treasury Committee, he has a good history of teasing out issues from the variety of witness that appear before that Committee. I had a wonderful opportunity to appear before a Select Committee recently, and I know that its members are dedicated to teasing out information in a positive way to ensure a good outcome.

Hon. Members have talked about the messages that the Committee is sending out about its expectations. When we talked about the unfair credit test, I was clear not to lay down any parameters on how unfairness should be described. However, hon. Members sent out very clear messages about what their expectations were. The way in which my hon. Friend moved the new clause has also sent out very clear messages. We have heard from APACS and others about the banking code coming into effect on 1 March and the changes that it will bring. The Committee and my hon. Friends want that to go further.

My hon. Friend's new clause specifies what other credit tokens may be used to draw on the account, such as credit card cheques that may be provided to the debtor under the credit agreement. There should not   be provision of such credit tokens to the debtor unless specifically requested by the debtor to do so, and this relates to unsolicited credit card cheques to consumers.

I am very sympathetic to my hon. Friend's concerns and the concerns of hon. Members across the Committee. I, on behalf of the Government, have considered my hon. Friend's new clause very carefully. The essence of those concerns can be dealt with under the existing powers of the Act, and I will go on to explain why I think that can be done.

The Act gives clear powers to the Secretary of State to make regulations dealing with matters such as the form and content of credit agreements and information to be given by businesses to consumers. Hon. Members will appreciate that although we have the ability to deal with the agreements relating to credit card cheques, in many cases if the issue of the credit card cheque is addressed in the agreement at all, it will be done in the small print. We do not consider that to be appropriate. Consumers should be clearly informed at the time they make the agreement that they may be sent credit card cheques, and what that means.

The Government intend to make regulations to require that consumers are clearly told at the outset that they may be sent credit card cheques and that the charges associated with such cheques are also clearly explained at the time, including the charge that starts immediately after a cheque is used, if that is the case.

We also consulted about whether other warnings may be required—for example, that using a cheque instead of a credit card to buy goods or services is the same as using cash. Using cheques means that the credit card issuer will not be jointly liable with the supplier for defects as happens when a credit card is used. My hon. Friend will appreciate that the key purpose of this Bill is to inform consumers.

The Government's approach means that consumers can be informed about the implication of using credit card cheques and that they will be informed when they make the agreement. Hon. Members will appreciate that the Bill already provides new avenues of regulation and redress in respect of credit card cheques. The OFT can take steps to stop bad practices under its new powers by imposing requirements on licensees for them to stop those practices and, if they do not, can impose financial penalties.

I am grateful to my hon. Friend for outlining several existing options that the Government have to pursue regulation. Is he saying that he is minded to pursue any or all of those routes in order to achieve a customer opt in, as opposed to the current opt out?

My hon. Friend should bear with me as I give further explanation, as it may become clearer to him why I am being careful with the language that I am using.

Consumers can challenge unfair practices through the new unfair relationship test, and consumers can bring cases before the new financial ombudsman service to seek redress. I encourage the industry to   examine its practices and consider how it can take clear and effective steps to ensure that credit card cheques, which have some legitimate uses, as we heard from the hon. Member for Gordon and my hon. Friend the Member for Warwick and Leamington, are provided responsibly and do not act as a means to increase indebtedness of consumers, particularly the vulnerable.

I have heard many convincing arguments from my hon. Friend and hon. Members, the industry and consumer groups. I hope that the existing powers and the regulations that could flow from the Bill will meet my hon. Friend's objectives. He will know how the process of secondary legislation works through a statutory instrument, which may assist the situation.

At present the new clause is very wide and may not achieve my hon. Friend's intention. With sincerity, with caution, and with the careful use of words that I am offering, we believe that the existing Act gives us the opportunity to meet his objectives through secondary legislation. There must be consultation on that secondary legislation. If that does not satisfy my hon. Friend, the new clause, as it is drafted, is too wide to deal with the issue in the detail that he wants, and we would have to consider another way. I hope that is helpful to him. I have discussed the issue with my hon. Friend before, and I know the sincerity and urgency with which he wants to see this matter resolved. I share that urgency, but the route that I propose might help him to achieve his objective better than the new clause.

I agree with the Minister that the clause is widely drafted and may not have the desired effect, because the point was made that something could be put in the agreements whereby customers agree to being sent various offers from time to time, which they may or may not choose to take up. I agree with that. Likewise, the Minister may find new clause 2 too restrictive, because it specifies particular ways in which a customer may make contact, but it does not include e-mails or other forms. Nevertheless, the intent is clear.

When the Minister mentioned regulations and statutory instruments, did he mean regulations to provide more information, or if a practice is the subject of many complaints—for instance, to the financial ombudsman service—might there be an SI to bar the practice of issuing unsolicited cheques full stop?

The difficulty is perhaps that I was on the test for unfairness; if I prescribe a solution now, I could be accused of not following the normal process. We have set out the powers of the OFT in the Bill, how consumers can challenge unfair practices and the role of the Financial Ombudsman Service in seeking redress. We will not be dealing with new clause 2, as I am sure my hon. Friend is aware.

My hon. Friend the Member for Warwick and Leamington quoted from the White Paper, telling the Committee how it reported on credit card cheques. I am trying to be as helpful as possible, in my usual manner. I hope that the Committee will accept that secondary legislation will achieve what my hon. Friend   wants. As my hon. Friend the Member for Newcastle-under-Lyme pointed out, the new clause as drafted would not achieve the desired end. In any case, I ask my hon. Friend the Member for Warwick and Leamington to withdraw the new clause, because we would have to reconsider section 51 of the 1974 Act in more detail. However, I am convinced that, with the powers in the Act and with secondary legislation, we can achieve what my hon. Friend wants.

I think that the Minister and I are still on the same team—it feels like it. I am grateful that he has acknowledged the urgency of the issue, as millions of customers are regularly annoyed. I am heartened that he agrees with the objectives of my new clause, although I accept that there are imperfections in its drafting. Alas, the clever people in the banks would quickly work out a way round the defence that I have tried to raise to prevent the issuing of additional credit tokens. I interpret as a positive omen the Minister's assurance of a route through secondary legislation in the not too distant future and his assurances that he fully shares my objectives. Since I recognise the imperfections in the drafting of the new clause, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.