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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, or consumer hire, agreement as defined by the Act and is, therefore, capable of being regulated by the Act if the debtor or hirer under the agreement is an individual under the definition in section 189(1). The current definition gives an extended meaning to “individual”, including partnerships and other unincorporated bodies or persons of any size, so long as the members of the partnership or unincorporated bodies are not exclusively bodies corporate.
Bodies corporate are not included in the definition of “individual”, so they have 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, which can look after themselves and do not require the protections afforded to ordinary consumers. Having said that, the Government recognise the need to foster and protect small businesses to encourage enterprise in Britain. In order that they may grow, many small businesses require access to ready credit, such as credit cards or hire purchase. Many of those starting out in business operate with little distinction between their private and business lives. Such businesses also have similar or lower levels of credit equities and face similar risks to ordinary consumers in relation to their borrowing. That is why the clause amends the definition of “individual” to include partnerships of only three or fewer people.