Clause 20 - Powers of court in relation to unfair relationships

Consumer Credit Bill – in a Public Bill Committee at 3:45 pm on 23rd June 2005.

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Photo of Gerry Sutcliffe Gerry Sutcliffe Parliamentary Under-Secretary (Trade and Industry) (Employment Relations and Consumer Affairs) 3:45 pm, 23rd June 2005

I beg to move amendment No. 19, in clause 20, page 15, line 26, leave out subsection (8).

This is a technical amendment. Subsection (8) is unnecessary in light of the clauses 2 and 5, which remove the financial limit for regulation.

Amendment agreed to.

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

Photo of Charles Hendry Charles Hendry Shadow Minister (Higher Education and Intellectual Property), Deputy Chair, Conservative Party

Clause 20, particularly when one reads the explanatory notes provided by the Government, appears extremely innocuous, and very simple indeed. It runs to three and half lines. Again, however, it highlights a lack of detail in this Bill. It spells out a great range of punishments and penalties, but it does not say what you have to do to incur them. It is a bit like having traffic offences: people need to know what they have done wrong in order to incur a certain fine or number of penalty points. There is no guidance in this whatsoever. It is a bit like a Minister coming in and saying ''We have introduced a new punishment, which is a fine of £3,000'' and when we ask, ''What is it for?'' he replies, ''Well, I haven't actually thought of that yet, but I am sure it must be for something.''

All we have here is a list of penalties and punishments, without knowing what goes wrong. They are fairly broad ranging. New subsection (1)(b) says that it is to

''require the creditor, or any associate or former associate of his, to do or not to do (or to cease doing) anything specified in the order in connection with the agreement or any related agreement''.

That seems to cover virtually everything ever invented. It really is wide.

I think that before we start signing up to these things, we need to know what the Minister has in mind. Borrowers and lenders both need to know. There are clearly going to be great worries about going to court with absolutely no grounds for thinking that you are going to be successful. It goes back to one of the issues that my hon. Friends raised: the solicitor will say ''I do not know,'' but what people call ambulance chasers will be happy to take a test case on a no win, no fee basis, simply to find out if there is a little minefield that they can open up.  

The measure will mean that the borrowers will not want to take legal action, because they will not be certain of their ground, and the lenders will become more cautious in how they lend. That will particularly damage the people at the margins, the people whom we most seek to protect through this legislation.

It also appears that there are different structures for different parts of the UK. It would be helpful if the Minister told us who would resolve the disputes if, for example, they were between a Scottish borrower and a Northern Irish lender, or an English borrower and a Scottish lender. The position is not clear. Once again, it comes down to the fact that there is a distinct lack of clarity in what has to be done wrong in order to incur the penalties that are set out in clause 20.

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

I will attempt to satisfy the concerns of the hon. Gentleman. You never know—late on a Thursday afternoon, when the House has adjourned, people may be accommodated by what they hear from the Minister.

In introducing the unfair test, the Government want to ensure that the courts have all the powers they need to deal with unfairness in credit relationships. With the existing extortionate credit test, most cases fall at the first hurdle, as we have heard, which is meeting the standard of an extortionate credit bargain. Having made the test more accessible, we do not want now to create a situation where the courts' powers are restricted. We also want to make it clear to the courts the extent to which they can go to remedy an unfair relationship.

To that end, new section 140B(1) sets out the types of orders that a court can make about unfair credit relationships. Those powers allow the court to do what is necessary to remedy an unfair relationship. The courts' powers include requiring lenders to repay money to a debtor; to cease particular conduct; to reduce the amount payable by the debtor; to return property provided for security; to set aside any duty imposed on the debtor; to alter the terms of the agreement; or to direct accounts between parties.

New section 140B(2) makes it clear that only a debtor or a surety can make an application for these remedies. The court cannot do so on its own initiative. They do not have to start their own proceedings to do that, but can do so in proceedings brought by the creditor. New section 140B(3) provides that the court may in imposing a remedy impose a burden on the creditor. The rules would apply in Scotland, and a sheriff could impose these remedies. They also apply in Northern Ireland where, if the agreement is less than £15,000, the debtor can go to the county court. If it is higher, he can go to the High court.

New section 140B(10) makes it clear that the debtor or the creditor can join other parties to the action. Therefore, where the creditor has sold the loan to someone else, the debtor could bring an action against both those creditors. New section 140B(11) reflects the existing law in relation to the burden of proof when challenging agreements. It is the responsibility of the creditor to prove he has not acted unfairly where the debtor makes the allegation and provides particulars of unfairness alleged. I hope that that explanation   gives the hon. Gentleman confidence to support the clause.

Question put and agreed to.

Clause 20, as amended, ordered to stand part of the Bill.  

Clauses 21 and 22 ordered to stand part of the Bill.

Further consideration adjourned.—[Mr. Dhanda.]

Adjourned accordingly at two minutes past Four o'clock till Tuesday 28 June at Ten o'clock.