This clause introduces a new category of ancillary credit business—the provision of credit information services. Credit information service providers will require a licence. New subsections (7B) and (7C) describe what credit information services are. They cover businesses that help individuals to locate and to correct records about their financial standing. That help can be advising an individual or taking steps on their behalf.
New subsection (7D) describes a credit information agency, which is the body that might hold records about an individual’s financial standing. It may be a business that undertakes activity regulated under the legislation or undertakes related activities.
New subsection (7C) lists the steps that the credit information service provider takes that mean that it requires a licence. Those steps are ascertaining whether a credit information agency holds information relevant to the financial standing of their client; finding out what that information is; and correcting it or ensuring that it is deleted or not passed on. Subsections (3) to (5) make consequential amendments to include credit information services elsewhere in the 1974 Act.
Hon. Members may know that credit information services are more commonly provided by credit repair firms. Those firms investigate a person’s credit record. If they find incorrect entries on records, they can, on behalf of the borrower, ask for those entries to be corrected. There is nothing to stop consumers asking for entries to be corrected themselves. People can write to one of the credit reference agencies enclosing a cheque for £2 to receive a copy of their credit record. If there are mistakes, they can ask for them to be corrected. The Information Commissioner’s office publishes a useful leaflet entitled “No Credit?”, which explains clearly the steps that a consumer can take.
I recognise that some people may never be able to take such action themselves, or may prefer that someone else does it for them. That is fine when the service being provided is legitimate. The OFT would have no problem in licensing legitimate companies that can prove that they are fit.
The problem comes when credit repair companies promise more than they have the legal power to deliver, thus misleading consumers by suggesting that they are able to repair their credit record. They do not say that they can remove only the incorrect entries. Adverse entries on a person’s credit record cannot be removed if they are correct. Some credit repair companies do not make that clear to customers.
In some cases, consumers pay a large sum to the company and receive nothing in return. One company that was investigated by the radio programme “You and Yours” charges £80 to undertake credit repair. It told the reporter that they could clear the file of any record of bad debts, even if he had defaulted on those debts. All too often, those claims are targeted at consumers who already have financial problems and believe that a better credit rating would enable them to borrow more.
Credit repair companies that encourage customers to lie about entries on their credit record are, of course, committing fraud. Currently, the OFT has limited powers to target the rogues in the market, although it has issued consumer warnings about credit repair firms.
Bringing credit information services under the licensing regime ensures that fit businesses can get a licence. The OFT will be able to use its information-gathering powers and, if necessary, to impose requirements on licences. Those that are not fit to provide credit information services will not be given a licence. If they then trade without a licence, they will be committing a criminal offence. We are ensuring that rogues are kept out of the market and that the OFT can maintain appropriate standards among credit information services.
I am grateful to the Minister for such a detailed explanation of the clause and of the thinking behind it. I assure him of our support in this area. All of us have had distressing constituency cases in which people have come to us and said that they are unable to borrow because they have been told that they have a bad debt rating, when in fact that rating relates to someone who lived in the house a while before or to a student who happened to live there. To have the issue made clearer is something that we should welcome.
I welcome the fact that the Government announced yesterday that they are setting up a £45 million fund on debt advice. Will some of that fund be used specifically in this area? It seems that many people are simply not aware of credit repair firms, their right to obtain information for a fee and how they go about trying to correct incorrect information that is on file. Does the Minister envisage some of that funding being used to make sure that people are not put in this invidious situation?
Even I can answer this question; it says yes. Clearly, I welcome the hon. Gentleman’s support for the clause. I am pleased to have given the explanation I did on the clause. It is clear that we are trying to make sure that the rogues that promise things that cannot be delivered are removed from the marketplace.
I am delighted that the £45 million is being made available for financial inclusion. It will consider the range of education support. That £45 million will come to the Department for Trade and Industry. We must work out the detail, but a broad range of programmes will come in bids from a variety of agencies, including Citizens Advice, and other debt counselling and money advice services, to offer a range of support to people throughout the levels. A key element of the Bill in the context of financial inclusion and education is to give people as much information as possible.
I welcome the hon. Gentleman’s support for the clause and for the funding. The measure is apolitical in that we all agree that the work is necessary and must be done. I am happy to talk to him about how to develop the fund as we go along.