Consumer Credit Bill

Public Bill Committee, 27 January 2005.

Standing Committee E

Consumer Credit Bill

Clause 31 - Variation of standard licences etc.

Joe Benton (Labour, Bootle)

With this it will be convenient to take Government amendment No. 4.

Gerry Sutcliffe (Labour, Bradford South)

Welcome to the Chair, Mr. Benton. You will see that the Bill is making great progress, being properly scrutinised and being dealt with in a convivial manner.

Amendment agreed to.

Amendment made: No. 4, in clause 31, page 24, line 13, leave out

'because a person can no longer'

and insert

'simply because, by virtue of provision made in a general notice under section 24A(5), a person cannot'.—[Mr. Sutcliffe]

Clause 31, as amended, ordered to stand part of the Bill

Clause 32 - WINDING-UP OF STANDARD LICENSEE'S BUSINESS

Clause 34 - DEFINITE AND INDEFINITE LICENCES

Laurence Robertson (Conservative, Tewkesbury)

I beg to move amendment No. 32, in clause 34, page 27, line 39, at end insert—

'(1E) In all cases, the OFT shall state its reason for allowing for a limited period only, when the application was for an indefinite period, and those reasons shall be consistent with the guidelines the OFT itself sets out.'.

I, too, welcome you to the Committee, Mr. Benton. As the Minister said, it has been conducted in a professional and convivial manner. I am sure that that will continue under your chairmanship.

Amendment No. 32 deals with the length of time for which licences will be given. As I understand it, licences are currently renewed every five years. The clause will enable a move towards licences having effect indefinitely. However, there is a caveat, which is that the Office of Fair Trading can refuse to give an open-ended licence if it thinks that there is good reason why one should have effect for a limited period only. My amendment seeks to ask the OFT to state its reason for not giving an indefinite licence.

I accept that there are many instances when the OFT should look at the way in which a licensee conducts business. One of the Bill's general objectives is to allow the OFT to do that in between issuing licences, as legislation permits at the moment, but on a rolling basis when those licences are indefinite.

All I ask is that the OFT, when it varies the granting of indefinite licences, should give a reason for doing so. What I ask may be seen as yet another assault on the power of the OFT, and I make no apology for that. I have said previously, and will probably say again, that the OFT has too much power. It is rather a free spirit, and that has not always been to the benefit of the business that it is supposed to regulate. I make no apology for wanting to try to clip its wings a bit.

Gerry Sutcliffe (Labour, Bradford South)

I recognise the spirit in which the hon. Gentleman moved the amendment—

Laurence Robertson (Conservative, Tewkesbury)

But?

Gerry Sutcliffe (Labour, Bradford South)

The hon. Member for Tewkesbury (Mr. Robertson) is right; there will be a ''but''. The amendment is unnecessary, and I hope that he will bear with me as I explain why. I am aware of his continuing diligence in watching the work of the OFT, and I have come well armed today with defences of that organisation's role. I am sure that we can look forward to further debate.

I agree that people should be told why they are granted a licence that is different from the one for which they applied. However, his amendment is unnecessary because the OFT already gives reasons for its licensing decisions. The decision to grant an indefinite or time-limited licence is no exception: that is good practice.

Section 27(1)(a) of the Consumer Credit Act 1974 requires the OFT to give reasons for issuing a licence on different terms from those of the application. The amendment also mentions OFT guidance, and clause 30 requires the OFT to have regard to the most recently published guidance. Therefore the OFT is already required to do what the amendment proposes. I hope that I have explained that to the hon. Gentleman and that he will withdraw his amendment safe in the knowledge that he does not have to clip the OFT's wings on this occasion.

Laurence Robertson (Conservative, Tewkesbury)

The OFT may give reasons, but I do not know that it is required to do so. The Minister referred to the 1974 Act, which requires the OFT to give reasons. However, the Act does not refer to open-ended licences as they did not exist in 1974; the Bill will introduce them. My amendment is desirable for technical reasons, but on this occasion I shall not press it to a Division.

Gerry Sutcliffe (Labour, Bradford South)

I am not trying to be dismissive, because the hon. Gentleman has a point that we shall consider in greater detail to ensure that it is covered. The aim is to strike a balance between the 1974 Act and the guidance contained in clause 30. However, we shall consider what the hon. Gentleman has said and not dismiss it out of hand.

Laurence Robertson (Conservative, Tewkesbury)

I am grateful for that explanation. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 34 ordered to stand part of the Bill.

Clauses 35 to 37 ordered to stand part of the Bill.

Clause 38 - POWER OF OFT TO IMPOSE

Laurence Robertson (Conservative, Tewkesbury)

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.

Gerry Sutcliffe (Labour, Bradford South)

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.

Laurence Robertson (Conservative, Tewkesbury)

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.

Gerry Sutcliffe (Labour, Bradford South)

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.

Laurence Robertson (Conservative, Tewkesbury)

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?

Gerry Sutcliffe (Labour, Bradford South)

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.

Laurence Robertson (Conservative, Tewkesbury)

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.

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?

Gerry Sutcliffe (Labour, Bradford South)

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.

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?

Gerry Sutcliffe (Labour, Bradford South)

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.

Clause 42 - Guidance on Requirements

Laurence Robertson (Conservative, Tewkesbury)

I beg to move amendment No. 33, in clause 42, page 33, line 27, leave out subsection (3) and insert—

'(3) The OFT shall have the duty to take all reasonable steps to ensure that the revised guidance is brought to the attention of those likely to be affected by it.'.

Joe Benton (Labour, Bootle)

With this it will be convenient to discuss the following amendments:

No. 34, in clause 42, page 33, line 31, at end insert

', which shall include a representative sample of those likely to be affected by it.'.

No. 43, in clause 54, page 44, line 39, at end insert

', which shall include a representative sample of those likely to be affected by it.'.

Laurence Robertson (Conservative, Tewkesbury)

These are technical amendments. Clause 42 concerns guidance on requirements of licensees, whereas clause 54 relates to statement of policy in relation to civil penalties. The amendments seek to place on the OFT a duty to take all reasonable steps to ensure that anyone who is likely to be affected by the guidance is notified. When drawing up that guidance the OFT should also have a duty to consult such persons as it thinks fit. However, that is already in the Bill. I seek only to add to that to include a representative sample of those whom it is likely to affect.

What does the Minister have to say about technical amendments? I reckon I can guess, but perhaps they will be moved.

Alistair Burt (Conservative, North East Bedfordshire)

May I say, Mr. Benton, how much I welcome being under your guidance this morning? I apologise to the Committee for not being here for the earlier parts of this important Bill. I particularly welcome the presence of the Minister. He and I go back many years, largely through our friendship on the football pitch. We have been regular performers, if I can use that word in the context of the parliamentary football team. The Minister has established an excellent reputation as a stopper of first rank. Between the sticks, I must say that the Minister's skills at preventing things getting past him have become legendary in the dressing room. Seeing him in action and how he manages to hold up the skilful interventions of my hon. Friend the Member for Tewkesbury, I realise that his powers of stopping things are not confined to the football pitch. It is a great pleasure to see a friend in that position.

Laurence Robertson (Conservative, Tewkesbury)

Does the Minister always have the benefit of the officials on his side?

Gerry Sutcliffe (Labour, Bradford South)

Usually.

Alistair Burt (Conservative, North East Bedfordshire)

If the impartiality, wisdom and skill of the official who presides over the Committee this morning were transferred to the football team, I am sure the Wobblers would have won many more games than we have.

I support my hon. Friend on the technical amendments. Like the majority of the Committee, I welcome the balance of the Bill, which is designed to protect consumers further, for reasons set out on Second Reading and in earlier meetings of the Committee. All of us have, on occasion, seen constituents in extraordinary distress over agreements they have entered into—sometimes unwisely with full knowledge, sometimes unwisely lacking knowledge—and who have ended up in situations that they would rather not be in. We have been involved not only professionally, but sometimes with a degree of personal upset in trying to deal with the mess that some people get themselves into.

My history on these issues goes back many years, and I commend the activities of Credit Action, people like Keith Tondeur who have spent a lifetime working with those in debt, and Bob Holman in Easterhouse, whose work was recognised in some of our briefings. They have worked with some of the poorest people in dealing with those problems.

However, credit exists and is necessary for many people to get through particular difficulties. The aim of the Bill is not to set up an adversarial system, where the Government and Parliament take the position that credit is somehow instinctively wrong and dangerous. It is not that we must be overwhelmingly on the side of those who receive credit to the extent that those providing it feel that all their bona fides are questioned. That will not enable us to get to the heart of the matter, which is to target those who are the most dangerous to people in the poorest position.

The point of my support for the technical amendments is that it is recognised that the powers of the OFT have been significantly strengthened by the Bill, giving sweeping new opportunities for that body to declare its dissatisfaction with those who have caused harm. To redress the balance, the amendments enable the public and credit providers to have the assurance that they will specifically be involved in the consultation on the guidance to cover their industry. That should help to convince them that it is not an adversarial situation, in which they are permanently and exclusively in the dock, and should ensure that those responsible in the industry have an opportunity to ensure that rapier-like guidance goes to the heart of the problems and that those who must be caught are caught.

Much of my experience is that our constituents' problems have arisen from ambiguities or misunderstandings.

Accordingly, it is incumbent on us to ensure that all possibility of ambiguity and misunderstanding is removed. We have seen how people have been exploited if rules and wording have been unclear. Those who have power over debtors have been able to exploit that to their own advantage.

It would help if those in the business of giving credit were involved in the consultations on the Bill and on the publication of guidance. Greater involvement would prevent ambiguity and misunderstanding, and would make clearer the purpose of the Bill.

Gerry Sutcliffe (Labour, Bradford South)

I thank the hon. Member for North-East Bedfordshire (Alistair Burt) for his kind comments about my footballing prowess. We were together in defeat on Monday of this week at West Ham, when the parliamentary team played a team of Holocaust survivors and their relatives. That was quite an emotional occasion, considering the commemorations that have taken place this week.

Alistair Burt (Conservative, North East Bedfordshire)

It was truly an occasion when the result did not matter.

Gerry Sutcliffe (Labour, Bradford South)

Indeed. The hon. Gentleman mentioned my skills in stopping shots or, more recently, my inability to stop shots, given my advancing years. I pay tribute to his skills in making runs that take people's eyes off the ball and cause defenders not to look where they should because they have been hoodwinked—I will not say by a sly one—by a wonderful run by the hon. Gentleman in the attacking position. He will understand why I do not accept the amendment so eloquently moved by him and his colleagues. However, he is right that we must achieve the best score.

Earlier, I explained in answer to a question from my hon. Friend the Member for Northampton, North how I thought the OFT would operate. I talked about the effect of the enforcement concordat on how the OFT should operate. I am not sure that the amendments would effect the change that the hon. Members for Tewkesbury and for North-East Bedfordshire want. The clause as it stands will achieve what they want, and the amendment adds little to it.

Guidance will be published to bring matters to the attention of those likely to be affected. That means that it will be available on the OFT's web site; it can also be obtained in hard copy. That allows anyone interested in or affected by the guidance to get a copy. Trade associations will also publicise the guidance to their members. I hope that the OFT will consider hon. Members' suggestions.

That goes to the heart of our discussions on the Consumer Credit White Paper and on the Bill. I have attended many meetings, as have Opposition Members, with organisations representing small and large lenders involved in the credit business.

John Battle (Labour, Leeds West)

I am sure that the Minister is aware that in a research report published yesterday by Liverpool John Moores University and sponsored by the Co-operative Bank, the author, researcher Paul Jones, listed not only the usual credit companies, but also buy-back stores, cheque cashers, home credit companies, pawnbrokers, telebanks, unauthorised lenders and weekly repayment shops. A host of people massively overcharge the poor. I am not convinced by my hon. Friend's argument that it is simply a case of ambiguity. In some cases it is a deliberate attempt to get money off the poorest. Would the OFT's powers cover such businesses? If he can assure me of that I would be grateful.

Gerry Sutcliffe (Labour, Bradford South)

That is my understanding. Those are the people providing credit, and it is important that the OFT's new powers are proportionate to what they achieve, and that in the preparation of the draft guidance those affected have the right to have their views taken into consideration.

The amendment does not take us any further forward, but it is right that the hon. Gentlemen put their concerns on record. When the Bill becomes law they should inform the interested parties about what needs to be done about the draft guidance. I hope that, in that spirit, they will withdraw the amendment. The amendment is not necessary, as I have explained in detail the powers of the OFT and how they will operate.

Laurence Robertson (Conservative, Tewkesbury)

I am grateful for the Minister's explanation. I did say that mine was a technical amendment, although ''probing'' might have been a better word. I am grateful to my hon. Friend for his eloquent argument in favour of some degree of certainty that would lead to protection. I am concerned that people should contribute to the drawing up of the guidelines; not merely because I do not want the OFT to be too powerful, but because I want consumers and licensees to make a fair contribution. I am sure that the Minister will ensure that that is the case. Therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 42 ordered to stand part of the Bill.

Clauses 43 to 46 ordered to stand part of the Bill.

Clause 47 - POWER OF OFT TO REQUIRE ACCESS TO PREMISES

Laurence Robertson (Conservative, Tewkesbury)

I beg to move amendment No. 35, in clause 47, page 38, line 27, at end insert—

'(7A) It shall be the duty of the OFT to take all reasonable steps to ensure that its own officers, or those of the enforcement agency, shall, when entering and while on the premises by virtue of this section, at all times behave in a reasonable and professional manner.'.

I assure the Minister that I shall not press the amendment to a Division, as it, too, is a probing amendment. However, it is a continuation of my concern about the OFT. Clause 47 gives the OFT power to require access to premises; clause 48 gives the OFT power of entry to premises under warrant. That is quite an extension of the OFT's powers. They are, I suppose, similar to the powers of Her Majesty's Customs and Excise; its considerable powers are familiar to any businessman. Perhaps they are required; I do not know.

Amendment No.35 requires the OFT to ensure that anyone entering premises, either as their own agent or as agents of other enforcement authorities, should behave in a proper and professional manner. That is not an unreasonable requirement. It is a probing amendment because there are many requirements on business and on licensees to co-operate. I am, however, concerned about the powers granted to the OFT. I ask the Minister to address not merely the amendment, but also to give the Committee an explanation of what supervision he envisages for the OFT when it has such powers of entry. It will concern licensees greatly.

Gerry Sutcliffe (Labour, Bradford South)

Once again, I am grateful to the hon. Member for Tewkesbury for moving the amendment; I accept that it is a probing amendment. I do not wish to underline too much his concerns about the OFT, but I should set out how the OFT should behave when exercising its new powers under the Act.

The hon. Gentleman is of the view that nobody can control the OFT. The OFT is an independent regulatory body established under the Enterprise Act 2002 and is fully accountable to Parliament, reporting annually to the Secretary of State for the Department of Trade and Industry and appearing before relevant parliamentary committees. Indeed, several meetings take place between OFT officials, DTI officials and Ministers.

Alistair Burt (Conservative, North East Bedfordshire)

In replying to my hon. Friend, I would appreciate it if the Minister would tell us why this power is being sought. Why can the OFT not rely on other powers, including the power of discovery, in order to produce documents at an appropriate stage? Why have representations been made specifically requiring such an increase in the OFT's powers?

Gerry Sutcliffe (Labour, Bradford South)

I appreciate the spirit in which the hon. Gentleman asks those questions. As I have said, the OFT already has many powers under the Enterprise Act 2002, but I can reassure the Committee that the Bill contains the appropriate checks and balances required to regulate the behaviour of OFT officers and those acting on the OFT's behalf.

First, under clause 50, anything done by an enforcement officer acting on behalf of the OFT will be treated as if it had been done by an officer of the OFT. Secondly, a licensee would have grounds for appeal in the highly and, I hope, unlikely event of an officer behaving in anything other than a reasonable and professional manner. A licensee might be able to appeal against a decision if the OFT sought to use evidence in an unreasonable and unprofessional manner. Thirdly, officers of the OFT, like all public servants, are bound to act reasonably and professionally at all times. If they do not, they can be reported to the parliamentary ombudsman. Administrative law imposes a general duty on public bodies to act reasonably.

In addition to those checks and balances, I would like to provide further reassurance to hon. Members. The OFT has similar powers of access to premises under cartel investigations and, despite having no specific legislative duty, OFT officers have behaved responsibly and professionally when conducting visits for these investigations. There is no reason to believe that OFT officers will act any differently when conducting licensing visits. Therefore, together with all the checks and balances already in place, the amendment—which I accept is a probing amendment—is unnecessary.

It is important for the OFT to have those powers. I was asked why we are giving people the power to enter business premises at all. In some cases fitness can be assessed most effectively and efficiently by an enforcement officer visiting the premises of a licensee and gaining access. The powers already exist under the Enterprise Act 2002, and we are looking into the licensing regime. Safeguards are in place—a variety of checks and balances already exist.

Hon. Members have put on record their concerns, which I am sure the OFT will take into consideration in how it operates. I hope that those assurances have reassured the hon. Gentleman, and I ask him to withdraw his amendment.

Laurence Robertson (Conservative, Tewkesbury)

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 47 ordered to stand part of the Bill.

Clause 48 - ENTRY TO PREMISES UNDER WARRANT

Laurence Robertson (Conservative, Tewkesbury)

Clause 48 deals with entry into premises under warrant. Clause 47 gives the OFT the power to require access to premises, but I presume that clause 48 is subsequent to that should the OFT be refused that entry. However, if the OFT has the legal power to enter premises, does it not naturally flow that it should be granted a warrant to enter should entry be refused? I wonder whether we are going a little too far.

I understand that there is a need to gather information in order to protect consumers, but would it not be better to allow the courts to draw an inference from a refusal to allow entry, rather than to give them the power to grant a warrant? If some of the wording of the clause had been different, I might not have wished to speak about it. For example, proposed new section 36D(3) states that a warrant gives an officer the right

''(a) to enter the premises specified in the warrant;

(b) to search the premises and to seize and detain any information or documents appearing to be information or documents specified in the warrant or information or documents of a description so specified''.

If the court has such a degree of detail, is there a need to enter the premises in the first instance? It also provides for the power

''to use such force as may be reasonably necessary.''

That alarms me. It is not clear who is allowed to use such force. Is it an officer of the OFT?

Perhaps I am getting into an area that I do not quite understand, but the wording in the Bill on the right to obtain a warrant and to enter premises alarms me. I wonder whether such officers will be of a certain description or given a certain legal right. I am troubled by that, and before accepting the clause, I would like an explanation of why it is felt that the courts should be able to issue such a warrant and, more particularly, why there is a need for some of the wording in the Bill.

Alistair Burt (Conservative, North East Bedfordshire)

I wish to reinforce the concerns raised by my hon. Friend. This issue represents another example of the extension of powers. With regard to my earlier question, if the information is not available to the Committee today, perhaps the Minister could write to Committee members. What circumstances have arisen regarding the supervisory authorities so that they now require such powers? Are there occasions when the authorities have been convinced that some irregularity exists, when information was available that would help in the pursuance of a case against someone whom they wished to charge under this or a similar Act, and they simply failed to obtain it because they were not quick enough or because the process of discovery through civil proceedings did not bring that information to light? This is quite heavy stuff.

None of us would resist giving the authorities the ability to acquire information in circumstances where people have been badly let down or are being adversely affected by the inappropriate activities of those who, alas, sometimes operate in the industry. However, the powers are very extensive; people with a warrant will be able to knock on doors, enter premises and seize whatever they choose. If the powers are justified, my concern is to establish where the need has, technically, come from. What have the authorities said to the Government to show that they need extra powers in addition to those that they already possess? In the general context of the Bill, it would be helpful—bearing in mind the powers that we are seeking to exercise on behalf of consumers, who are the worst hit when things go wrong—if some evidence could be given as to why such sweeping powers are necessary.

Gerry Sutcliffe (Labour, Bradford South)

I agree with the hon. Member for North East Bedfordshire that it might be worthwhile to write to Committee Members to set out the reasons for the powers. I shall try to deal with that matter, but to reassure hon. Members, it may be better to provide a more detailed written explanation of why it is important to provide for such powers.

The powers will be invoked only once the proper procedure has been exhausted, and the authorities have failed to gain access via their existing powers. The clause addresses the circumstances in which an enforcement officer can enter premises with a warrant obtained by the OFT and the procedure required for that. Under certain circumstances, the OFT may apply to a justice of the peace for a warrant to search premises. That justice of the peace must be convinced that such action is reasonable. In Scotland, applications must be made to a sheriff. The OFT must have reasonable grounds to believe that there is information on those premises that is required under section 36B. The OFT must also have reasonable grounds to believe that if a requirement to provide information were imposed, it would not be complied with or the documents or information in question would be tampered with. Most people will act reasonably in those situations.

Many hon. Members have mentioned loan sharks and disreputable people. The provisions concern linkage to the licensing regimes. It might be that reasonable force applies to opening a locked cupboard where information is stored. The officer responsible for carrying out the warrant could enter and search the premises. He can seize and detain any information or documents of the description specified in the warrant. The officer would then be able to act to secure the protection of the information or documents and prevent interference with them. Those powers are subject to the definition of reasonable force, which applies to other powers in the Enterprise and Competition Acts.

Laurence Robertson (Conservative, Tewkesbury)

I appreciate the Minister's attempt to define reasonable force, which could simply mean breaking open a locked cupboard, but it could also mean much more. If I may draw an analogy, we had a spirited debate recently in Parliament about the use of reasonable force to protect one's home, and there is much uncertainty about what that term means. It troubles me that reasonable force may include much more than breaking open a locked cupboard. I am concerned about giving that degree of power, which ordinarily is given only to police officers—who are directly accountable—for entering premises. What grade of officer will be given the power to use reasonable force? I am very troubled by subsection (3)(d), and I ask the Minister whether he is prepared to reconsider it.

Gerry Sutcliffe (Labour, Bradford South)

The short answer is no. That is not being unreasonable because the powers are commensurate with our goals. The hon. Member for Richmond Park (Dr. Tonge) spoke earlier about prevention being a good cure—to ensure that things do not happen. When I mentioned the powers of the Enterprise and Competition Acts, I was referring to cartels. Those are the same powers that we have included in the clause. The OFT must have reasonable grounds; it must convince the legal jurisdiction that it has reasonable grounds; and it must operate—as was mentioned during the debate on an earlier clause—in a professional and reasonable manner. I reassure hon. Members that that was my thinking when I set out the written conditions and situations.

I worry about the hon. Member for Tewkesbury's concerns over the powers of the OFT, which are probably creating an imbalance in his thought patterns. I do not mean that discourteously, although it may sound that way. It is a safeguard that all reasonable steps to get to that position are being taken. Licensees who give credit to people who, in certain circumstances, would be very vulnerable must be given the proper opportunity to gain information that is required to ascertain whether those people are fit borrowers. OFT staff are also told that force can never be used against people. That should reassure hon. Members.

Alistair Burt (Conservative, North East Bedfordshire)

What would happen if someone were to stand in front of the cupboard?

Gerry Sutcliffe (Labour, Bradford South)

If an illegal use of force were an issue, there are other mechanisms, such as phoning the police or asking OFT officers for assistance. Through a series of reasonable processes that are designed to elicit information, people will have been asked to do the right thing. However, a consumer could have been seriously harmed, and we must ensure that the OFT has the necessary powers. It could be that groups of people—cartels—may be operating in tandem to damage consumers, and legislative powers already exist relating to cartels.

I acknowledge the views of the hon. Members for Tewkesbury and for North-East Bedfordshire, but they may be overplaying the issue, albeit in the right way. Sufficient safeguards are in place. I shall write to the Committee and give details about situations in which these powers will be used.

Laurence Robertson (Conservative, Tewkesbury)

I am sorry if the Minister thinks that I have become unbalanced. I assure him that I am not unbalanced—not in this instance anyway.

Proposed new section 36D(3)(b) states that the warrant gives the right

''to search the premises and to seize and detain any information . . . specified in the warrant''.

Therefore courts are already aware of the documents that are required. In a short but telling intervention, my hon. Friend the Member for North-East Bedfordshire highlighted the uncertain nature of subsection (3)(d). What happens if a licensee stands in front of a cupboard or at a front door? The Minister tells us that force cannot be used against that person. Courts know what documents are required, and given that it is normal practice for them to call for documents, would it not be better to do that when the case comes to court?

Gerry Sutcliffe (Labour, Bradford South)

That would complicate the situation unnecessarily. OFT officers are bound to act reasonably and professionally, so there are safeguards. The OFT must convince the court about the reasonableness of the request for information. People must be protected from rogues.

Sally Keeble (Labour, Northampton North)

How would my hon. Friend rate the chances of an incriminating document that is held by a loan shark lasting long enough to be used in a court case? I would rate the chances at zero.

Gerry Sutcliffe (Labour, Bradford South)

My hon. Friend may be right, and that explains why the OFT should have those powers. I have tried to describe the circumstances, and I have offered to write to the Committee giving further details. I have acted as reasonably and professionally as possible.

Alistair Burt (Conservative, North East Bedfordshire)

I acknowledge the perfect good sense of the hon. Member for Northampton, North. However, the same worries would apply when a warrant application was made. If a rogue had received a series of written applications requesting information and had refused to co-operate, documents could still go missing. As the hon. Lady said, people who do not wish to comply will take steps to remove incriminating evidence. That could apply at any stage in the process, and documents may have disappeared by the time the application is made. My hon. Friend the Member for Tewkesbury and I recognise that there are powers to catch rogues, but we want to ensure that the right people are targeted. Powers should not be so sweeping that innocent people are affected. The law should not be brought into disrepute by using the over-powerful arm of the state in the wrong context.

Gerry Sutcliffe (Labour, Bradford South)

This is not about an over-powerful state. This is about achieving a necessary balance; it is about protecting documents that could be tampered with, even though those documents may be destroyed. Hon. Members are right to have probed me. My powers of eloquence will either persuade them or otherwise on this matter, and I hope that the Committee will support the clause.

Question put and agreed to.

Clause 48 ordered to stand part of the Bill.

Clauses 49 and 50 ordered to stand part of the Bill.

Clause 51 - CONSEQUENTIAL AMENDMENTS

Laurence Robertson (Conservative, Tewkesbury)

I beg to move amendment No. 36, in clause 51, page 42, line 43, at end add—

'(9) The OFT shall maintain a record of all visits to premises carried out by virtue of the relevant sections of this Act, and those records shall be made available to the appeal authorities set up by this Act.'.

This relates to records of visits to premises. It is desirable for the OFT to maintain a record of all visits to premises carried out by virtue of the relevant proposed new sections to be included in the 1974 Act. That would include voluntary visits to premises—when the OFT does not have a warrant—or visits when it has a warrant. It would make those records available to the appeal authorities that the Bill will set up.

This is not an assault on the OFT; it might actually help the OFT in certain deliberations. I do not intend to speak to the amendment for long. I request only that the Minister consider whether it might be helpful.

Gerry Sutcliffe (Labour, Bradford South)

The hon. Gentleman will not be surprised to hear that I agree that the OFT should maintain records of monitoring visits. I reassure him that that will happen even without his amendment. Every monitoring visit that is undertaken by the OFT, or by officers acting on its behalf, will be recorded in writing. That is essential if the evidence gained is to be used to monitor fitness. Without the written record the visits are useless. Any records that relate to licensing decisions will be made available to the appeals tribunal, should the need arise. Those will include records of the monitoring visits. I hope that I have assured the hon. Gentleman that his amendment is not necessary and that I can persuade him to withdraw it. The written record will be used at the tribunal.

Laurence Robertson (Conservative, Tewkesbury)

I am delighted to hear that. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 51 ordered to stand part of the Bill.

Clause 52 - POWER OF OFT TO IMPOSE CIVIL PENALTIES

Laurence Robertson (Conservative, Tewkesbury)

I beg to move amendment No. 37, in clause 52, page 43, line 16, at end insert

'This amount may be altered by the Secretary of State by Statutory Instrument.'.

This issue was raised several times on Second Reading, particularly by Labour. Members. It relates to clause 52(3), which states:

''The amount of the penalty shall not exceed £50,000.''

It is probably correct to put a figure in the Bill, but Labour. Members were concerned that that figure might not be high enough in certain cases. More particularly, there is no provision in the Bill for the Minister to amend that figure by statutory instrument. It may be that, if we take another 30 years to revisit consumer credit—which we may or may not do; I do not know—that figure of £50,000 could become rather paltry.

We have relatively low inflation at present, but that may not always be the case, especially if we continue with the level of spending and debt that this Government seem determined to pursue. It might not be long before £50,000 is not much more than a slap on the wrist for some companies. I am trying to help the Minister by tabling the amendment. I am disappointed that none of his hon. Friends did so, because the point was raised several times on Second Reading.

The amendment does not alter the maximum penalty set out in the Bill. I do not suggest that the figure of £50,000 be changed; I suggest that the Minister should be able to vary the figure in future if he thinks it necessary, given the conditions at the time and, possibly, the seriousness of any offences that may be committed. We do not know what will happen in future, so it would be helpful for the Minister to have that power.

I am not normally one for giving too much power to Ministers, but we must be realistic. The Bill could become irrelevant if it is another 30 years before the issue is revisited. Why is that power not in the Bill? The Bill leaves many areas open in which a Minister can intervene; some of which are desirable, some of which perhaps ask too much of a Minister. I am surprised that this subsection cannot be changed, and I look forward to hearing the Minister's explanation.

Alistair Burt (Conservative, North East Bedfordshire)

I support my hon. Friend. This is an opportunity to speak, as it were, for the other side in this very balanced Bill. Like my hon. Friend, I do not see the reason for specifying the maximum sum. To give maximum flexibility to the authorities it is necessary to take into account all the aggravating factors that might have led to proceedings being taken in the first place. I shall not reiterate everything that has come up in the Committee, on Second Reading and in our everyday experience. However, we have sometimes found the most distressing circumstances produced by companies that, when their financial affairs are probed, are more than able to stand a substantial fine.

For some very small companies or for those that operate small partnerships or the like this is a deterrent sum. For those who rake in millions of pounds—often in the unfair manner suggested by the right hon. Member for Leeds, West (Mr. Battle)—this would appear to be no more than an occupational hazard. Therefore an opportunity to include flexibility seems useful.

Malcolm Bruce (Liberal Democrat, Gordon)

The amendment is appropriate and should be debated. Does the hon. Gentleman agree that the problem with the Bill is that there are two sanctions? One is a fine of up to £50,000 and the other is the cancellation or withdrawal of the licence. The trouble is that that is a nuclear option for the very large companies for which a £50,000 fine would not be a deterrent. It is incumbent on the Minister to explain how he would deal with the gap between a large fine and the withdrawal of a licence.

Alistair Burt (Conservative, North East Bedfordshire)

The hon. Gentleman is absolutely right, and I am sure that the Minister will address his point. We have received briefings that have made it clear that although the powers of the OFT have been based to some degree on the powers of the Financial Services Authority, in similar circumstances the latter body is not limited to a specified amount when considering a fine. This appears to be an appropriate situation to draw a parallel.

The opportunity to fine gives maximum flexibility, bearing in mind all the circumstances of the case, for the authorities to show their concern. No matter how much money certain companies may have, receiving a very large fine would have an exemplary effect in discouraging unfair practices; it would finally hit them where it hurts, and for most commercial companies where it hurts is in the wallet. For those reasons, my hon. Friend's amendment is more than justified, and I hope that, on balance, we might assist the Minister by giving him the opportunity to respond positively.

Malcolm Bruce (Liberal Democrat, Gordon)

I raised the issue of what the penalty would be applied to, and that also cropped up on Second Reading. In other words, if a company has been pursuing practices that are determined to be in breach of the law, is the penalty a one-off fine for the collective breach or could it be a series of fines for each individual breach? If the latter were the case, a much larger fine could be imposed on a company.

Will the Minister say whether the advice to him is that the courts could apply a ruling in that way? That would substantially alter the effect of the Bill. It is unusual, although not unprecedented, to include a figure in a Bill. It is not often, I must say, that Opposition Members encourage Ministers to introduce secondary legislation, but here it might be appropriate.

Gerry Sutcliffe (Labour, Bradford South)

I thank hon. Members for trying to assist me. I know that they do it in the proper spirit.

John Battle (Labour, Leeds West)

Of course.

Gerry Sutcliffe (Labour, Bradford South)

I meant Opposition members—I am not sure about the Government members. There have been interventions and interventions from them, but, on balance, they have been helpful.

Hon. Members are right to raise the issue of the penalty because there was a great deal of debate on Second Reading about why it should be in the Bill. Issues around the drafting of the clause also related to that confusion. I hope that my explanation will rectify that and prove that the amendment is not required. However, we will go through it to be consistent.

The amendment concerns the maximum penalty that the OFT can impose for breach of a requirement or an information requirement, and the trigger is that sum of £50,000. On Second Reading, we were asked how we decided on that figure. It was felt that £50,000 would be proportionate to the type of infringements that lead to a penalty, but not all penalties would be that high: it is a limit, not a target. The OFT's guidance will elaborate further, and it will decide on the amount of the penalty.

In reply to the hon. Member from North-East Bedfordshire, we considered linking the penalty to turnover. Features of the Competition Act, for example, attract penalties of up to 10 per cent. of turnover, but those penalties are for monopoly market power built up over a number of years, which are completely different in nature to the infringements that this power tackles.

We welcome the hon. Member for Gordon (Malcolm Bruce). He asked me to explain the difference between the options—the nuclear options, as he put it. However, as we discussed on previous clauses, the OFT will seek requirements of licensees if they breach agreements, and it can set individual requirements on one branch in a chain of branches, or on an individual in that branch. If that did not occur, the OFT would move on to penalties if there were many breaches. We would then move to the nuclear option of considering the fitness of that person or organisation to have a licence.

Clause 53(3) already includes a power for the Secretary of State to amend the maximum. That clause amends section 181 of the 1974 Act to include the maximum civil penalty as one of the provisions on monetary limits that can be amended by a statutory instrument, subject to resolutions of both Houses. As the hon. Member for Tewkesbury said, this is important for future-proofing. I appreciate that the drafting meant that this power was perhaps not immediately evident on Second Reading, but it does what the hon. Member's amendment seeks to do. It is already there; the secondary power will be taken.

I hope that I have explained the reasoning behind the £50,000 penalty and how the penalty system works with regard to the requirements, the interim arrangements and, finally, the loss of licence. I hope that the hon. Gentleman will now withdraw the amendment.

Laurence Robertson (Conservative, Tewkesbury)

I am grateful to the Minister for his explanation. I accept that section 181 of the 1974 Act covers the clause. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Laurence Robertson (Conservative, Tewkesbury)

I beg to move amendment No. 38, in clause 52, page 43, line 23, after 'OFT', insert 'through the courts'.

The amendment gives me a chance to question the Minister. It refers to proposed new section 39A(5)(a), which states that

''the penalty shall be recoverable by the OFT''.

By adding ''through the courts'' my amendment questions whether that would be the procedure for recovering the penalty.

It is not immediately obvious what the right of appeal is against the penalty imposed, so will the Minister clarify that? I appreciate that that is not strictly related to the wording of the amendment, but it may help the Committee to have an explanation.

Gerry Sutcliffe (Labour, Bradford South)

I thank the hon. Gentleman for his amendment; it gives me the opportunity to clarify matters. It is not necessary to specify whether the penalty could be recovered through the courts; that is understood. The OFT asks in its notice for the penalty to be paid in a specified period. If it is not, the OFT may have to take court action to recover the money.

The current framing of the clause means that the OFT is not restricted to going to court to recover the penalty. If it were in the interests of efficiency for the OFT to recover the penalty in another way, we would not want the legislation to prevent it from so doing. I reassure the Committee that however the penalty is recovered, the OFT will act reasonably and properly. Safeguards are in place. Other than using the courts, the OFT may employ a debt collector, although it would always ensure that those working on its behalf behaved properly, in accordance with the previous clauses. The right of appeal is set out in clause 53(2).

I hope that the hon. Gentleman will withdraw his amendment.

Laurence Robertson (Conservative, Tewkesbury)

Will the Minister explain the right of appeal against the penalty that the OFT would impose, if there is such a right?

Gerry Sutcliffe (Labour, Bradford South)

That is covered by the reference to clause 53(2). If it is not, I shall write to the hon. Gentleman setting out the rights of appeal.

Laurence Robertson (Conservative, Tewkesbury)

In view of the Minister's explanation and his undertaking to write to me on that issue, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 52 ordered to stand part of the Bill.

Clause 53 - FURTHER PROVISION RELATING TO CIVIL PENALTIES

Laurence Robertson (Conservative, Tewkesbury)

I beg to move amendment No. 39, in clause 53, page 43, line 41, leave out 'and'.

Joe Benton (Labour, Bootle)

With this it will be convenient to discuss amendment No. 40, in clause 53, page 44, line 3, at end insert

'; and informing him of his right of appeal against this penalty.'.

Laurence Robertson (Conservative, Tewkesbury)

Proposed new section 39B states:

''(1) Before determining to impose a penalty on a person under section 39A the OFT shall give a notice to that person—

(a) informing him that it is minded to impose a penalty on him;

(b) setting out its reasons for being so minded;

(c) stating the proposed amount of the penalty;

(d) setting out its reasons for proposing that amount;

(e) setting out the proposed period for the payment of the penalty; and

(f) inviting him to submit representations to it about the matters mentioned in the preceding paragraphs in accordance with section 34.''

The OFT's notice would be a standard document and would be easy to put together, so the OFT should be obliged to notify the licensee about his right of appeal. I previously asked about the right of appeal, and the Minister said that he would write to me. I do not mean to be pedantic.

Gerry Sutcliffe (Labour, Bradford South)

That is my fault; I was not clear. The hon. Gentleman is correct. The consumer credit appeals tribunal under clause 55 provides the appeals mechanism. The tribunal will consider credit appeals. I hope that that helps, but I shall write to the hon. Gentleman to clarify things.

Laurence Robertson (Conservative, Tewkesbury)

I am grateful to the Minister for that helpful introduction, and I would appreciate a more detailed explanation of how things work. I am a little concerned that the Bill is not as clear as it could be, but I am straying into discussion of an amendment that I did not table.

The amendments that I have tabled would require the OFT to clarify the right of appeal. The rather uncertain discussion between the Minister and me suggests that that is not entirely clear. I ask the Committee to require the OFT to notify a person of his right of appeal against the imposition of a civil penalty. The OFT is already required, rightly, to give details about a penalty that it is minded to impose, and it is not unreasonable to ask it to set out the right of appeal. It follows naturally from what is already in the Bill.

Gerry Sutcliffe (Labour, Bradford South)

That was a valiant attempt to persuade me to agree to the amendment. I hope that the uncertainty about the right of appeal has been addressed. The hon. Gentleman rightly said that clause 53 sets out the procedure that the OFT must follow in order to impose a civil penalty, and lists what should be included in the OFT's notice to inform a person that it is so minded. Amendment No. 39 is not necessary, and its intention is unclear. As far as I can see, it simply deletes the word ''and'' in the list that appears in clause 53.

Amendment No. 40 proposes that the notice should include a statement that a civil penalty can be appealed. That is not needed; the Consumer Credit Licensing (Representations) Order 1976 sets out what a notice from the OFT of a proposed determination should include, and it stipulates that the right of appeal should be drawn to the attention of the person or persons affected. That statutory instrument will be amended so that it refers to the new tribunal, rather than to the Secretary of State, and it will cover the new determinations provided for in the Bill, such as the power to impose a civil penalty. The current appeal regulations oblige the OFT to send a form that can be used to make that appeal when it gives a clear notice of determination. In future, the Department for Constitutional Affairs will provide a notice of appeal.

Laurence Robertson (Conservative, Tewkesbury)

I would like the Minister to clarify something that he said about the requirement to notify a person of the right of appeal being in another Act. I hope that I am not misleading the Committee, but I am unsure how the consumer credit appeals tribunal could require the OFT to inform a person of that right, when it was not in existence at the time of that Act.

Gerry Sutcliffe (Labour, Bradford South)

The appeals mechanism came into existence in the Consumer Credit Act 1974. The provision that the hon. Gentleman requires is covered by the Consumer Credit Licensing (Representations) Order 1976, which sets out what is required by the OFT. The difference will be that we take out the words ''Secretary of State'' and insert the words ''new tribunal''. I ask that he withdraw the amendments.

Laurence Robertson (Conservative, Tewkesbury)

Okay, but—[Laughter.]

Chris Bryant (Labour, Rhondda)

Look behind you.

Laurence Robertson (Conservative, Tewkesbury)

I have been in many small minorities during Divisions of the House of Commons, but a minority of one or two is perhaps going a bit far. I am still a little concerned about the Minister's explanation in as much as the Bill sets out several requirements of the OFT. It would not be over-onerous to set out that final paragraph. It would be a standard document and, in the interests of consolidation and clarification, I do not see that there is a problem.

Gerry Sutcliffe (Labour, Bradford South)

It must be done under the provisions of the 1976 Order. It is unnecessary to reinsert it; it is already there.

Laurence Robertson (Conservative, Tewkesbury)

I am happy to accept the Minister's assurance. I wonder whether any of the other matters are set out in other legislation, and, if so, why they are repeated. Perhaps that stretches the point a little too far. [Interruption.] Even though reinforcements have arrived behind me, I shall not press this matter to a Division. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Laurence Robertson (Conservative, Tewkesbury)

I beg to move amendment No. 41, in clause 53, page 44, line 11, at end insert—

'(c) the effect such a penalty will have on the ability of the person to continue to run the business.'.

Clause 53 deals with penalties that may be imposed by the OFT. Subsections (2), (2)(a) and (2)(b) state that

''the OFT shall have regard (amongst other things) to . . . any penalty or fine that has been imposed on that person by another body in relation to the conduct . . . other steps that the OFT has taken or might take under this Part in relation to that conduct.''

I wonder whether it is necessary—it may not be, because the original wording says ''amongst other things''—for the OFT to take into account the continuing ability of the person to run that business. For example, a court could consider whether removing someone's driving licence might be too drastic a measure. If it means that that person could not earn a living, the court might reduce the sentence.

That brings to mind what the Liberal Democrat spokesman, the hon. Member for Gordon, said about the OFT being neither one thing nor the other. I accept that it can do some things, such as making companies change their conduct. However, the OFT should be able to take account of a company's circumstances in relation to fines. It may not want to impose a heavy fine that could put a company out of business or make it unable to carry on its business. Perhaps that should appear on the face of the Bill.

Gerry Sutcliffe (Labour, Bradford South)

The amendment gives me an opportunity to reassure the hon. Gentleman and to explain the process for civil penalties. I hope that he will understand why his amendment is unnecessary.

To reiterate the point made by the hon. Member for Gordon, there are three positions. The OFT requires the licensee to change their behaviour in order to avoid any further licensing action; that acts as an incentive for the licensee to improve. These are the requirements: at the penalty stage, a sum of up to £50,000 is in place; if that penalty does not work, there is a sanction to withdraw the licence. The OFT would take into account the impact of a civil penalty when a licensee's ability to run a business was being assessed. Reputable businesses that comply with requirements have nothing to fear; penalties will be imposed only when requirements are breached.

The philosophy is that if a business is not operated properly, requirements will encourage a change of behaviour. If that does not work, penalties will come into play. If penalties do not work, the ultimate sanction is there. Those are reasonable processes, and appeal mechanisms are also in place, and those measures are set out on the face of the Bill. Given my explanation, I hope that the hon. Gentleman will withdraw his amendment.

Laurence Robertson (Conservative, Tewkesbury)

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 53 ordered to stand part of the Bill.

Clause 54 - STATEMENT OF POLICY IN

Laurence Robertson (Conservative, Tewkesbury)

I beg to move amendment No. 42, in clause 54, page 44, line 34, at end insert

', who shall have the power to order that the statement of policy shall be amended if he is not satisfied with it.'.

Clause 54 concerns a statement of policy in relation to civil penalties, which the OFT is obliged to publish. Proposed new section 39C(3) in the 1974 Act says:

''No statement of policy shall be published without the approval of the Secretary of State.''

My amendment is partly a probing amendment, although not entirely. I want to test what exactly subsection (3) means. Does it mean that the Secretary of State must be satisfied with the details of that statement? I would be happy if that were the case, because hon. Members will recall that I have just once or twice been slightly critical of the OFT and the extra powers it will gain. I am happy for the Secretary of State to be required to approve the statement before it is published. That is the probing part, to which I would like an answer.

My amendment, however, goes a little bit further and clarifies subsection (3) if that is not to be the case. It gives the Secretary of State the power to order that the statement of policy be amended if he is not satisfied—in other words, to avoid getting to the point at which he is not satisfied and then nothing seeming to happen from there on.

That is important, because the OFT's imposition of civil penalties is a serious matter. It may turn out that the OFT is too heavy handed in the way in which it imposes penalties, or it may turn out that it is not heavy handed enough. At some point, the Secretary of State should be able to affect that. I will not go over the horse racing analogy, which hon. Members had to sit through on Tuesday, in which the Secretary of State could not intervene or make any particular difference. However, with a body as powerful as the OFT, the Secretary of State should have some ability to affect what it does. When I say the Secretary of State, I mean that Parliament should have an ability to affect what the OFT does. I would like an explanation of that.

May I test your patience just for one minute, Mr. Benton? This is the final clause that relates directly to the OFT. I remain concerned by the OFT's power, and by Parliament's lack of ability to affect what it does. The Minister has said that the OFT frequently appears in front of Select Committees, but we all know that Select Committees do not have any power to affect what the OFT does. They can produce a damning report, and that may or may not happen in the future, but I remain concerned by the lack of parliamentary control over the OFT and by hon. Members' lack of ability to represent their constituents with regard to the way in which the OFT works. I would like to put that on the record. The Bill has added to my concerns in many ways, and I have gone through those concerns in great detail. I will not repeat them now, but I do want to say that I am very concerned about it indeed.

Gerry Sutcliffe (Labour, Bradford South)

I recognise the problems that the hon. Member for Tewkesbury has had with the OFT, not least the issue around the racing analogy. Cheltenham racecourse is in the hon. Gentleman's constituency, and that clearly could have had an impact on his constituents. I understand his view of the OFT, but I have tried to explain some of the safeguards that are in place that relate to the OFT and its powers, how it reports and how it is accountable to Parliament.

With regard to amendment No. 42, I agree that the Secretary of State should have some control over the statement of policy on civil penalties. The statement of policy will set out details of the circumstances in which the OFT would impose civil penalties and would set out the level of civil penalties. It is right that the Secretary of State should approve a policy statement before it is published, and that is exactly what clause 54 ensures, stating that no statement of policy should be published without the approval of the Secretary of State. In the unlikely event of the Secretary of State's not approving the policy statement, and if the OFT does not make amendments to it, the statement could not be published. Until a statement is published the OFT cannot impose civil penalties on licensees. Therefore the clause offers an additional safeguard. Having been given that assurance, the hon. Gentleman will, I hope, withdraw the amendment.

Laurence Robertson (Conservative, Tewkesbury)

With the Minister's—I almost said ''Secretary of State's'', although I am sure that that is only one reshuffle away if a general election does not intervene—very clear explanation of how the clause will work, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 54 ordered to stand part of the Bill.

Further consideration adjourned.—[Mr. Watson.]

Adjourned accordingly at Six minutes past Eleven o'clock till this day at half-past Two o'clock.

Standing Committee E

Consumer Credit Bill

Laurence Robertson (Conservative, Tewkesbury)

On a point of order, Mr. Benton. A few minutes ago, I tried to get into this Room to retrieve papers and to prepare for the debate. I was told that Members could not enter the Room until 2.30 p.m. I pointed out that the Committee started at 2.30 p.m., and that that would make me late, but I was still refused access. I bumped into you in the corridor and protested further. The person responsible for unlocking the Room made another telephone call and was eventually told that hon. Members could enter the Room once the Chairman had appeared. Could you, through your good offices and as a member of the Chairmen's Panel, look into this matter? It seems very hit and miss indeed? Perhaps the way forward might be to agree a time; say, a quarter of an hour before the Committee is due to sit. Some degree of certainty would be useful. It was the most ridiculous situation, and it should not occur again.

Joe Benton (Labour, Bootle)

Having experienced the same incident, I can say only that I agree entirely and I will ensure that some arrangement will be made.

Clause 55 ordered to stand part of the Bill.

Schedule 1 - Schedule A1 to the 1974 Act

Laurence Robertson (Conservative, Tewkesbury)

I beg to move amendment No. 48, in schedule 1, page 55, line 24, at end insert

'or for any other reasonable reason, providing that reason is stated.'.

Welcome back to the Chair, Mr. Benton. The amendment relates to paragraph 4 of schedule 1, which deals with the terms of office of the members of the consumer credit appeals tribunal panel. Sub-paragraph 2 states:

''The Lord Chancellor may remove a member of either panel from office on the ground of incapacity or misbehaviour.''

The meaning of ''misbehaviour'' is perhaps obvious. The meaning of ''incapacity'' might be open to some debate. Would it be helpful to the Lord Chancellor to have a slightly extended remit and to allow him to remove a member of the panel for

''any other reasonable reason, provided that reason is stated.''?

That might enable the Lord Chancellor to ensure that the panel is flexible and able to understand all the issues likely to come before it.

Gerry Sutcliffe (Labour, Bradford South)

I, too, welcome you to the Chair, Mr. Benton. I have not been out to lunch today so my memory will not be impaired. I fully remember the issues that we discussed this morning.

I would like to go through my case with regard to amendment No. 48, and then perhaps we can explore it further. The only grounds on which the Lord Chancellor may remove a member of the appeals tribunal from office are incapacity or misbehaviour. The schedule does not change the current position of members of the existing panels. There are strict requirements for the qualifications of panel members, which are set out in paragraph 3 of schedule 1.

Once the Lord Chancellor has appointed the members, they are entitled to a full term of office unless they are incapacitated or misbehave. It is imperative that members of the tribunal are certain of their security of office. The schedule makes the reasons for removal very clear. It also makes it clear that tribunal members should hold and vacate office in accordance with the terms of their appointment, which will be determined by the Lord Chancellor.

Further to that, the selection of particular members of the tribunal to hear each appeal shall be carried out in accordance with arrangements made by the tribunal president. That enables the president to take into account members' availability and particular areas of expertise. Of course, the Lord Chancellor does not have to reappoint any member once their term of office comes to an end. That is the case that we wish to pursue with regard to this amendment. However, I am interested to hear whether the hon. Gentleman wishes to discuss it further.

Laurence Robertson (Conservative, Tewkesbury)

The Minister has given a sympathetic response, but he appears to be fishing for more information from me. I do not think that I can explore the matter any further.

Gerry Sutcliffe (Labour, Bradford South)

I am not wildly opposed to what the hon. Gentleman says. There are established criteria, but I will give a commitment to consider the issue of reasonable grounds. If we are able to amend those we will, and if we are unable to, I will ensure that the hon. Gentleman gets the reasons for that.

Ian Liddell-Grainger (Conservative, Bridgwater)

Perhaps I can help the Minister a bit. The Committee on Standards in Public Life has a code of practice. Would the Minister consider incorporating part of that? It is not applicable to most of this, but there is a serious set of guidelines that could be used. Perhaps the Minister will consider that; it may be helpful.

Gerry Sutcliffe (Labour, Bradford South)

I am happy to do that. I must be careful not to start off the afternoon by—[Interruption.] Does my hon. Friend wish me to give way?

Chris Bryant (Labour, Rhondda)

No.

Gerry Sutcliffe (Labour, Bradford South)

I thought that my hon. Friend was trying to be helpful again.

In the spirit of the amendment, we will examine that matter—I wish to reassure the Committee on that. However, if, in the spirit that I am trying to engender, I somehow drop myself in it, I am sure that the hon. Gentleman will accept it if we are unable to do as he wishes. We will consider the idea of ''any other reasonable reason'' as an additional test.

Laurence Robertson (Conservative, Tewkesbury)

I am happy to accept that. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 1 ordered to stand part of the Bill.

Clause 56 - Appeals to the Consumer Credit Appeals Tribunal

Laurence Robertson (Conservative, Tewkesbury)

Clause 56 concerns appeals to the consumer credit appeals tribunal. In a wider context, can all OFT determinations be appealed to the tribunal? Does leave have to be sought, or is there an automatic right of appeal? Perhaps the Minister could clarify those two points.

Gerry Sutcliffe (Labour, Bradford South)

I shall try to do that. As the hon. Gentleman said, the clause relates to the new consumer credit appeals tribunal. That tribunal is being established to hear appeals against determinations of the OFT, and it replaces the current system of appeals to the Secretary of State. The clause amends section 41 of the Consumer Credit Act 1974, which contains the existing provisions for appeals against OFT determinations. The clause would repeal subsections (2) to (5) of section 41 and insert the new subsections proposed in subsection (2).

Appeals should be made by sending the tribunal notice of appeal in the form specified by the rules. Appeals are be carried out by way of a rehearing, which means that the merits of the case are considered by the tribunal on the day that the appeal is heard. The tribunal will then able to consider evidence that was not available to the OFT at the time that it made its determination. There is no requirement for leave to be granted to appeal determinations of the OFT to the new tribunal. I hope that that is helpful.

Question put and agreed to.

Clause 56 ordered to stand part of the Bill.

Clauses 57 and 58 ordered to stand part of the Bill.

Clause 59 - Financial services ombudsman scheme to apply to consumer credit licensees

Sally Keeble (Labour, Northampton North)

I am grateful for the chance to ask questions about this important clause, which sets out the proposals for the extension of the ombudsman scheme to cover consumer credit licensees. In a sense, the OFT deals with the trade end of the regulations, and this provision deals with the consumer end. I have always found the ombudsman's services—in all matters with which it deals—extremely helpful and important because it provides a chance for people to get justice and redress without going to court.

I would welcome clarification of some of the terms used in the clause. It seems that it would be only in the cases of regulated credit, loans and debt that people will have recourse to the ombudsman's service. Will the Minister clarify that, because the clause states the condition that respondents must have possessed a standard licence at the time that the complaint relates to. Subsection (3) also states that the provision applies to firms that provide consumer credit, to businesses as they relate to debt counselling, and to businesses as they relate to debt collecting. Does that refer only to the consumer credit companies and any advice they might provide on debt management, or does it refer to a different category of business altogether?

Will my hon. Friend also explain how the scheme will operate and how much promotion there will be? I note that some statements on this matter refer to the provision of information, the relationship between the ombudsman and the Office of Fair Trading and the exchange of information between them. It is important that members of the public, who may be in debt and who may feel that this provision is a source of redress for them, understand how they can access it. It is important that they know that this big expansion of services has taken place. I suspect that the provisions will be extremely important for some of our constituents, particularly those who have had problems with credit, even in cases where that credit came from registered companies. I shall return to that matter later.

Will my hon. Friend explain the relationship between this clause and unregulated debt? I am thinking about two types of debt. Normally, if constituents come to us with debt problems, they have not only one debt, but a whole host of them. Some concern credit cards and other such loans, and some concern the public sector. I ask the Minister to address public sector debt, especially its relationship to private sector debt. I shall give an example, and I hope that it will not delay the Committee too much.

One of my constituents started with quite a small debt of £10 or £15 for a parking ticket and £53 for a second parking ticket, which he disputed. The constituent received income support. He did not pay the fines, and that was entirely his fault, but by the time Northampton council sent the bailiffs round, the debt had escalated to £600. Three days before Christmas, the bailiffs took his sofa, his dining table and chairs and his television set. Three days before Christmas, that is a disaster. He got a £600 loan to pay off the debt, which will take him a couple of years to repay.

Finally, I am also concerned about the article that my right hon. Friend the Member for Leeds, West (Mr. Battle) mentioned this morning, which I too saw in the Financial Times, which addressed debt management and the fact that people who are most in need get credit from pawnbrokers and informal money lenders. Those are businesses in which we want to prevent sharp practice. We wish to see an improvement in the way in which credit is provided. Businesses must conform to the best practice in the industry because people need credit. What happens when people have problems with a loan shark? Presumably, if a business does not have a licence, the debtors will not have any redress through the ombudsman. We must make sure that those people can be brought into the equation.

I welcome the extension of the financial services ombudsman's remit. I hope that we will receive enough information to ensure that when our constituents experience difficulties, they can benefit from the service.

Paul Farrelly (Labour, Newcastle-under-Lyme)

I apologise for missing the start of the debate.

I welcome the extension of the ombudsman's jurisdiction to hear complaints against the holders of consumer credit licences and many of their nefarious, oppressive and exploitative practices—I do not intend to mince my words, Mr. Benton. The ombudsman will not be a panacea, but it will provide an alternative forum for consumers and another fount of bad publicity for bad behaviour. Regulatory competition might spur people on to improve their act. I do not include the Minister in that statement; he has done a great job in piloting the Bill. In particular, however, I do include the Office of Fair Trading. Let me tell my hon. Friend why I say that, and why I called for better enforcement during our discussions on Tuesday. I shall also tell him why I support additional powers and the involvement of the financial services ombudsman.

In various guises—as a business adviser, journalist and financial editor—I have had 20 years' experience of dealing with the OFT. Year after year, I have seen Sky television run rings around competition regulators. The only recent notable high-profile success by the OFT that I can remember was its busting up—wait for it—a price-fixing ring for replica football shirts. From the press, I now note that it is the Serious Fraud Office, not the OFT, that is pursuing alleged cartels of multinational drugs companies that are involved in the altogether more serious issue of fixing the prices of medicines.

The OFT started to examine penalty charges in 2004, after publication of the Select Committee's first damning conclusions. The OFT has now written to eight major credit card providers as part of that ''investigation''. The director-general of Fair Trading, Sir John Vickers, wrote to the Committee in October. His letter stated:

''We found that different card issuers use different accounting policies and bases for charging, some of which, in our preliminary analysis, are of questionable validity under the regulations on unfair terms in consumer contracts.''

In January 2005, in response to enquiries from The Guardian, the OFT said that it was still investigating the issue. Today, in response to enquiries from my office, the OFT said, again, that it was still investigating. It had contacted the eight companies, but it could not comment any further. It could not say how long the investigation would last, nor when a report might be drawn up or any announcement made.

Like other hon. Members, I appreciate the need for time and confidentiality to undertake serious inquiries such as this one. However, these well-known practices have dragged on for years. Only yesterday, Seymour Fortescue, the chief executive of the Banking Code Standards Board, condemned the charges as being indefensible. Have we seen, however, any conclusions or action from the OFT?

In 2004, one of the credit card companies, the US-based MBNA, told its shareholders that it might have to reduce late-payment charges in the UK, and that that might affect its profits. That was more to do with stringent reporting requirements in the USA, where they know a thing or two about cracking down on unfair trading practices, than the prospect of any imminent action by the OFT.

I understand the need to take proper legal advice, particularly when confronted by batteries of highly paid City lawyers and barristers from the banks on the other side. However, there is plenty of good free legal advice, and that has been the case since the 1974 Act. With regard to that issue, I draw the attention of Committee members to an article in The Guardian in August 2004 by the eminent barrister Richard Colbey.

We all remember, before 1997, how well the old Securities and Investment Board, as part of the City's self-regulation, kept the perpetrators of pensions mis-selling firmly under wraps, until this Government got in, and my right hon. Friend the Member for Airdrie and Shotts (Mrs. Helen Liddell) forced the board to do a U-turn on naming and shaming, and we all know what an effect that had.

That is the sort of spine that I want the OFT to have. It is the sort of spine the financial services ombudsman will have in dealing with consumer credit issues, and I hope that some regulatory competition from the ombudsman will do the OFT and consumers the power of good.

Ian Liddell-Grainger (Conservative, Bridgwater)

I wish to ask the Minister for clarification on three areas. First, who will be the gatekeeper to the ombudsman? Will it be Members of Parliament, or will people be able to approach the ombudsman directly? Part of the issue concerns compulsory jurisdiction. It would be helpful if we knew how people will be able to approach the ombudsman.

Secondly, may we have some clarification on subsection (5)? It says:

''The approval of the Treasury is required for an order under subsection (2)(e).''

Subsection (2)(e) reads:

''at the time of the act or omission that type of business was specified and an order made by the Secretary of State''.

Is the Secretary of State then subservient to the Treasury, or will the Treasury be dictating rules on how an individual can bring a complaint to the ombudsman? I am not sure that I quite understand what either provision is intended to achieve. If the Treasury cannot deal with the matter, it seems to go back to the Secretary of State. If that is the case and there is a disagreement between both, the problem then arises that there is no one to make the decision. Would the Treasury and the Secretary of State then go to the ombudsman? I hope that the Minister agrees that that would be ridiculous.

Thirdly, under subsection (2)(f), if the complaint cannot be dealt with under the compulsory jurisdiction, what mechanism will deal with it? Will the complaint be automatically returned to the ombudsman, or does that provision relate to the period before the ombudsman becomes involved? If so, would the individual take the complaint, or would that be done through the Minister's office or by some other mechanism of which I am not aware?

Gerry Sutcliffe (Labour, Bradford South)

It is proper to spend a little time on this clause, because it introduces a new consumer redress system and is using the financial services ombudsman as the vehicle to do that. I will try to return to the specific issues raised by my hon. Friends the Members for Northampton, North (Ms Keeble), and for Newcastle-under-Lyme (Paul Farrelly) and the hon. Member for Bridgwater (Mr. Liddell-Grainger). Setting out the purpose and detail of the clause may help hon. Members in their appreciation of what we are trying to achieve.

The clause introduces a compulsory alternative dispute resolution scheme to hear complaints about consumer credit matters. Consultation showed that consumer and industry groups strongly supported the introduction of an ADR system for consumer credit. In most cases, consumers have no other option than to go to the courts to seek redress against unfairness. That often proves daunting and expensive for consumers and industry. Most credit provided by banks and building societies is already covered by ADR, and some trade associations run their own ADR schemes. However, access for consumers to ADR is not universal, and business can, in many cases, opt out.

ADR will provide wider and easier access to an efficient and cheap process of dispute resolution for both consumers and industry. It means that most consumers no longer have to be worried about going to court to challenge unfairness and will allow agreements to be settled quickly and simply. Consumers will have a better chance of obtaining fair redress against unfair practices, and it will encourage fair standards throughout the industry.

Ultimately, these changes will increase consumer confidence in the market, which in turn benefits the industry. As has been said, the ADR will be provided by the financial ombudsman service. The FOS was chosen as the ADR provider for consumer credit matters because it already deals with financial sector services generally. Under the Financial Services and Markets Act 2000, the FOS provides ADR for two existing jurisdictions: the voluntary jurisdiction and the compulsory jurisdiction; this clause adds a third—the consumer credit jurisdiction.

Around 80 per cent. of people who responded to the consultation said that they would like the FOS to provide ADR under the Consumer Credit Act 1974. The FOS's experience and expertise, which has been recognised by members, will ensure a smooth transition to the newer ADR scheme more than any other provider.

Clause 59 describes the conditions that must be satisfied for a complaint to be dealt with by the FOS. It also states how different activities will be made subject to the consumer credit jurisdiction. The Secretary of State for Trade and Industry will introduce types of credit businesses into the consumer credit jurisdiction by means of an order. It will be agreed with Her Majesty's Treasury Ministers and will set out one or more of the types of business in the new licence categories. These are: consumer credit business; consumer hire business; credit brokerage; debt adjusting; debt counselling; debt collecting; debt administration; credit information.

Sally Keeble (Labour, Northampton North)

I would be grateful for clarification on debt counselling and debt advice. Is the Minister talking about businesses that sell the services, such as independent financial advisors? Can he rule out bodies such as citizens advice bureaux and housing, money and advice centres, which may have a company structure, but which consider themselves part of the voluntary sector? If he does not know the answer, perhaps he could provide it in writing.

Gerry Sutcliffe (Labour, Bradford South)

If my hon. Friend bears with me, the position may become clearer. To finish that list, I should add credit information services and credit reference agencies. Different types of businesses will be introduced on a staggered basis. The rate at which businesses are introduced into the consumer credit jurisdiction will be agreed with the Treasury after consultation with the FOS and the Financial Services Authority. That will ensure that the FOS can cope with the additional workload and will not be at risk of being overloaded, which was an issue raised on Second Reading.

When a type of business is introduced, the FOS will make rules setting out the activities that it will consider to be within the remit of that type of business. That will provide maximum symmetry between the existing compulsory jurisdiction covering banks and building societies and the new consumer credit jurisdiction covering consumer credit firms.

Sally Keeble (Labour, Northampton North)

I am sorry to come back, but my hon. Friend may wish to write to me afterwards. I want to make absolutely sure that people who provide advice through organisations such as housing, money and advice services and citizens advice bureaux, which provide financial advice, will not be taken to the ombudsman.

Malcolm Bruce (Liberal Democrat, Gordon)

They are not licensed.

Gerry Sutcliffe (Labour, Bradford South)

That is the point. The hon. Gentleman said that they are not licensed; but they are licensed. Citizens advice bureaux have a group licence, and group licences will not be covered.

Sally Keeble (Labour, Northampton North)

So, they will not be covered?

Gerry Sutcliffe (Labour, Bradford South)

No, they will not. The new rules will ensure that a consumer's ability to obtain redress is balanced with the FOS's capacity to deal with the extra work. The FOS will also make procedural rules regarding the operation of a consumer credit jurisdiction. The FOS must hold a public consultation before making any rules, and the rules must be approved by the FSA.

Ian Liddell-Grainger (Conservative, Bridgwater)

Is the Minister saying that if the rules are changed after the order is made so that the Treasury can decide that it wants other things to be included, that will be done as part of an amendment, so that the rules can go into jurisdiction within the existing orders.

Gerry Sutcliffe (Labour, Bradford South)

Yes. That will become clear. The FOS must hold a public consultation before making any rules, and the rules must be approved by the FSA. For the FOS to become involved, the consumer must want the FOS to be eligible and to deal with complaints. A person is eligible if they are the individual, or are directly related to the individual through the agreement, and they are covered by the FOS rules.

The credit business must have held a standard licence at the time of the complaint; the complaint must fall under a type of business included in the consumer credit jurisdiction; the complaint must also be outside the FOS's compulsory jurisdiction. That ensures that businesses do not become subject to multiple jurisdictions.

Consumers can take complaints about firms to the FOS. On receiving a complaint from a consumer, the FOS will first check that the firm's internal complaints handling procedures have been exhausted. At present, firms have eight weeks to settle complaints before the FOS becomes involved. If at the end of this period a complaint has not been resolved, a firm will be obliged to let the consumer know about the FOS. If the criteria mentioned earlier have been met, the FOS will look into a complaint. The FOS will first try to settle a complaint informally before opening a case. If that is unsuccessful, the FOS will open a case to investigate a complaint.

Ian Liddell-Grainger (Conservative, Bridgwater)

Will the Minister give way?

Gerry Sutcliffe (Labour, Bradford South)

I should like to continue. My statement may generate more questions, so it may be helpful if those who have questions wait until the end.

Much of the FOS's work is carried out by correspondence so that neither consumers nor businesses need appear at a hearing. After considering a case the FOS will issue adjudication. A member of FOS staff other than the ombudsman could handle that stage of a case. If either party is unhappy with the adjudication it can request that the ombudsman review the assessment and make a determination. The FOS's decisions are based on what is fair and reasonable in each case. The FOS takes into account the law, the regulations, the regulator's rules, the relevant codes and good industry practice. That ensures that within the legal framework, the FOS can come to a practical, common-sense solution that has a better chance of being accepted by all parties. The FOS can order a range of imaginative redress mechanisms from either party to effect a just and amicable solution.

If the consumer accepts the ombudsman's final decision, it is binding on the business. The FOS's decision can be enforced through the courts, and the FOS can inform the OFT of its determinations so that the OFT can take any necessary regulatory action. The clause is necessary to provide consumers with better and more accessible opportunities.

My hon. Friend the Member for Northampton, North raised the disturbing case of the parking fine that escalates to £600 that in turn goes to a loan shark. She was correct to point out that the Bill does not regulate public debt. The Government believe that that would be outside the scope of the Bill. None the less, such issues must be tackled. That is why the Government launched its indebtedness strategy last year. It brought together groups from the public and private sectors. Particularly in the public sector, in local government and in central Government, the strategy examined how government itself contributed to debt in how it collected its payments and how it tracked individuals.

The case that my hon. Friend raised, therefore, provides a good example of where things can go wrong, and I hope that that will influence the direction of that indebtedness strategy. To widen the scope to public debt would push the FOS too far outside its area of expertise, and it is outside the scope of the Bill. The FOS may take other debts into consideration but only in relation to the circumstances of the case and where regulated to other bodies.

My hon. Friend the Member for Newcastle-under-Lyme gave his view on the Office of Fair Trading and his experiences of it over many years. His comments are on record, and I am sure that the OFT will be clear on what he said about how he feels it operates. I think that he was a little harsh. The Government recognised, through the Enterprise and Competition Acts, that it was important to ensure that the UK has a strong competition regime, and according powers to the OFT and the Competition Commission develops that. The developing expertise has led to the UK's being recognised as one of the leading competition regimes in the European Union and beyond.

Malcolm Bruce (Liberal Democrat, Gordon)

I do not wish to join in the collective OFT bashing, but does not half the problem lie in what the Minister has just said? There is understandable confusion in the public mind about a body that is called the Office of Fair Trading, but which when one takes fair trading issues to it says, ''No, that's not our responsibility; it's competition that we are dealing with.'' The name is wrong, because it does not describe the function, and that leads to considerable frustration and disappointment.

Gerry Sutcliffe (Labour, Bradford South)

The hon. Gentleman has put his comments on record, and I am sure that the OFT will look at that. There may be an opportunity if it is necessary—it is not at this stage—as we review the effects of the Enterprise and Competition Acts to look at how those organisations are working and how his comments fit in. It is an important move away from the idea that Ministers should take the final decision on competition issues. It is better that there be a detailed, professional look at the issues.

Ultimately, as I said earlier, the OFT must appear before the various Select Committees and must meet the Secretary of State for Trade and Industry. The OFT's developing expertise is important and progressive. The position of financial services ombudsman is established and works well in other jurisdictions. I hope that this will not be a soft touch. That would be a tragedy given the spirit in which we have worked on the Bill. We have worked with all stakeholders, be it industry or consumer groups, to get to the right level. We have talked about responsible lending and borrowing to ensure a fair approach and to ensure that, when people enter into agreements, they fully understand them for the lifetime of those agreements.

Paul Farrelly (Labour, Newcastle-under-Lyme)

I am glad that the Minister said that I was only a ''little harsh'' rather than ''very harsh'' about the OFT. My OFT bashing was not meant to be a criticism of the Bill, which is a wonderful step in progressing regulation. I was pointing out that I hope that some regulatory competition, with a bit of backbone, will help the OFT to become a harder touch.

Gerry Sutcliffe (Labour, Bradford South)

I acknowledge my hon. Friend's point. I assure the Committee that I meet regularly with the director-general of the OFT, Sir John Vickers. Sir John will leave his post later in the year, and there will be a replacement. We will have to look at how people see the OFT's role in the context of the Bill. I acknowledge the concerns raised and will pass those on to the OFT. The hon. Member for Bridgwater asked several questions. I am not sure that I have answered them, so I shall give him the opportunity to reply.

Ian Liddell-Grainger (Conservative, Bridgwater)

I have two supplementary questions. One concerns the delay in the FOS deciding what the outcome will be. One problem with such cases has always been that they can drag on interminably. The second issue is that the Minister said that either party can go to the ombudsman. As I said on the Select Committee on Public Administration, which deals with the ombudsman, the ombudsman is swamped most of the time. The problem is that either party could decide that it is much easier simply to make their views known and pass the matter to the ombudsman, which would cause an enormous delay.

The hon. Member for Northampton, North very eloquently expressed how emotional the process is. The Minister knows that the longer the delay, the more the credit piles up, and the situation becomes much worse. There is the potential for a delay of three or four months, perhaps longer, if there is no agreement when it reaches the ombudsman.

Finally, I refer to the matter of a complaint being dealt with by the ombudsman on the condition that it cannot be dealt with under the compulsory jurisdiction. The Minister mentioned voluntary and compulsory jurisdiction. When does one become the other? If the complaint cannot be dealt with under the voluntary jurisdiction because one party does not agree, is the matter then resolved under compulsory jurisdiction? Could the Minister clarify that?

Gerry Sutcliffe (Labour, Bradford South)

We are adding a third jurisdiction—the consumer credit jurisdiction. I take the point about the time delay. One of the industry's concerns was that many complaints would be piled on to the ombudsman, in the way that the hon. Gentleman mentioned. A levy is to be applied to the industry to deal with the costs of the issues surrounding ADR. Firms must deal with complaints with their own structures within eight weeks. They must prove that complaints have gone through all their in-house processes.

If the complaint has not been resolved after eight weeks, the firm must inform the consumer about the FOS, which can then become involved. A first attempt can be made to settle the complaint informally, not necessarily by the ombudsman himself. If that does not work, the ombudsman service will open a case and investigate. After consideration, an adjudication will be issued. If either party is unsatisfied, the ombudsman will make a formal determination. A benefit to the consumer is that if they accept the final decision, it becomes binding on the business and can be upheld by the courts.

With regard to the point about the additional workload associated with the consumer credit jurisdiction, the FOS is well resourced in terms of staff expertise in consumer credit issues. It already handles a large proportion of consumer credit business under its existing jurisdictions, because banks and building societies provide about 75 per cent. of consumer credit businesses in the compulsory jurisdiction. The additional workload is not expected to be large. Estimates based on research conducted by MORI indicate that the FOS might expect to receive a maximum of about 13,000 additional consumer credit complaints a year. Any such increase is unlikely to overburden the FOS. Furthermore, much of the current FOS workload is made up of mortgage endowment complaints, and it is anticipated that the number of those complaints will begin to fall. In addition, the gradual phasing in of consumer credit activities to the FOS's jurisdiction will allow it to take on activities consistent with its capacity to handle the volume of complaints, given its workload.

There has been an increase of 57 per cent. in the number of cases received. The FOS has maintained its targets for dealing with complaints: 45 per cent. within three months, 80 per cent. within six months and 90 per cent. within nine months.

Ian Liddell-Grainger (Conservative, Bridgwater)

The Minister has almost answered his own question about the level of complaints to the ombudsman. Every Member knows how difficult it is to get the ombudsman to deal with complaints. I have two suggestions for the Minister: first, will he examine the possibility of a credit ''holiday'' so that interest does not continue to rack up?

Sally Keeble (Labour, Northampton North)

An interest holiday?

Ian Liddell-Grainger (Conservative, Bridgwater)

Yes, I thank the hon. Lady for her help. Given the delay on the ombudsman's part, can the credit holiday option be examined?

Secondly, will the Minister examine the possibility of a definition of ''seriousness'', so that cases can be categorised. The ombudsman has been trying to pigeonhole cases into levels of seriousness. The hon. Member for Northampton, North spoke eloquently about the desperation factor. Some people will be able to pursue their cases, but many others will not, and they will have no choice. I am aware of the complexities, but if there are some 13,000 running cases, the situation will simply continue to deteriorate, and many cases will not be resolved until it is too late.

Gerry Sutcliffe (Labour, Bradford South)

I understand where the hon. Gentleman is coming from and what he is trying to achieve. The FOS can operate within its capacity with regard to targets. It will be able to cope with various businesses. During our discussions on other clauses, we dealt with accumulation of interest. I shall come back to the hon. Gentleman on that issue.

Sally Keeble (Labour, Northampton North)

I understand that it is important to have a freeze on interest while a case is being progressed. The Minister has reassured us that the FOS can deal with the number of cases. Can he also reassure us that the FOS is geared up to deal with various types of cases? Does it have the necessary skills to deal with people who have small debts that they find it impossible to manage? Complaints about administration and technical issues may be well-founded, but the FOS may not be familiar with certain types of complaints. I have referred certain cases that I can well imagine would be difficult to deal with.

Gerry Sutcliffe (Labour, Bradford South)

I refer my hon. Friend to my previous remarks about the consultation process and how we arrived at the FOS with regard to stakeholders working with the industry and consumer groups that understand the complexity of the disagreements and the ensuing problems. I strongly suggested that the FOS was the appropriate route because of its experience and its ability to operate in other jurisdictions.

Information on interest has not yet been forwarded to me. We must be careful not to micro-manage the FOS; we must trust its expertise and independence. I can only say to the hon. Member for Bridgwater that I think that we have covered the issue of accumulated interest and what can be done about it. [Interruption.] On the other hand, in news just in, I am now told that we have not examined situations when debt interest stops. The Bill has no provision to stop interest being charged in such situations. I shall investigate that issue.

Ian Liddell-Grainger (Conservative, Bridgwater)

Perhaps I could help the Minister. All members will agree that it would be unacceptable for that scenario to continue. When the situation becomes compulsory rather than voluntary, perhaps the Government should think about letting the guillotine down. The hon. Member for Northampton, North is right; this situation cannot be allowed to continue. We know that the FOS can run out of time and cases could continue for three or four months. The Minister decided voluntarily to take things to that stage. If it becomes compulsory, it is because it needs to be taken further. Perhaps the Minister could consider that as a cut-off time.

Gerry Sutcliffe (Labour, Bradford South)

I am happy to do that. However, the ombudsman can deal with a complaint in various ways, and he may be able to deal with that matter through the consideration of cumulative interest.

Ian Liddell-Grainger (Conservative, Bridgwater)

It gives him the chance.

Gerry Sutcliffe (Labour, Bradford South)

In that spirit, we shall examine those issues in the context of financial ombudsman service solutions. I hope that that explains everything.

This has been an important debate, as the system that we are introducing is new. I hope that, in the light of the caveats that I have provided, hon. Members will accept the clause.

Question put and agreed to.

Clause 59 ordered to stand part of the Bill.

Schedule 2 agreed to.

Clause 60 - Funding of ombudsman scheme

Laurence Robertson (Conservative, Tewkesbury)

I beg to move amendment No. 44, in clause 60, page 49, line 41, at end add—

'(16) No licensee shall have to pay to the Ombudsman or its scheme operator any money until such time as the case is decided against him.'.

Perhaps I could provide a little background on how I see the situation, not just on the funding of the ombudsman scheme that clause 60 deals with, but with the general principle. I can illustrate my point with an example. Some time ago, one of my constituents who was an independent financial adviser was reported by a client to the authorities. He was charged £500 for the pleasure of having his case heard. The complaint against him was dismissed, and it might be reasonably assumed that he could claim back his £500. I am afraid that that was not the case. That seems very wrong for two reasons. First, why should he pay anything when the case was dismissed? That seems to fly in the face of justice; we do not normally fine people who have not committed an offence. Secondly, it gives rise to the possibility that vexatious litigants keep reporting someone whom they do not like until that person is bankrupt.

My amendment states:

''No licensee shall have to pay to the Ombudsman or its scheme operator any money until such time as the case is decided against him.''

I do not see what objection there could be to such an amendment. I know that there is a precedent to the opposite effect; and I know that it may affect other legislation. However, I do not see how it can be fair that people should have to pay what are, in effect, fines when they have done nothing wrong. I look forward to hearing what the Minister has to say.

Gerry Sutcliffe (Labour, Bradford South)

It will come as no surprise to the hon. Gentleman that the Government will resist the amendment. It is a principle of the ADR scheme that it is self-funding, and amendment No. 44 could make that impossible. It is also a fundamental principle of the ADR that it should be free to the consumer. That ensures that all consumers have access to redress mechanisms, not just those who can pay for them. The ADR funding arrangements should recognise the unequal bargaining positions of firms and consumers. I seek to correct that imbalance so that cost is not a barrier for consumers when seeking redress.

Under clause 60, the ADR scheme would be funded by a modest annual levy, and a case fee will be payable by those businesses against which complaints are considered. There will be a levy and a case fee. The majority of firms will never pay the case fee. Their cases do not get as far as requiring ADR—

Sitting suspended for a Division in the House.

On resuming—

Gerry Sutcliffe (Labour, Bradford South)

To recap, I had said that the ADR scheme would be funded by a modest annual levy with the case fee payable by those businesses whose complaints are considered at ADR. I also said that the majority of firms will never pay the case fee if their cases do not get as far as requiring ADR. Firms that come before the FOS currently get the first two cases in a year free anyway. Therefore, ADR will be much cheaper for firms than going to court.

I am not clear how the proposal to fund the arrangements would work in the scenario offered by the hon. Member for Tewkesbury (Mr. Robertson). Case fees for businesses that lose cases will be likely to increase dramatically. The FOS takes all steps possible to ensure that firms do not pay unnecessarily for ADR. When the FOS receives a complaint, it attempts to resolve it informally before the case is opened. If it is successful, no case fee is payable. The FOS will consider a complaint only when a firm's internal complaints handling procedures have been exhausted; the FOS also has a screening system to filter out complaints that are obviously frivolous or vexatious. The outcome of the ADR is rarely as straightforward as simply upholding or dismissing a complaint; and the solution given by the FOS is often somewhere between a win or a lose for the consumer or the lender. As such it is not usually obvious whether a firm should pay the case fee or not.

It is vital that the FOS be independent of both consumer and firm, and it must be seen to be independent. A case fee determined by the success of a complaint would give the FOS a financial stake in its own determination, and that would undermine industry and consumer confidence in the ADR scheme. Although the Bill gives the lender many opportunities to avoid going as far as the ADR, it also ensures that the FOS remains self-funding. If the case fees are too small, firms may be put out of business, and we do not want that.

I hope that with that explanation the hon. Member for Tewkesbury will withdraw his amendment. If he does not, I shall have to ask the Committee to vote against him.

Laurence Robertson (Conservative, Tewkesbury)

As my hon. Friend the Member for North-East Bedfordshire (Alistair Burt) has said, the Minister has a reputation on the football field for letting nothing past him. However, that does not mean that the Opposition stops trying. In spite of the Minister's detailed response I am not satisfied that these arrangements are in keeping with the spirit of natural justice. At one point, the Minister said that if firms that were cleared of an accusation did not pay, those that had cases proved against them would have to pay more. Well, what is wrong with that? That is in keeping with the spirit of natural justice.

I accept that there may have to be an annual fee so that the body can operate. I do not dispute that; neither does my amendment. However, it is not right that a firm should have to pay a fee when the case against it is not proven and, indeed, is thrown out. That is simply not right. Therefore on this rare occasion the Minister has failed to persuade me that we should let this one go. As on the football field we shall have to try to slip this one past him. I realise that he has the officials on his side just as he has on the football field but I do want to press the matter to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 5, Noes 7.

Clause 62 - Monitoring of businesses by OFT

New Clause 1 - Credit-token specification

James Plaskitt (Labour, Warwick and Leamington)

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.

Malcolm Bruce (Liberal Democrat, Gordon)

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?

James Plaskitt (Labour, Warwick and Leamington)

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.

Chris Bryant (Labour, Rhondda)

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.

James Plaskitt (Labour, Warwick and Leamington)

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.

Laurence Robertson (Conservative, Tewkesbury)

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.

James Plaskitt (Labour, Warwick and Leamington)

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.

Paul Farrelly (Labour, Newcastle-under-Lyme)

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.

James Plaskitt (Labour, Warwick and Leamington)

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.

Alistair Burt (Conservative, North East Bedfordshire)

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.

Chris Bryant (Labour, Rhondda)

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.

Gerry Sutcliffe (Labour, Bradford South)

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.

James Plaskitt (Labour, Warwick and Leamington)

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?

Gerry Sutcliffe (Labour, Bradford South)

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.

Paul Farrelly (Labour, Newcastle-under-Lyme)

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?

Gerry Sutcliffe (Labour, Bradford South)

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.

James Plaskitt (Labour, Warwick and Leamington)

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.

New Clause 3 - Duties of lenders and debtors

Laurence Robertson (Conservative, Tewkesbury)

It may be helpful, to present this clause as clearly as possible, if I explain to the Committee the mischief that I seek to remove. I want to give an example, but it is by no means a single example; it happens all too frequently. A school in my constituency had been dealing with a company that supplied photocopiers. The company had a change of personnel and told the school that it could offer a new deal on a new photocopier. The school agreed. The company said that there was no need to fill in any forms, as there was a signature. The company said that it would sort everything out. The company duly supplied a new photocopier.

The problem was that the photocopier was not financed by the company; it was financed by a third party, Abbey National. It turned out that the agreement for the photocopier had been fraudulently drawn up—the police are investigating the matter as we speak. The problem was that Abbey National, which had no part in the fraud but which had supplied the money, asked for its £14,000 back. The school is a primary school, and £14,000 would have put a huge hole in its budget. I got involved and I got the police involved. Eventually, to Abbey National's credit, it reduced the amount to be repaid to a more realistic £4,000.

The difficulty was caused by the school's dispute with the company that supplied the photocopier. That company was acting as a credit agent for Abbey National, to which the school owed money. That is not an unusual situation; it often happens with hire purchase agreements. Problems can, however, arise. For example, let us suppose that the Minister is a car dealer from whom I purchase a car. Let us also suppose that you, Mr. Benton, finance that purchase. In that situation, I have an ongoing relationship with the financier—whom I have a duty to pay—rather than with the car dealer. Were I to cease my payments, you, Mr. Benton, as the financier have a legal redress, and may be able to seize the car. I, however, have no such comeback with the Minister, the supplier of the car. Such relationships are subject to agency law, which must be re-examined.

I seek to put a duty on the lender, not to go into minute detail, but to take all reasonable steps to ensure that his or her agent—who provides people with perhaps several thousand pounds—acts in a proper, professional, reasonable and legal manner. It is not unreasonable to expect that. Were we to turn it on its head and say that the downside for Abbey National—to return to the case I cited—would be that it would lose business, are we thus saying that most of its dealings are with crooks? That is not the case. In English law credit providers or financial services sellers are heavily regulated—they have to give best advice among other requirements. There is a difficulty in that those who act as their agents do not have to give the same duty of care to the people they advise. As a result, some people can get into terribly complicated situations.

I return to the example of the car dealer. There may be a way to get back to the initial dealer, but it is almost necessary to go nuclear. Agency law must be re-examined. I should be interested to hear whether the Minister explored that area of law.

Gerry Sutcliffe (Labour, Bradford South)

I am going to surprise the hon. Gentleman: I agree with his argument.

Laurence Robertson (Conservative, Tewkesbury)

There is not going to be a vote, then?

Gerry Sutcliffe (Labour, Bradford South)

There may still be a vote.

The hon. Gentleman eloquently set out the case for what is required. The 1974 Act already covers the points he raised. Section 56 determines the accountability of the lender for representations made by certain persons supplying goods and involved in negotiations to get consumers to enter into credit agreements. It makes lenders responsible for things said or done by such persons or agents.

The existing provisions go further than the hon. Member's new clause in that they apply not only to an actual relationship of agency, but in cases where a relationship can be inferred from the behaviour of the supplier. An agreement will be void if it purports to exclude any person, including the lender, from liability for any act or omission by the credit broker or the supplier acting as agent on their behalf.

In addition, section 75 of the 1974 Act provides that where a connection exists between the lender and the supplier of goods and services, the creditor will be ''jointly and severally liable'' for any misrepresentation or breaches of contract by the supplier. That would apply, for example, to purchases made with a credit card.

Given that the protection already offered to consumers under sections 56 and 75 of the 1974 Act not only covers but goes beyond the hon. Gentleman's points, I hope that he will see that his new clause is unnecessary. However, I understand the nature and detail of his argument.

Laurence Robertson (Conservative, Tewkesbury)

My problem is that when we looked into the situation involving the school and the photocopier, we seemed to be unable to move the case forward at all. That was despite taking legal advice, and, indeed because a school was involved, the legal department thoroughly examined the case. I will look at the case again and see whether the legal bods missed something. As I have often said, I am not a lawyer and cannot be expected to advise on the law. However, I want to re-examine the case, and perhaps we could return to it on Report, or consider it in another Committee.

Gerry Sutcliffe (Labour, Bradford South)

I will help to facilitate meetings with the officials and lawyers who advised me. That may help the hon. Gentleman to make progress with the case.

Laurence Robertson (Conservative, Tewkesbury)

I am extremely grateful to the Minister for his helpful response. I do not want to make this matter purely about me and my constituency. Many schools in Gloucestershire fell foul of that company in that particular situation. Any clarification will help at a national level, but it will also help those schools. The matter is not too small to be important so I am grateful to the Minister for his sympathetic response. With that in mind, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 4 - Liability of debtor on termination of hire-purchase etc. agreement

Laurence Robertson (Conservative, Tewkesbury)

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

This is our last throw in Committee so I shall try to make it a good one. This new clause refers to what is often termed the ''half rule'': the voluntary termination of a contract. To continue the car analogy, if someone enters into a hire purchase agreement to buy a car—having had such an agreement, I declare an interest—the law states that they may hand the car back at any time and be liable for only half of the due payments; that applies to the capital and the interest. I think that I have correctly understood the law.

On the face of it, that is beneficial to consumers who have a car and can hand it back as long as it is in a reasonable condition. The definition of ''reasonable condition'' can be problematic, but that is not the point I am making. The Finance and Leasing Association and other groups, such as motor manufacturers, financiers and rental companies, support my amendment. It may appear that handing the car back after three months, six months or halfway through the term benefits the consumer, but there is a problem. If that is costing the hire purchase companies a lot of money—I am advised that it is—somebody somewhere is paying for that. The hire purchase companies—I mean no disrespect to them—will not foot the bill themselves. If I hand a car back, somebody else will have to pay for it through slightly higher interest rates; indeed, I may have done so myself. Somebody somewhere has to pay.

The Finance and Leasing Association advises that between 80 and 90 per cent. of cars are handed back not because people have got into financial difficulties, but because that is the option available to them under those contracts. As a consumer, I have declared that interest, and I may indeed take advantage of the situation. Given that it is legal, there is no reason why people should not do so. However, that distorts the market and transfers to other people the responsibility of paying a fair price for the credit. Above all, it is a distortion of contract law.

It is neither a satisfactory way of doing business, nor is it beneficial to consumers or hire purchase companies. It is an area of the law that needs looking into, and, if I am correct, it emanates from the 1974 Act, which is 30 years out of date. I ask for the Minister's thoughts on the amendment and on the situation that I described. The Department has looked into the matter, so he may surprise the Committee and amaze me by accepting an amendment to the Bill for the first time, but I shall not hold my breath.

Gerry Sutcliffe (Labour, Bradford South)

The hon. Gentleman is right; I shall not be able to satisfy him, despite his valiant efforts and despite the many amendments that have been tabled even at this late stage. However, he is right to raise the matter, which was principally highlighted by the motor finance sector. It feels that financially savvy customers exploit the provisions by walking away from car finance agreements. One half of the amount has been repaid when such customers become aware that the remaining repayments exceed the residual value of the vehicle. Therefore, in handing the car back, they leave the finance company holding the loss.

The industry's views about the provisions are well known to the Government. That is why, at the end of last year, we consulted on its future. We hope to publish that consultation shortly. Hon. Members and the hon. Gentleman might not be surprised to learn that the responses vary greatly, depending on who gave them.

Whereas the lenders and the motoring industry fear the abolition of the provisions, groups that represent consumers and enforcers were equally adamant that those provisions should be retained. Having assessed the responses, we have concluded that section 100 and the right voluntarily to terminate should be retained. There are three main reasons why we have concluded that. The first is the lack of consensus, which I outlined. Views were polarised, and in such circumstances it would be difficult to justify the change.

The second reason is the compelling argument that we would need to remove an existing element of consumer protection. The right voluntarily to terminate is an essential provision of the hire purchase provisions—it is the consumer's key safeguard. Given that we cannot remove that right without calling the whole concept of HP into question, we do not believe that that argument has been made. Thirdly, the industry's economic evidence that it produced to support its claimed losses is open to interpretation.

The job of industry is to lobby hard, but we wonder whether changes in, for example, marketing practice and product design, which require large deposits, might alleviate the problem. We carefully considered the amendments—that is why we consulted—but on balance the responses to the consultation did not make an arguable case for repeal. In those circumstances, we believe that we should not remove those forms of consumer protection, and in the light of that explanation I hope that the hon. Gentleman will withdraw the motion and the new clause.

Laurence Robertson (Conservative, Tewkesbury)

The Minister has proved that he is an extremely good goalkeeper. He is also, to use the technical term in football, a very good sweeper: nothing has got past him.

He said that section 100 is about retaining consumer protection, which I do not wish to undermine. However, perhaps consumers are paying more for credit than they should be because of it. It is a matter of weighing up and interpreting the evidence, and of striking the right balance. The Department has already looked at section 100, but it may need to reanalyse the situation, as it could become a problem, because more and more cars are being sold—although the section does not apply only to cars. This rather strange area of law should be examined. The market was very different when the 1974 Act was introduced, and because of that—if for no other reason—section 100 should be looked at again in more detail. However, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 5 - Regulatory impact

Joe Benton (Labour, Bootle)

With this it will be convenient to consider new clause 6—

Office of Fair Trading: further duties—

'(1) The Office of Fair Trading (OFT) shall consult other financial agencies and produce a standard requirement for the presentation of interest rates to enable direct comparison between products.

(2) The OFT shall periodically, and at least annually, publish the range of interest rates on the market for specified products.

(3) The OFT shall further publish court rulings and advice of the ombudsman on levels of interest rates for particular products which are likely to be deemed unfair under section 19.'.

Malcolm Bruce (Liberal Democrat, Gordon)

Something like new clause 5 should perhaps appear in a Bill, but it is particularly important in the Consumer Credit Bill.

The Minister acknowledged on Second Reading that the Bill is setting up a mechanism, the full impact of which will not be accessible until it has been in operation for some time. New clause 5 would require the OFT to give an annual report of how it is proceeding and what impact the interpretation of the regulation is having. After five years, the Secretary of State should review not only the impact of the Act and all the regulations and activities applied by the Bill, but any European legislation that is likely to have been enacted in that period. That is in no way to undermine the Bill—quite the opposite—but to ensure that it does not lead to a layering of additional regulations and bureaucratic detail on the industry that gets in the way of the Bill's principal function. That is a matter of genuine concern.

When one talks to businesses—in this case, financial services businesses and banking businesses—they tend to be able to argue that any individual Act or regulation is probably justified and acceptable, but the cumulative effect can be substantial. That puts the onus on the Office of Fair Trading and on the Secretary of State. It does not give the industry an opportunity to set its own parameters, but it does give an undertaking that it will be reviewed, reported on annually and, over five years, it would require the Secretary of State to say that he has examined the whole impact and tried to ensure that it has been done as lightly as possible.

Alistair Burt (Conservative, North East Bedfordshire)

The hon. Gentleman knows the Government very well if he is concerned that one piece of legislation would lead to a raft of regulations in its wake. While the hon. Gentleman is making his remarks, will he ask the Minister, in his response, to offer an opinion on the general issue of whether sunset clauses that are added to Bills and regulations, which is our policy, would also make a significant difference to the way in which regulation would be accepted by industry and business, which is now literally groaning under the effect of regulations he has described?

Malcolm Bruce (Liberal Democrat, Gordon)

I am content to be associated with the idea of sunset clauses, which my colleagues and I strongly support. However, I want the Minister to focus specifically on the new clause. He and the House have acknowledged that these provisions set up new arrangements, the workings of which will only become apparent over time. I ask for a clear recognition of the need for a review to ensure that the provisions do not create unnecessary bureaucracy, duplication or overlapping that make the delivery of desirable benefits, either to the consumer or to service providers excessively costly. It is a simple clause, and I hope the Minister will accept it.

New clause 6 deals specifically with hon. Members' concerns about potentially high or extortionate rates of interest. The Minister, the Conservatives and I did not agree with the inclusion of a specific maximum interest rate in the Bill. Several hon. Members, particularly Labour Members, wished to see that.

The new clause states that there should be a standard mechanism for setting out interest rates for different products, because credit card interest rates operate in several different ways. Overdraft interest and hire purchase interest are expressed in different ways. The first thing we must do is ensure standard ways of expressing interest rates appropriate to different products, which can be compared so that consumers can see the full range of credit costs. The OFT should produce—at least annually; certainly periodically—a list of interest rate ranges, which will change as interest rates vary.

Subsection (3) of the proposed new clause addresses the concerns of hon. Members who wish to identify and eliminate extortionate interest rates. On the basis of experience and practice, it is for the ombudsman and the OFT to say, ''This is the range of products. This is the upper and lower rate of interest for those different products, and on the basis of ombudsman's rulings or court cases, we will indicate from time to time the level of interest rate that is likely to be deemed unfair.'' That would warn credit providers that if they charge above that rate, they are likely to lose a reference to the ombudsman or to the courts.

The new clause does not insert a specific interest rate into the Bill; it allows that to vary and it leaves it to the discretion of the ombudsman and the OFT. This is a genuine attempt to address people's concerns, consistent with the agreement of all Front Benchers that putting a specific interest rate in the Bill would be, for a variety of reasons, possibly counter-productive and difficult to enforce.

I commend both of the new clauses to the Committee. They genuinely meet the concerns of the industry in the spirit and the letter of the law. They also meet concerns on consumer regulation, particularly for those people at the lower end of the market who often face very high interest rates. A mechanism can be built into the Bill that would effectively allow the authorities to identify, at any given time, interest rates that could give rise to a ruling that they are unfair.

Gerry Sutcliffe (Labour, Bradford South)

I am grateful to the hon. Gentleman for addressing the two clauses in a sincere manner. We do not need new clause 5 because what it aims to achieve is already in place. The OFT publishes an annual report; it is under an obligation to do so under the Enterprise Act 2002. Section 4 of that Act says that the annual report shall include

''an assessment of the extent to which the OFT's main objectives and priorities for the year . . . have been met''.

That annual report states progress against the objectives of the annual plan. The first chapter of the 2003-04 report is entitled ''Enforcing consumer protection legislation''. It lists the number of checks on licence application renewals, the number of investigations into fitness, and the number of licences revoked, refused or granted under different terms. It also reports the work done on guidance communication of information, input to policy, and other cross-cutting work.

It was suggested that the Secretary of State should review the impact of the Act. A regulatory impact assessment has already committed us to review the success of the changes two years after the commencement of the Act. That review will examine whether the number of complaints from consumers has fallen and whether complaints are handled better. It will also examine the costs and benefits of the changes and the effectiveness of regulators. It will also consider the costs and benefits of the changes and the effectiveness of regulators. We said that those would be reviewed alongside other recent changes to the secondary legislation on consumer credit. If a new consumer credit directive is issued by the time of the review, we will also take that into account. Hon. Members will be aware that progress on the directive has been extremely slow, and we do not believe that UK consumers should be made to wait for a directive that may never materialise. I hope that reassures the hon. Gentleman on new clause 5.

New clause 6 concerns the provision of information on interest rates, but it does not support a provision of clear information for consumers. Better informed consumers can make better choices and encourage competition. We had a great debate on Tuesday about the unfairness test, which captured many of the issues that the hon. Gentleman raised. However, we cannot support new clause 6.

The two new clauses proposed by the hon. Member require a presentation of interest rates to allow comparison. All hon. Members will be aware of discussions held by the Treasury Committee. Extensive consultation, both here and externally with industry consumer groups and regulators, has informed the Government's position on interest rates. Therefore, I hope that the hon. Gentleman, in the spirit with which he talked about the unfairness test, will realise that the Committee will deal with the issues that he has raised. The redress mechanisms through the OFT and the FOS mean that he will not have to examine the extra cost that the burden of his new clause will bring. I hope that hon. Gentleman will accept the spirit of what we are trying to achieve, and ask him to withdraw the motion.

Malcolm Bruce (Liberal Democrat, Gordon)

I appreciate the Minister's reply, and I hope he understands that there are issues that could usefully be further debated. In the hope that we will be able to return to those issues on Report, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Question proposed, That the Chairman do now report the Bill, as amended, to the House.

Gerry Sutcliffe (Labour, Bradford South)

This is an important Bill, and I am pleased with the way in which the Committee has handled it. We have teased out the issues that needed to be addressed.

Laurence Robertson (Conservative, Tewkesbury)

I, too, thank Mr. Benton and Sir John Butterfill who chaired the deliberations on Tuesday. I also thank my Colleagues and all hon. Members who have contributed to the spirit and detail of the discussion of the Bill. I thank the Minister for being very accommodating not just today, but during the entire consideration of the Bill. I look forward to further discussions with him about issues that have, to some extent, been left unresolved. It is unfortunate that we did not manage to get a goal past him.

I am reminded of an interview that Enoch Powell once did on Europe. The interviewer asked him: ''Mr. Powell, haven't you failed?'' He replied, ''Maybe failed, but I wasn't wrong.''

Malcolm Bruce (Liberal Democrat, Gordon)

I want to echo those sentiments. The Committee has proceeded with remarkable speed and efficiency. I acknowledge the contribution of my hon. Friend the Member for Richmond Park, who stood in for me on Tuesday. As she will admit, I think, this is not her star subject, but she did extremely well on our behalf. I am glad that I have been able to take part today.

This is an important Bill, which will have an impact. All Committee members can feel that they have each made a useful contribution to a piece of legislation that will help our constituents.

Joe Benton (Labour, Bootle)

On behalf of Sir John and myself, I thank the Committee members for the courtesy that they have extended. I will ensure that those kind remarks are passed on to Sir John. I also thank the learned Clerk and the support services.

Question put and agreed to.

Bill, as amended, to be reported.

Committee rose at Five o'clock.