Consumer Credit Bill

House of Commons, 29 March 2006.

Clause 7 — Further provision relating to statements

Gerry Sutcliffe (Labour, Bradford South)

I beg to move, That this House agrees with the Lords in the said amendment.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this we may discuss Lords amendments Nos. 2 to 5.

Gerry Sutcliffe (Labour, Bradford South)

On Lords amendment No. 1, we believed that it was necessary to modify the wording of the proposed new subsection (2) in clause 7(3), to ensure no ambiguity in its meaning. It is a technical amendment that simply makes the wording clear and removes any potential for confusion by changing the word "his" to "the debtor's". I hope that hon. Members will support it.

On Lords amendment No. 2, the Government amended clause 20 in another place to remove subsection (4). Again, the amendment is technical. Clause 20(4), as it was, was intended to prevent the court from setting aside judgments previously made to give effect to the rule that a statutory jurisdiction to reopen a transaction does not enable the court to reopen one that has been subject to a previous judgment made by the court. It replicated a provision in the Consumer Credit Act 1974.

The Government reconsidered the impact of that provision in the light of current court rules operating in England and Wales, Scotland and Northern Ireland and concluded that subsection (4) would in practice serve as an impediment to the Government's policy intention—to enable consumers to access effective redress from the court under those provisions—and that the court rules should be allowed to apply to those provisions in the normal way. If we left the provision as it stood, before the Lords amendment, it would serve to lessen the benefits of the Government's policy on unfair relationships. Therefore, the provision is best left out of the Bill.

Lords amendment No. 3 was tabled to clause 29, prior to Third Reading in the other place. Members of this House and noble Lords expressed their concerns about "irresponsible lending practices" during debates on this Bill. The Minister in the other place, the noble Lord Sainsbury of Turville, and I considered carefully the contributions of hon. Members and noble Lords on this issue. We thought hard about how the Government should respond. The Government believed that the wording of clause 29, as previously drafted, would allow the Office of Fair Trading to take account of "irresponsible lending practices". However, in response to the concerns expressed on both sides of both Houses, we concluded that there was merit in making explicit in the Bill the ability of the OFT to do that.

Given the interest expressed by hon. Members in the issue of "irresponsible lending practices", I should explain the amendment further. The Government believe that the most appropriate means of addressing "irresponsible lending practices" is in the context of the OFT's powers to monitor and enforce the fitness of licence holders. With this amendment, the OFT, which is best placed to monitor changing practices in a dynamic market, will be able to provide guidance to licence holders on lending practices which, on the basis of the OFT's knowledge and experience of the market—

Ian Liddell-Grainger (Conservative, Bridgwater)

As the Minister is well aware, one of the big problems, is the policing of all these provisions. Whatever this place decides, and whatever legislation we send out to Britain, we still cannot control it. Does he agree that we must somehow tighten the Bill even further?

Gerry Sutcliffe (Labour, Bradford South)

I am satisfied that the amendments, which were discussed in the Lords at great length, along with the debate that we had in the Commons on the Bill, have produced a tightened position. There was considerable discussion about irresponsible lending and we believe that the amendment, with the role of the OFT, is the appropriate way forward.

Mark Prisk (Conservative, Hertford and Stortford)

Further to the excellent question from my hon. Friend the Member for Bridgwater (Mr. Liddell-Grainger), the key point is not the quality of the legislation but the effectiveness of its implementation. Does the Minister understand that, because I suspect hon. Members are looking for an assurance on implementation?

Gerry Sutcliffe (Labour, Bradford South)

As I move on, I hope that I will be allowed the opportunity to talk about the implementation plan, which may allay some of the fears that hon. Gentlemen have. Throughout consideration of the Bill, we have said that we are keen to ensure transparency in terms of policy objectives. We need to work with the organisations involved, whether the industry, consumer groups or the OFT, to make sure that the implementation is what we intend.

Michael Fallon (Conservative, Sevenoaks)

The phrase "irresponsible lending" is included but not defined in the Bill. Is it to be left to the OFT to define the powers that it will exercise? Can the Minister assure us about how the definition will be drawn up?

Gerry Sutcliffe (Labour, Bradford South)

The hon. Gentleman raises a fair question and if he lets me progress in my speech, I hope that I can answer that.

The OFT would perform this role through its fitness guidance. That approach will allow the OFT to provide business with an indication of what types of conduct are considered "irresponsible lending practices". Businesses would therefore have some guidance on what they ought to avoid, while not being discouraged from seeking out new ways of addressing customer demand. That will be backed by a sanction available to the OFT of reviewing a lender's fitness to hold a licence if the lender engages in such practices.

Peter Bone (Conservative, Wellingborough)

The clause refers to "deceitful" practices. Would a practical example be the sending out of statements by credit card companies during public holidays so that the recipient has no chance of paying the bill before the specified date and therefore incurs a penalty charge?

Gerry Sutcliffe (Labour, Bradford South)

I have made great strides in ensuring that I do not determine the qualifications from the Dispatch Box. I feel that it is better to leave the OFT to decide what constitutes irresponsible practices. The hon. Gentleman knows that the three spokespeople on the issue have been dealing with APACS—the Association for Payment Clearing Services—and studying the banking code to establish the position in regard to consumer credit card cheques. We will keep the House informed about the progress of those deliberations.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The Minister's answer on how irresponsible practices would be defined seems to contradict what he said on 14 July last year. Then, he said, "The amendment"—a different amendment—

"seems to assume that the test is somehow dependent on the OFT's guidance. It is not. The OFT's guidance is simply that: guidance."—[Official Report, 14 July 2005; Vol. 436, c. 1021.]

He went on to say that, ultimately, the courts would decide the definition of such tests and whether it was a question of irresponsible lending or of unfairness. Can he confirm that the definition will be decided by the courts, not the OFT, and that the OFT's guidance will ultimately have no legally binding effect on rulings?

Gerry Sutcliffe (Labour, Bradford South)

The hon. Gentleman is right in the context of why I did not go into the definition of unfair lending and the unfairness test. As for the issue of guidance and support from the OFT, the response to points raised in both Houses was that it was thought best to give business some certainty about some of the practices that could be considered irresponsible lending practices, on the basis of the OFT's ability to develop a process in the light of its experiences and its responsibility for determining whether people are fit to hold licences.

I hope that Members in all parts of the House accept that the Government have listened and that we will discuss the issues with all the bodies that have helped to make this the Bill that it is—a Bill that is well respected and that has been subject to much consultation. I know that, given good will from Members, we shall achieve what we want to achieve.

James Brokenshire (Conservative, Hornchurch)

I welcome the introduction of the concept of irresponsible lending, which was debated in detail in Committee, but I have a question for the Minister. This provision relates to the granting of new licences on the basis of the "fit and proper purpose" test. Will he tell us more about ongoing monitoring? A new applicant may not have a track record, in which case it will be necessary to see what happens after a licence has been granted.

Gerry Sutcliffe (Labour, Bradford South)

That will depend on how we implement the provisions following discussions with the industry. We have outlined the OFT's role on the basis of its experience. As the hon. Gentleman knows, because we discussed it in Committee, the OFT already grants licences.

Philip Hollobone (Conservative, Kettering)

rose—

Gerry Sutcliffe (Labour, Bradford South)

I am happy to give way, but I want to make some progress, because most of the amendments are technical. We have spent some time on this amendment because of the introduction of the new concept of irresponsible lending.

Philip Hollobone (Conservative, Kettering)

It is right for us to spend some time on that important issue, but I commend to the Minister the work of the citizens advice bureaux. Most of the complaints received by Kettering CAB concern the indebtedness of local people and it has built up a substantial body of evidence that would help him to define irresponsible lending.

Gerry Sutcliffe (Labour, Bradford South)

I acknowledge the work done by citizens advice bureaux and other advice agencies. The hon. Gentleman will know of the Government's intention to allow the financial inclusion fund to give advice face to face and of our wish to find ways of helping people early to deal with the debts that they incur. He also knows of the regulations following our consumer White Paper, which offer help and support.

I am grateful to the industry for its work in offering mechanisms of support for people who find themselves in debt. I believe that we are all trying to achieve the same thing: transparent legislation that makes clear the responsibilities for both lender and borrower. However, we also want to do what we can to support the agencies that offer help. The hon. Gentleman will know of the "loan shark hunter" pilot schemes in Birmingham and Glasgow that offer advice to people who find themselves in debt to, and exploited to the limit by, the most horrendous members of society.

We have listened to what has been said to us about irresponsible lending. I hope and expect that we shall gain the support of the Opposition parties, given that, during the variety of debates in which we engaged, it was clear that they wanted us to take this step.

Lords amendment No. 4 is technical and would alter new section 36F(3) in clause 50 to ensure that the clause does what was originally intended. Clause 50 deals with officers of enforcement agencies other than the OFT. New section 36F(2) makes the OFT responsible for the actions of those officers while they are fulfilling their duties under section 36C of the 1974 Act, which deals with access to premises, and section 36D, which deals with access to premises under warrant. However, section 36F(3) disapplies section 36F(2) in the case of criminal proceedings against an officer of the enforcement authority. It does not currently mention the OFT and we believe that, for the sake of clarity, it should be specifically mentioned. The amendment clarifies the position as originally intended.

Lords amendment No. 5 addresses a key recommendation of the Delegated Powers and Regulatory Reform Committee, which reported on the Bill in October last year. The amendment makes an order under clause 68 subject to affirmative resolution in both Houses of Parliament, as opposed to negative resolution in either House. An order made under clause 68 can make changes to any other Act or piece of subordinate legislation that is necessary as a consequence of the Consumer Credit Act.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Can the Minister confirm that, if the Legislative and Regulatory Reform Bill is passed, the powers that it gives Ministers would mean that the amendment was superseded?

Gerry Sutcliffe (Labour, Bradford South)

The amendment restricts the powers to affirmative resolution, because the Delegated Powers and Regulatory Reform Committee felt that they were too wide-ranging. We had a long debate in Committee about the need for affirmative or negative resolution in the case of various clauses, based on tradition and on what had applied in earlier legislation. However, we listened to what was said by the Delegated Powers and Regulatory Reform Committee and were happy to accept its recommendations in this case.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

It is not that we disagree with the amendment. I think that the Government were right in another place to listen—eventually—to the recommendations of the Delegated Powers and Regulatory Reform Committee. My point is that a Bill that is being dealt with in the other place, having been scrutinised in this place—the Legislative and Regulatory Reform Bill—gives Ministers powers to change regulations willy-nilly, without coming back to Parliament. If we pass the amendment, will we merely give ourselves a breathing space of a few months because in due course Ministers will be able to disregard it?

Gerry Sutcliffe (Labour, Bradford South)

I am sorry to have misunderstood the hon. Gentleman's point. He is right: the Legislative and Regulatory Reform Bill is going through its stages in both Houses. We do not expect the clause to be superseded by anything that appears in that Bill, but we shall have to see what happens during its passage.

Lords amendment No. 5 is technical, as are many of the earlier amendments apart from the one that deals with irresponsible lending, which we have spent some time debating.

I should like to say a little about implementation, because that has been raised with me. The Bill will be implemented as soon as is practical, with account taken of all stakeholder views. Some provisions may be implemented earlier than others; it will depend on lead times for preparation and interdependencies between clauses. The timetable for implementation will be refined after Royal Assent, in consultation with stakeholders. We have had a number of meetings with other Departments, the industry and consumer representatives, which will continue. We are also establishing two stakeholder working groups to inform the implementation process, one to look specifically at the implications of the Bill on IT system changes and one to examine the technical detail of the statutory instruments. We intend to publicise the final timetable towards the end of May. The Department will adhere to all relevant guidelines and best practice on implementation, such as the 12-week minimum for formal consultation periods.

I hope that, in the light of those explanations, the House will accept the Lords amendments.

Mark Prisk (Conservative, Hertford and Stortford)

I begin by thanking the Minister for his opening remarks and for organising the recent joint meetings of the various political parties with the Association for Payment Clearing Services. In these meetings, we have been looking at the key issues arising out of the Bill and, indeed, at matters that lie at the heart of amendment No. 3, to which the Minister alluded.

The Minister and I have debated on a number of occasions, but this, I believe, is the first time that we have debated a Bill across the Dispatch Box. Indeed, I must confess that I have not debated this Bill before. Although it was introduced twice last year—before the election and after—it was sent to the other place before I assumed my current role, so I am not as well versed in its detail as other Members, including a number of my colleagues, such as my hon. Friend the Member for Hornchurch (James Brokenshire), who has made a valuable contribution to the debate.

This is an important Bill and some of the amendments before us may improve its meaning and clarity. Sadly, it is not very difficult to make the Bill clearer. Indeed, the need for amendments Nos. 1 and 2 draws our attention to the considerable obfuscation that exists throughout the rest of the Bill. Here, I want to place on the record my genuine concern that, as with so much of this Government's legislation, the quality of the Bill's drafting leaves much to be desired. I hasten to add that that is the fault not of parliamentary counsel, but of those who instruct them. That is a particularly important point to bear in mind when we consider the central tenet of amendment No. 3: what the Minister and the Bill describe as the "unfairness test". After all, it was the Minister himself who told this House last June on Second Reading that the Bill has to be judged on the principles of "transparency, protection and fairness". If that is so for the Bill's substance, it should also apply to its language.

That is why we need to consider these amendments with great care. Several of them, particularly amendments Nos. 1 and 2, make predominantly technical changes, so I hope that the Minister will be prepared to put on the record his explanation for tabling them. He has made a welcome initial stab but there were a number of omissions, which I hope to address later. A willingness and ability on his part to respond to my points will help us with the implementation to which he referred. After all, transparency can be achieved not only through better legislation, but through well-chosen words from a Minister during a debate. It is such transparency that I seek this evening.

Amendments Nos. 1 and 2 would alter clauses 7 and 20 respectively. Although they are technical, I have some concerns about their effects, to which I will come in a moment. Amendment No. 3, which, as the Minister said, inserts new wording into clause 29, is directly concerned with what we have described as "irresponsible lending". [Interruption.] Here, the Minister's response will be particularly vital, and I hope that he is listening closely to every single word.

Gerry Sutcliffe (Labour, Bradford South)

As always.

Mark Prisk (Conservative, Hertford and Stortford)

Indeed, and I am sure that he will do so throughout this debate.

Peter Bone (Conservative, Wellingborough)

What worries me is that no practical examples have been given of what the wording means, which is no good for the industry or the consumer. I hope that the Minister will give such practical examples.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful to my hon. Friend for that intervention and he is right: one key issue with all such legislation is ensuring that we think through its implementation. Sadly, that skill seems to be lacking on the Government Benches, but I have every confidence in the Minister and, hopefully, he will be able to shine in the darkness of his colleagues' abilities. However, we shall see. I am a generous soul and I am always happy to give the benefit of the doubt on these matters.

Michael Weir (Scottish National Party, Angus)

What does the hon. Gentleman regard as irresponsible lending? I am slightly concerned that some Conservative Members are trying to include in the Bill a prescriptive list. That would be very dangerous, because it is the nature of irresponsible lending that it can mutate, depending on when such a lender is found out and another appears.

Mark Prisk (Conservative, Hertford and Stortford)

The hon. Gentleman is right to suggest that if we become too prescriptive, the danger is that we will tie the hands of the authorities involved. But I hope that during this debate, we can clarify the parameters within which those authorities will operate; indeed, that is perhaps the essence of our consideration this evening.

Gerry Sutcliffe (Labour, Bradford South)

I do not want to interrupt the flow of the hon. Gentleman's argument—I appreciate that it might take him some time to get to the detail—but I should point out that amendment No. 3 would establish a licensing responsibility on the part of the OFT in examining the concept of irresponsible lending. He and his colleagues are widening the debate to include the unfairness test, but the amendment is concerned with the OFT's powers in relation to the licensing function.

Mark Prisk (Conservative, Hertford and Stortford)

I would be very unwise were I to try to widen the tenor of this debate, Mr. Deputy Speaker, because I know that you would be the first person to bring me back in order. So although I understand the Minister's natural concern, I shall certainly do my best to ensure that we do not fall into that trap.

I have received a significant number of representations on amendment No. 3 that merit what I am sure will be a proper response from the Minister. Amendment No. 4 would amend clause 50, which deals with

"Officers of enforcement authorities other than OFT",

an issue to which I shall return in a moment. Amendment No. 5 seeks to ensure that the powers in clause 68 to modify certain legislation should be allowed only by means of the affirmative resolution procedure of the House, and not by the unsatisfactory negative procedure, a problem to which Members have referred before. So as I suspect Members can see, these amendments are of significance and will have important ramifications for those affected—lenders and borrowers, creditors and debtors alike.

Amendment No. 1 would amend clause 7(3) by removing the word "his" in proposed new subsection (2) and inserting the phrase "the debtor's". So once amended, it would state that

"the creditor need not give statements to any debtor who has signed and given to him a notice (a 'dispensing notice') authorising him not to comply in the debtor's case with section 77A or (as the case may be) 78(4)."

As Members will doubtless appreciate, although this is a technical matter it is also one of some substance. As I said earlier, transparency is indeed key to the whole Bill, and to that end, we welcome the use of the phrase "the debtor's" instead of the word "his", in order to clarify earlier references to creditors and debtors. However, if Members consider the context of new subsection (2), they will immediately notice the confusing aspects of the remaining drafting. The beginning of new subsection (2) states:

"Notwithstanding subsection (l)(a), where credit is provided under an agreement to two or more debtors jointly, in performing his duties—

(a) in the case of fixed-sum credit, under section 77A, or

(b) in the case of running-account credit, under section 78(4)".

That is followed by the part that I read out a moment ago, in which the phrase "the debtor's" is inserted for the word "his".

The Bill remains confusing and difficult, especially as what is proposed is to be inserted into the original 1974 Act. Does the Minister consider the language to be transparent?

Clarification of the Bill at this late stage is welcome, but we have consistently said that the fundamental problem is that it is vague and lacking in detail. Those problems persist, to the detriment of consumers and lenders alike.

Amendment No. 2 to clause 20 is small but equally significant. It would remove subsection (4), which at present states:

"An order under this section shall not alter the effect of any judgment."

As I was not clear what that meant, I looked at the background. Clauses 19 to 22 introduce a new unfair relationship test, as the Minister mentioned earlier. The new test will expand the number of factors that the court must take account of when considering the fairness of agreements between creditors and debtors. It will enable the court to decide whether a relationship between a creditor and debtor was unfair to the debtor due to the terms of the agreement, or the way that the creditor operated the agreement, or

"any other thing done (or not done) by . . . the creditor"

before or after the agreement was made.

Clause 20(4) was originally put in the Bill to prevent the courts from setting aside other judgments previously made, in line with the rule that a court cannot reopen a transaction previously subject to a judgment by the court. The comparison is not direct, but people will recognise that as resembling the double jeopardy principle. I am sure that my hon. and learned Friend the Member for Harborough (Mr. Garnier) will clarify matters if I stray too far in respect of judicial consideration in other types of court, so I shall not pursue the matter.

However, the Government subsequently reconsidered the provision's impact, and the Minister said earlier that it was decided that clause 20(4) would be an obstacle to enabling customers gaining effective redress from creditors via the court.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman may be doing a disservice to the Opposition Front Bench in the other place. Did not the Conservative Lord De Mauley first propose the amendment in the Grand Committee?

Mark Prisk (Conservative, Hertford and Stortford)

I am not condemning the amendment. I want to ensure that it is implemented effectively. I have every confidence in Lord De Mauley, who is an excellent representative of my party in the other place.

The Minister will know that a very similar amendment was tabled in Grand Committee, as has just been noted. We welcome the Government's intention to remove an obstacle to consumers gaining effective redress through the courts. The Minister likes candour and a cross-party approach, so it is fair to say that the amendment is insignificant, in the overall scheme of things, when compared with the much bigger difficulties that the new unfair relationship rules present.

I shall not rehearse in detail all the points raised repeatedly in this House and the other place. However, the Minister will be fully aware of the concerns that have been expressed, and that various implementation issues remain unresolved. We support the general principle of a new unfairness test, but are concerned about the lack of clarity in respect of what that will constitute in practice. I want to use the debate to tease the details out in a positive way, so that they can be put on record.

Gerry Sutcliffe (Labour, Bradford South)

I am grateful to the hon. Gentleman for pointing out that it was the Opposition who proposed a similar amendment in the Grand Committee. That was withdrawn, and the Government put forward the amendment under consideration now. However, I assure him that he can say nothing to tempt me to change my view of the unfair relationship test. I hope that that will prevent him from going on too long. The hon. Gentleman can be eloquent, but he will not change my mind.

Mark Prisk (Conservative, Hertford and Stortford)

The Minister is protective of my larynx, and I am grateful, but I want to ensure that the House as a whole is aware of the issues involved. My argument is not for his benefit alone, but is for consideration by all hon. Members. However, I appreciate what he says.

Ed Vaizey (Conservative, Wantage)

My hon. Friend joins a long line of hon. Members who have tried to tease a definition of unfairness out of the Minister. Indeed, I made a speech in Standing Committee that cited extensive case law and judgments in a detailed definition of unfairness. The Minister said that the new definition in the Bill reflected the Government's desire to tackle "all types" of unfair relationships. I made the point that the lack of further guidance leaves dissatisfied debtors in a very difficult position.

Mark Prisk (Conservative, Hertford and Stortford)

I did not participate in the Committee debates, so I am grateful to my hon. Friend the Member for Wantage (Mr. Vaizey) for clarifying the background.

As I said, we are concerned about the lack of clarity with the unfairness test. Constituents are worried that, if the industry is not clear about the lending practices that are acceptable, it inevitably will be more cautious in its lending practices, to the detriment of the borrower. Without a thorough understanding of their chances of success in the courts, some consumers may be deterred from pursuing cases that, if unsuccessful, would only add to their financial difficulties, stress and problems. I am sure that hon. Members from all parties will have had that difficulty brought to their attention by constituents who have experienced it.

It is not a sensible approach for either lenders or consumers to have to wait for case law to develop before they can be clear about the law's parameters. Moreover, the vast majority of cases are likely to be of relatively low value, so will be litigated predominantly in the lower courts. They are likely to go largely unreported as a result.

Even with the amendment under discussion, there remains the risk of inconsistency. When the Minister replies to the debate as a whole, I hope that he will tell us what assurances he can give the industry and consumers that the new test will not prove unfair in implementation.

What safeguards will be put in place to ensure that courts give consistent rulings? That goes beyond ensuring that previous judgments are not set aside, and touches on the more important question of what the unfairness test comprises. Most pertinently, where will the burden of proof fall?

Concern has been expressed by a wide range of interest groups—including lenders such as Barclays bank and the Association for Payment Clearing Services, and consumer representatives such as the Consumer Credit Association—about the reversal of what some perceive as the normal burden of proof and the introduction of the premise that all relationships might be deemed unfair unless proved otherwise.

We are concerned that that might prompt many consumers to try their luck with a claim. Ironically, the consumers most likely to do that could well be those least able to afford to do so. That could be detrimental to them in the future.

Ed Vaizey (Conservative, Wantage)

My hon. Friend echoes the point that I made in Committee, which was that the absence of a definition of unfair is a lose-lose situation. Not only would lack of clarity harm the debtor, but it could also harm the creditor, because ambulance-chasing lawyers will try their luck.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful to my hon. Friend. I was about to say that sometimes great minds think alike, but I am aware of how that phrase concludes.

Steve Pound (Labour, Ealing North)

Fools seldom do.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful to the hon. Member for Ealing, Comedy—I am sorry, Ealing, North for reminding us.

On Report, we moved an amendment to provide that the Office of Fair Trading issue periodic guidance on what constitutes an unfair relationship. If definitions are not included in the Bill, will the Minister undertake at least to reconsider the scope for issuing guidance to clarify the situation for consumers, lenders and the courts alike? The key to an effective consumer credit regime lies in shared responsibility. Lenders have a duty to make responsible lending decisions, and data sharing, which the Minister and I have discussed both in the House and in his Department, is critical. Consumers also have to take responsibility for their borrowing and spending decisions but, sadly, many people do not have the financial literacy to enable them to do so. The Government thus have a responsibility to get the legislative framework right so that both lenders and consumers know where they stand.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Will the hon. Gentleman give way?

Mark Prisk (Conservative, Hertford and Stortford)

I am just about to move on to amendment No. 3, but as there is a little time left, I will give way.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman is so generous.

Is not data sharing the key to greater transparency, as it would mean that irresponsible lending would be actionable and the provisions would actually work?

Mark Prisk (Conservative, Hertford and Stortford)

The hon. Gentleman is right. Data sharing is crucial. His predecessor as Liberal Democrat spokesman had discussions about it with the Minister and me. The matter is proceeding, so perhaps cross-party consensus could be developed.

Moving from that consensual tone, I turn to amendment No. 3, which would amend clause 29 by inserting an additional subsection at the end of line 6, page 24. I shall not read it out as I am sure that Members have studied it. The amendment makes explicit the power of the OFT to take account of irresponsible lending when monitoring and enforcing the fitness of licence holders. As originally drafted, the Bill required the OFT to have regard to the

"skills, knowledge and relevant experience"

of any person applying for a licence in relation to consumer credit, consumer hire or ancillary credit services. It also required the OFT to bear in mind whether an applicant had

"committed any offence involving fraud, dishonesty or violence",

contravened any relevant law relating to consumer credit, engaged in discriminatory practices or business practices that the OFT judged deceitful—a point to which my hon. Friend the Member for Wantage (Mr. Vaizey) referred earlier—oppressive, unfair or improper.

In Committee, several Members on both sides of the House supported amendments to include a requirement that creditors lend responsibly. The Government originally resisted those proposals. However, as the Minister told us, considerable concern has been expressed throughout the passage of the Bill about the fact that debt in itself is not the problem, but that irresponsible lending and, therefore, borrowing can be. Lending to someone who is already up to their neck in debt is neither sensible nor responsible. It is good neither for the customer nor, in the end, the lender. In previous debates, here and in the other place, the Government steadfastly refused our calls for a specific power on irresponsible lending in the Bill, on the grounds that it would be difficult to define irresponsible and that including such a specific duty would require guidance as to what did and did not constitute irresponsible lending.

The Minister in the other place, Lord Sainsbury, stated:

"A positive duty to lend responsibly may, considered in isolation, appear attractive. However, by imposing such a positive duty, the consequence is that the guidance will need to provide lenders with sufficient information to comply with that positive duty. That would involve the compilation of a list of rules of what is and is not responsible lending."

He concluded:

"We want to encourage responsible lending. But we do not believe that the way to do this would be to include an unhelpful duty in the legislation or in guidance. We are convinced that it will lead to the development of a multiplicity of procedural rules, which we want to avoid."—[Official Report, House of Lords, 18 January 2006; Vol. 677, c. 742–43.]

We welcome the Government's willingness to recognise that that would not be the case in their U-turn on the matter. Does the Minister now believe that guidance on what constitutes irresponsible lending will not after all reflect on the concerns to which the Minister in the House of Lords referred and which were described as an inflexible tick-box approach? What particular aspects persuaded the hon. Gentleman of the change? He made some brief allusions in his opening remarks but he did not give us the full explanation. It would be helpful for us to understand the reasoning behind the decision.

As the Minister is aware, the Opposition expressed continuing concern in the other place that amendments may still not cover the irresponsible granting of credit; for example, where customers are offered further credit facilities for the purchase of furniture, kitchens or other big-ticket items, despite already being able to borrow thousands of pounds on credit cards. The Government's view is that the amendment will cover that issue as well as irresponsible lending. We hope that will prove to be the case.

The Minister is no doubt aware of the latest concerns expressed by industry representatives about the lack of definition. Members from various parties touched on that earlier. Only yesterday, I received representations from APACS—an organisation that will be at the heart of the Bill's implementation—that the lack of definition will give the OFT inappropriate power. Rosalind Sellers from APACS stated:

"This amendment gives the OFT powers to refuse credit licences based on an undefined concept of 'irresponsible lending'. We strongly support the principle of making what has been implicit throughout discussion of the Bill—i.e. the need to curb irresponsible as well as unfair lending—explicit at this stage. However, we are concerned that, in practice, the lack of definition will enable the OFT to define its own powers and then enforce them without consultation."

In previous debates, one of the Minister's arguments for excluding the provision was that it would be difficult to reach a definition. It would not be surprising if the Minister said that part of the problem is as much of our making as his, given that we pressed for inclusion of the provision. However, as he has conceded to our request, it is his duty as a Minister of the Crown to ensure that the Bill is workable. That, in essence, is my concern. So will he tell us his plans for issuing guidance to the OFT and creditors on the definition of irresponsible lending?

Peter Bone (Conservative, Wellingborough)

Are not we being asked to pass into law something that is not transparent, on which guidance will be issued only afterwards and which gives a lot of power to the OFT? That is not good for consumers or the industry.

Mark Prisk (Conservative, Hertford and Stortford)

My hon. Friend's trilogy of concern sadly reminds me of so many Bills that the Government generate. They are not transparent and they are not workable in practice. Unfortunately, that is a regular feature. My hon. Friend is right; the amendments take positive steps, but there are concerns that they do not go far enough. I am concerned about the workability of the legislation.

Gerry Sutcliffe (Labour, Bradford South)

I can fully understand why the hon. Gentleman—he was not with us in Committee—is going over some of the arguments that have been well rehearsed and, I hope, explained. Do I get the impression that he will not disagree with any of the Lords amendments? Will the Opposition vote against any of them?

Mark Prisk (Conservative, Hertford and Stortford)

I have always believed that, in a debate, one should listen to the argument first. I stick to that principle, and I hope that the Minister will understand why.

Lords amendment No. 4 relates to clause 50. I am sure that hon. Members realise that the Government are seeking to leave out from the word "against" to the word "in" in page 42, line 21, and insert the words

"the officer, the enforcement authority of which he is an officer or the OFT".

I suspect that hon. Members who, like myself, have not been familiar with the Bill for long would wonder what that meant. Lords amendment No. 4 is a clarifying amendment, designed to ensure that clause 50 will achieve what is intended. One would assume that the Government would have done that in the first place, but that is not always the case, as I am sure my hon. Friend will recognise.

Clause 50 deals with officers of enforcement authorities other than the OFT. Proposed new section 36F(2) of the Consumer Credit Act 1974 will make the OFT responsible for the actions of those officers, while they are fulfilling their duties under proposed new sections 36C and 36D, as the Minister said at the beginning of the debate. However, proposed new section 36F(3) disapplies that provision in the case of criminal proceedings against an officer or the enforcement authority—that is, the OFT will not be responsible in those instances. As originally drafted, proposed new section 36F(3) did not specifically refer to an instance where proceedings are brought against the OFT itself as a result of the actions of such an officer. Lords amendment No. 4 includes that situation for the purposes of clarification.

Again, the principle that underlies the Bill is welcome—it will introduce some clarity—but can the Minister give an assurance that, in his opinion, it contains no other instance of a similar lack of clarity about the respective roles of the OFT or any other agency? I look forward to hearing his reply, and I certainly want to ensure that it is on the record.

In Committee, the Minister suggested that the other enforcing authorities likely to carry out such activities on behalf of the OFT were most likely to be local authority trading standards officers. He went on to give an assurance that that work could not, and would not, be subcontracted out to other organisations or, for that matter, to the private sector. Can he repeat that reassurance? It was only a suggestion, as far as I can see from the record. Can he advise us about what statutory restrictions are in place to prevent the contracting out of those duties to inappropriate organisations or authorities?

Ed Vaizey (Conservative, Wantage)

The Minister in saying that there would be no subcontracting also said that no police checks would therefore be undertaken on any organisation carrying out such work. Therefore, my hon. Friend is making an extremely important and pertinent point.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. The House has probably heard enough recapitulations of what was said in Committee. Such information is already available in printed form to all hon. Members, and I am sure that it has been studied ahead of the debate.

Mark Prisk (Conservative, Hertford and Stortford)

I am sure that you are right, Mr. Deputy Speaker. It is important that we study these matters thoroughly, because they are of great concern.

We welcome the fact that the Government have accepted Lords amendment No 5, which was tabled by my colleagues in another place. As the Minister will recall, that amendment addresses a key recommendation of the House of Lords Delegated Powers and Regulatory Reform Committee, which specifically expressed the view that the powers in clause 68 should be subject to the affirmative rather than the negative procedure. We welcome the Government's rather belated acceptance both of that Committee's advice and of our amendment.

Clause 68 will allow the Secretary of State, by statutory instrument, to modify any Act or subordinate legislation as he thinks fit in consequence of any provision in the Bill. Those are sweeping powers, as hon. Members will realise. Can the Minister give us an indication of the kind of legislation that is likely to be amended as a result of that clause? Of course, as with most legislation that this Government generates, we would have liked less secondary legislation in the first place.

A lack of clarity in the Bill will simply lead to confusion both for those who will implement it and those who will be subject to it. What assurances can the Minister give us that orders and guidance published under the Bill will be produced in a timely manner, giving lenders, enforcement agencies and others a proper opportunity to prepare for implementation?

The debate has given us the opportunity to seek further clarification, which hon. Members on both sides of the House will wish to pursue. It is fair to say that I have raised a number of important points about the Bill's implementation, and I look forward to the Minister response. However, as I am aware that other hon. Members wish to contribute to the debate, I want to make some final points. One of our main concerns has been the lack of detail in the Bill. That concern has been recorded throughout the discussions that have taken place in the House. The Lords amendments under consideration today are relevant to two of our particular concerns.

Gerry Sutcliffe (Labour, Bradford South)

I am a fool to myself, but I want to help the hon. Gentleman. He is arguing that lots more should be included in the Bill to provide certainty, but the other side of that argument relates to the implementation of the regulations that flow from the Bill and the industry's ability to deal with those issues. If all that is included in the Bill, it becomes too restrictive—it does not allow the opportunity to discuss the changes in systems—so he cannot have it both ways. That issue was raised throughout the debates in Committee.

Mark Prisk (Conservative, Hertford and Stortford)

There is much merit in what the Minister says, except for the fact that we are always concerned that too many Bills are essentially shells. We are asked to take it on trust that the elements that fill them out will be as described. Although the Minister is an honourable man, it is always our concern to ensure that we understand that issue, which is the essence of my concern in this case.

As the Minister will know, widespread concern has been expressed throughout the industry about the timetable for the implementation of the Bill. Indeed, the Minister made that point at the end of his opening remarks. We recognise the fact that the Department of Trade and Industry has recently published an indicative timetable—not a final one—for the secondary legislation, guidance and consultation and that the industry welcomes that clarification.

Detail is essential not least to allow lenders to reconfigure IT systems, so that they can fully comply with the new legislation. For example, APACS has noted that, in its experience, the design, building and testing of IT systems can take 18 months from regulatory certainty to full implementation. Given the Government's record on botched IT projects, I hope that the Minister will have sympathy with the industry's concerns during the implementation programme and that he will be able to respond accordingly.

Finally, good progress was made on the Bill in another place. It is fair to say that we welcome the careful consideration that the Lords have given to the Bill. I trust that we will indeed have a useful debate today, and I look forward to hearing the Minister's detailed responses to the questions that I have had the opportunity to touch on today.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The House will be pleased to know that I will not take 39 minutes to make my remarks. I generally support the Lords amendments. My colleague the hon. Member for North Norfolk (Norman Lamb), who was in charge of the Bill for the Liberal Democrats when it was considered on Second Reading and in Committee, generally supported the Government's proposals, although he made some useful points of detail. In the spirit of his approach to the Bill, I, too, will support the Lords amendments tonight.

Lords amendments Nos. 1, 2 and 4 are very technical. They are basically drafting amendments and I have nothing to add to what has been said by the Minister and the hon. Member for Hertford and Stortford (Mr. Prisk).

On Lords amendment No. 5, I am still slightly worried by the Minister's reply to my intervention, in which I made the point that the Legislative and Regulatory Reform Bill, if passed, will make that amendment redundant. Liberal Democrat and other Members are very worried about that Bill and hope that it will not receive Royal Assent—obviously, that is for another time—but it is bizarre that we are debating Lords amendment No. 5 when its force may last for only a few weeks before that other Bill is passed. I hope that the Minister will correct the record, because I think that he was wrong earlier in his response to my intervention.

I want to focus my remarks on Lords amendment No. 3. The Government have listened to the debates in this House and the other place and have brought in the provision with respect to irresponsible lending to ensure that when the Office of Fair Trading grants a licence to a credit organisation, it can ensure that that organisation does not engage in irresponsible lending. That is a welcome development, but there are points that need to be probed.

Peter Bone (Conservative, Wellingborough)

Is the hon. Gentleman concerned that a licence may be granted and then, later on, unfair practices may come in? What are the powers to revoke the licence?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I thank the hon. Gentleman for that intervention. He makes an interesting point. I hope that the Minister was listening because he needs to provide the House with clarification on that point.

The concerns regarding the new provision—although it is widely welcomed—are about definition. We have heard that the hon. Member for Hertford and Stortford wants more prescription in the Bill. At least, he did at times, but in his reply to the hon. Member for Angus (Mr. Weir) he seemed to agree with the concern about being over-prescriptive. There is always a balance to be struck in legislation. The Government have sought to strike it by allowing the OFT to issue guidance. That is a settled view and I am not sure whether it will change as a result of tonight's debate. It is critical, in terms of the implementation of the Bill, that the guidance is timely and follows full and thorough consultation with the industry.

If the Minister says one thing in reply to my remarks, I hope that it will be that he will use every power that is open to him—I know that he does not have any strict legislative powers to command the OFT, given that it is an independent body under the Enterprise Act 2002—to ensure that the OFT hears loud and clear that this House wants to ensure that the consultation is comprehensive, thorough and engages with all the different players in the industry. It is important that the OFT is clear, as it plans ahead, in its consultation and in publishing the final guidance, because the industry needs to invest in IT systems. It needs to design, build, test and implement them. Although the Department of Trade and Industry has given an indicative timetable, as the hon. Member for Hertford and Stortford said, the industry wants greater clarity on that. The quicker the Minister and the OFT can provide that, the better. I hope that the Minister can say something on that tonight.

I would also like the Minister to be clearer about the role of future court judgments. Clearly, the definitions of irresponsible lending are ultimately testable in the courts. Although the OFT guidance will be the basis on which IT systems are implemented and new practices are developed, there could be a case in the courts in 12 to 18 months, or in two years, that overrides the OFT's guidance and changes the whole system.

Ian Liddell-Grainger (Conservative, Bridgwater)

If a subsidiary company of a main body did the lending, the OFT would have to follow that through the main company, the subsidiary company and all the way down. We have seen that with Barclays and many of the other big banks. Does the hon. Gentleman agree that one of the problems that the OFT will have will be enforcing the measure through subsidiaries? Who will it deal with?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman makes a good point. I hope that the Minister was listening. The question will be whether the licence is issued to the principal company or has to be applied for and then issued to all the different layers. I hope that the Minister can clarify that.

My point—the hon. Gentleman intervened to make a separate point—was about the role of future court decisions in defining what counts as irresponsible lending. I know that the Minister cannot pre-judge what the courts may say in a future case, but for the industry to make sure that it has some certainty and stability to invest, we need to make sure that the OFT's guidance and what the Minister says, tonight and at other times, assists that process.

Gerry Sutcliffe (Labour, Bradford South)

We are running the risk of confusing the unfairness test and irresponsible lending. We want to be very clear that the courts will consider the concept of unfairness. The test of unfairness already exists within the framework of the financial services and affects many parts of the financial services regulations. The hon. Gentleman is talking about irresponsible lending, but we are not talking about a duty in relation to irresponsible lending. We are talking about the OFT considering irresponsible lending in relation to the fitness of purpose of a licence holder. There is a difference.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I accept that, but let us imagine a situation in which the OFT has decided that it will not issue a licence to a particular credit institution because it believes that its previous lending was irresponsible. Presumably, the Minister is not saying that judicial review does not apply. I am sure that he would accept that if that credit institution was rather annoyed that the OFT had made that ruling and thought that it was unfair, it would surely be able to ask for a judicial review of the OFT. Perhaps I have misunderstood the 2002 Act. I hope that the Minister will reply to that point, because it is important.

I want to come back to the point that I made when I intervened on the hon. Member for Hertford and Stortford, because the issue of data sharing is particularly relevant to the point about irresponsible lending. If a credit institution were accused by the OFT of irresponsible lending, no doubt it would want to defend that to ensure that it got the licence. However, given that it will not have any powers—particularly in relation to people who had credit cards prior to the Data Protection Act 1998 coming into force—how will the OFT be able to say that it has been lending in an irresponsible manner? The credit institution will not have been able to have access to the other debts and borrowings of the applicant.

To make sure that the new factor—irresponsible lending—works, can be implemented and makes sense, I hope that the Minister will move forward, with the Department for Constitutional Affairs, on the issues relating to data sharing. My hon. Friend the Member for North Norfolk led that debate when we considered the Bill previously. He wanted to make sure that the Minister would push ahead on the matter, with his departmental colleagues. Lords amendment No. 3, which we will hopefully pass tonight, cries out for some real effort to go into that aspect because it is the missing piece of the jigsaw. If we pass legislation without that piece, there will be a concern that, although the provision is clearly a major improvement on what has gone before, it is still not quite there. Will the Minister give the House some detail about the future timetable for dealing with that issue?

Michael Weir (Scottish National Party, Angus)

I shall be brief. I simply want to make a couple of points. Obviously, we welcome the amendments, which are sensible. The Minister said that Lords amendment No. 2 was a technical amendment, but I am not sure that I agree. It is an important amendment. Prior to being elected to this House, I earned my crust as a solicitor and I often had people come to me who had got themselves into financial difficulties. One of the problems was that many people did not come forward to seek help until they were very well into those financial difficulties. In many cases, they had court judgments against them. It was well nigh impossible to do very much about the situation by that stage. The amendment will allow the courts to reopen some of the cases where there has been unfair lending. That is important and I congratulate the Minister on the amendment.

My other point relates to Lords amendment No. 3. As I mentioned in an intervention, I was concerned about some of the things that were coming from Conservative Members on this matter. I recognise the basic point being made: that both lenders and borrowers want some certainty. I accept that, but my problem with being too prescriptive is that those who indulge in irresponsible lending can be very inventive in how they do so. The danger with being prescriptive is that we will not hit many of those practices. The Minister has approached things sensibly by laying down a definition and leaving the matter to the OFT, so that there can be some flexibility. I note that it is more than 30 years since the last such Act was passed. The Bill is a piece of major legislation and if we find that we have to amend it, it could be a long time before we can do so.

Peter Bone (Conservative, Wellingborough)

I understand the hon. Gentleman's point. Does he agree that we have not been given a single practical example of what the Bill would catch? I would like some of those before the legislation passes into law, if it is to do so.

Michael Weir (Scottish National Party, Angus)

I understand the hon. Gentleman's point. I am sure that examples could be given, but I would not want them written into the Bill because it is important that the OFT is given the flexibility to deal with dynamic situations that can move quickly. People who indulge in such practices find inventive ways of dragging people into such schemes. The Minister's approach is sensible and I strongly support it.

James Brokenshire (Conservative, Hornchurch)

It is a pleasure to be locking horns with the Minister again on the Bill. I made my maiden speech on its Second Reading and have followed its progress through the House ever since. As a non-practising solicitor with some background in consumer credit, I have maintained a general interest in its passage.

We have heard that many of the Lords amendments are technical, and I would agree with that analysis. Lords amendment No. 1 obviously just changes around the wording of clause 7, and I have no issue whatsoever with that legal drafting point.

It was interesting to hear the discussions on Lords amendment No. 2, which will delete wording to ensure that previous judgments cannot act as a bar. The intention behind the Bill has been to try to ensure that there was a retrospective effect regarding the unfairness test. I remain disappointed that we have not gained the clarity that we wanted on the meaning of "unfairness", even at this late stage. It is interesting that previous judgments will no longer be a bar on the redress that a creditor may seek due to an unfair relationship.

The most interesting amendment is that to clause 29, which returns us to the debate on irresponsible lending. The Minister's analysis that the provision essentially relates to licensing, and is thus distinct to provisions on the ombudsman or the court, was correct. The unfairness test deals with redress, rather than licensing. However, I wish to follow up a point that I raised with him about the continuing nature of the provision. The clause relates to the determination of whether an applicant is a fit person for a licence. The word "applicant" suggests that we are talking about new applicants who want a consumer credit licence from the OFT. My question remains of what will happen when a person has been granted a licence by the OFT, given that clause 29 relates to the issues that the OFT will consider when determining whether to grant a licence.

I am aware that other aspects of the Bill, such as clause 38, which will insert proposed new section 33A into the Consumer Credit Act 1974, give the OFT the power to give notice to a licensee for purposes connected with

"addressing the matter with which the OFT is dissatisfied . . . or . . . securing that matters of the same or a similar kind do not arise."

I want an assurance that the interpretation of clause 38 will mean that the OFT will have the power to address matters in not just the context of new applications that it receives. Clearly, new applicants might not have much of a track record to show whether they satisfy the evidence test on engaging

"in business practices appearing to the OFT to be deceitful or oppressive or otherwise unfair or improper".

Lords amendment No. 3 is effectively further clarification on what those words mean, so irresponsible lending is, in essence, deemed to be a practice that is deceitful, oppressive, or otherwise unfair.

Peter Bone (Conservative, Wellingborough)

I am beginning to become very concerned as I listen to my hon. Friend. If the measure applies only to new licences, it drives a coach and horses through the legislation. We are worried about existing licences, so that point needs to be clarified.

James Brokenshire (Conservative, Hornchurch)

My hon. Friend makes the point to which I was trying to allude. I hope that the Minister will give us clarification on ongoing enforcement and monitoring and the ways of ensuring that someone remains a fit and proper person.

Gerry Sutcliffe (Labour, Bradford South)

rose—

James Brokenshire (Conservative, Hornchurch)

I see that the Minister wishes to intervene, so I hope that we will get clarification straight away.

Gerry Sutcliffe (Labour, Bradford South)

I intervene on the basis that I might not get the opportunity to give answers in full, given the time constraints. The measure will apply to existing licences as well.

James Brokenshire (Conservative, Hornchurch)

It is important that we have that clarification on the record. Given that the legislation is not a consolidating Bill, but merely inserts new measures into existing legislation, such clarification on what the follow-through will be is extremely helpful.

We come back to the definition of "irresponsible lending". There is some similarity between our consideration of that and our previous lengthy debates on the unfairness test. I have even asked the Minister a question about the unfairness test, and he kindly responded by promising to monitor closely the impact and effect of the test to ensure that it does not have unintended consequences. One needs to read both provisions together, although they are separate. The unfairness test relates to a creditor who wants redress trying to assert that the relationship that was entered into was unfair. However, when considering irresponsible lending, the OFT can examine both matters. It can consider whether someone has been unfair, even though it has said that it will not try to define that. I presume that it says that that is a matter for the courts because of the context in which the provision arose.

I hope that the OFT will be prepared to give more clarification on the meaning of irresponsible lending. My hon. Friend the Member for Hertford and Stortford (Mr. Prisk) talked about certainty. The industry needs certainty so that it can prepare properly and effectively for the implementation of the Bill. We will hopefully then not get into enforcement problems due to challenges on whether the provision has been infringed.

The question of clarity and certainty is germane. The hon. Member for Kingston and Surbiton (Mr. Davey) highlighted the fact that a balance must be struck. On the one hand, we need to provide protections, but on the other we do not want something that is too prescriptive. We debated in Committee why a prescriptive list that is an attempt to give certainty might lead to a box-ticking exercise, rather than providing the protection to creditors that we all want as a consequence of a Bill. If the system is too vague and uncertain, there is a risk that certain sectors of our community, especially people from socially disadvantaged backgrounds, will be denied credit—full stop. There is a risk that if the system is very vague and uncertain, lenders will say, "We don't know what this means, so we are not going to take any risks at all" and thus withdraw from a specific sector of the market.

Some providers lend small sums of money, but the annual percentage rate that they levy suggests that they are engaging in irresponsible lending. However, the monitoring process shows that they provide a service to the market that would otherwise be sucked up by loan sharks and unsavoury characters whose practices we hope the Bill will end. If there is uncertainty, credit could be denied to a sector of the market. Lenders already have to factor in the cost of risk, but because of the small sums involved that may appear disproportionate. I am deeply concerned that failure to provide clarity would have the unintended consequence of playing into the hands of loan sharks and illegal lenders who prey on the disadvantaged.

David Taylor (Labour, North West Leicestershire)

The hon. Gentleman suggests that if borrowers were denied access to those lending organisations they would be driven into the hands of loan sharks and unsavoury organisations. However, there are alternatives, such as credit unions, that are certainly not unsavoury, in many parts of the country. Does he acknowledge that they are properly regulated and do not offer unfair or excessive lending terms? I should declare that I am a member of a credit union board.

James Brokenshire (Conservative, Hornchurch)

I would certainly like to put on the record my appreciation of the work of credit unions. However, they are not accessible to everyone in those circumstances. We need to promote a diverse and varied credit industry. I hope that the Minister and the Department will continue to work with the industry to do so once the Bill is enacted. However, I fear that the industry may withdraw its services from certain parts of society if the law is not certain or if it is over-prescriptive. A balance needs to be struck.

My hon. Friend the Member for Hertford and Stortford referred to the briefing note circulated by APACS, which highlighted concerns about withdrawal from the market:

"In practice we are concerned that the OFT will set an unnecessarily wide definition and that this will in turn have an impact on whom lenders choose to lend to."

Lenders should be more cognisant of the people to whom they are lending. That is the concept of responsible lending that Members on both sides of the House have sought to promote throughout the progress of the Bill. There should be greater responsibility, but not if that means that services are withdrawn wholesale from certain parts of the market. It is self-evident that the socially disadvantaged are in a difficult situation, so an extortionate credit bargain under the existing legislation could put them in a much worse position. People would not have access to direct or regulated credit, so they would fall prey to the unregulated sector.

There has been reference to the involvement of the courts. In exercising its powers, the OFT must be certain about its remit and the provisions that it seeks to interpret. We have missed an opportunity by failing to spell out the concept of irresponsible lending in the Bill. In Committee, the Minister said:

"If we are very specific about an issue we could undo what we are trying to achieve."

I agree. He continued:

"For many, responsible lending imposes a requirement that lenders do certain things before extending credit. However, the things that a lender may take into account in the case of one debtor may be very different to those of another. It will depend on a debtor's circumstances.

Any duty to lend responsibly would mean defining what is, and what is not, responsible lending."—[Official Report, Standing Committee D, 28 June 2005; c. 93.]

Several months down the line, we have included the concept of responsible lending in the Bill, but we have not included a definition. I therefore hope that the Minister can explain where we can find such a definition, given his comments on the issue in Committee.

In summary, there is not certainty in the Bill about the meaning of responsible lending. I accept that a balance needs to be struck, but clause 29 deals explicitly with fraudulent, deceitful or oppressive practices. As a lawyer, I interpret things according to their context, and such practices suggest that a high standard would have to be breached before the responsible lending test were applied. Someone would therefore have to be guilty of an outrageous practice to breach that standard.

Peter Bone (Conservative, Wellingborough)

Does my hon. Friend agree that the Government appear to be against irresponsible lending, but they do not have the foggiest idea what responsible lending is?

James Brokenshire (Conservative, Hornchurch)

The Bill does not provide any indication of what constitutes responsible or irresponsible lending, so my hon. Friend is quite right.

Jim Devine (Labour, Livingston)

Is irresponsible lending based on giving a loan, but failing to reveal who provided that loan?

James Brokenshire (Conservative, Hornchurch)

I shall wait to see whether the Bill applies to us all in relation to any loans that may or may not have been made. It remains to be seen whether another Committee will decide to investigate its relevance to such matters.

The time allowed for industry to prepare for the Bill is of critical concern. We have already heard from my hon. Friend the Member for Hertford and Stortford that the proper implementation of the measure could take 18 months. I appreciate that the Minister can probably only take limited action in providing guidance and greater clarity, so such things may be left to secondary legislation and guidance from the OFT. I hope that that is sufficient to ensure a smooth transition for the industry. Throughout the Bill's progress, there has been a great deal of cross-party consensus about the need for a measure to update the Consumer Credit Act 1974, which is not fit for purpose, so I hope that we will use this final opportunity to do so.

Lords amendment No. 4 is a technical amendment. As a lawyer and a purist, however, I believe that it should refer not to "the officer" but to the "relevant officer", given that that term is used throughout clause 50. I would therefore be grateful if the Minister would confirm that "the officer" is indeed the relevant officer cited in that provision.

David Taylor (Labour, North West Leicestershire)

As life president of outsourcing watch and privatisation watch, could the hon. Gentleman comment on the suggestion made by his Front-Bench colleague, the hon. Member for Hertford and Stortford (Mr. Prisk), that amendment No. 4, which seeks to insert section 36F into the 1974 Act, would in some way catalyse outsourcing, privatisation or contestability, all of which are concepts dear to the hearts of people close to the power centres in the Government?

James Brokenshire (Conservative, Hornchurch)

I do not disagree with what my hon. Friend said in the context of clause 50 and amendment No. 4, although if he wishes to clarify his comments I am sure he will use the opportunity afforded to him this evening.

Amendment No. 4 is largely technical. It also clarifies the role of the OFT. Without it, there would have been a problem if a criminal action had been launched against the OFT as to the responsibility and actions of persons to whom powers had been subcontracted or delegated. I welcome the clarification that the amendment provides.

Finally, I welcome amendment No. 5, which ensures that the affirmative procedure applies to the Bill. I echo the sentiments of the hon. Member for Kingston and Surbiton (Mr. Davey) with reference to the Legislative and Regulatory Reform Bill. Hon. Members are concerned about the meaning of legislation, and the Bill seems to drive a coach and horses through large amounts of legislation by means of statutory instruments. Although I welcome the more positive way of making regulations under the Consumer Credit Bill, I remained concerned about other aspects, but that is not a matter for the Minister in the present context.

I hope that when the Bill is enacted, it brings about a regulated market that offers diversity, flexibility and a range of credit facilities to everyone in a more responsible way, so that there will be fewer of the cases that many of us continue to see in our constituency caseload, where there has been an unfair relationship test or irresponsible lending. I remain somewhat sceptical, but I note that the Minister has undertaken to review the legislation in due course. During that review, I hope that we will have a further opportunity to see whether it has achieved the ends that it is intended to achieve.

Ian Liddell-Grainger (Conservative, Bridgwater)

I wish to respond to the comments made by my hon. Friend the Member for Hornchurch (James Brokenshire) and the hon. Member for North-West Leicestershire (David Taylor) about credit unions. Credit unions were set up to bridge the gap between loan sharks and genuine lenders. The growth of credit unions reflects the failure to regulate the industry properly in this country.

I put two questions to the Minister about credit unions. If a new credit union is set up, will a new licence be needed? All credit unions, as the Minister knows, are individual credit unions. They are not part of one group. They are set up by local people and therefore use local resources. If each has to apply to the Office of Fair Trading for a licence and the applicant, under amendment No. 3, is deemed not to be worthy, how would the credit union continue to survive? One of the problems that credit unions face is that people can give 50p a week. No doubt the Minister will correct me if that is wrong. They therefore receive and give out tiny amounts, but they stop people falling into the hands of loan sharks.

I am sure that all hon. Members have had a chance to visit credit unions. If they have not, they should. Credit unions give people an opportunity. I would hate to see enforcement, regulation or any form of licensing that could affect them. The OFT is being given sweeping powers to carry out the functions set out in the Bill. It is a statutory body dealing with an organisation run by local people, who have neither the ability nor the expertise, unlike my hon. Friend the Member for Hornchurch, who is a solicitor—

Gerry Sutcliffe (Labour, Bradford South)

I am grateful to the hon. Gentleman for giving way. I should point out that credit unions will not be regulated under the Consumer Credit Bill. They are regulated under the Financial Services and Markets Act 2000, so they will not be subject to the tests that the OFT will apply.

Ian Liddell-Grainger (Conservative, Bridgwater)

I am grateful to the Minister. I am sure that credit unions throughout the United Kingdom and all the people who depend on them will be grateful too.

Jim Devine (Labour, Livingston)

The hon. Gentleman clearly knows a great deal about credit unions, as I do. Does he agree not only that individuals and their partners should join credit unions, but that organisations such as local bowling clubs, cricket clubs and so on should be allowed to do so?

Ian Liddell-Grainger (Conservative, Bridgwater)

The hon. Gentleman's proposal has great merit. Perhaps the Minister will consider it and in due course table an amendment to that effect. He will have to revisit the subject when the OFT wants more powers.

My next point is about citizens advice bureaux, to which people turn when they have problems. In their surgeries many hon. Members will have dealt with cases of people desperate to get out of debt as a result of irresponsible lending.

Peter Bone (Conservative, Wellingborough)

Is my hon. Friend aware that the CABs are dealing with so many cases of debt that they can hardly cope? In my constituency, the Rushden branch is desperate for extra funding just to deal with debt work.

Ian Liddell-Grainger (Conservative, Bridgwater)

I could not agree more with my hon. Friend, and neither, no doubt, could the House. Most people who approach the CAB are struggling with debt upon debt, not one set of debt. They have taken out too many credit cards—too many lines of credit. The Minister will be interested to know that that is the major part of the CAB's job, and the problem is getting worse. I hope that the Bill will address it, otherwise I suspect that the Minister will be back before the House making sweeping amendments to the Bill. He shakes his head. I hope he is right.

There is another aspect of licences that may require further attention. I refer to the ability of international companies to trade. They can be based in any country and their subsidiaries can legitimately be based in the United Kingdom, as with many banks and other organisations. One of the problems is their ability to lend money in the United Kingdom. Regulation has been difficult enough through the Financial Services Authority and other organisations, let alone the OFT. The Minister will understand that international law enforcement to bring to book companies that have lent in the UK from an international base is almost impossible. The OFT has no power to do that.

Steve McCabe (Labour, Birmingham, Hall Green)

I do not doubt that international situations are difficult, as the hon. Gentleman says, but surely that is no reason not to proceed with the measures tonight.

Ian Liddell-Grainger (Conservative, Bridgwater)

I entirely agree. That is not what I am seeking to do. I am trying to clarify the position. I can see nothing in the Bill that addresses that. My concern is that people will take out loans, thinking that they are dealing with a British company that is administered in Britain, pays its taxes in Britain and comes under British company law. When something goes wrong and a company goes into insolvency or has its licence revoked, one has no recourse if it turns out that it is based in another country, which will probably not be in the European Union.

Peter Bone (Conservative, Wellingborough)

I hope that I am not about to steal my hon. Friend's thunder, but he has mentioned the European Union. Is there a European Union perspective to the matter, and should we take it into account?

Ian Liddell-Grainger (Conservative, Bridgwater)

I always hesitate to mention Europe in this place—but luckily, certain hon. Members are not in their places. I do not have a problem with people trading out of Europe—most of our companies have European subsidiaries—but I am thinking about a situation in which a European company has a subsidiary in this country.

Gerry Sutcliffe (Labour, Bradford South)

I think that I shall have some sport: there is going to be a European consumer credit directive, and I hope that the hon. Gentleman will support it.

Ian Liddell-Grainger (Conservative, Bridgwater)

I was just about to come to that. Never mind my hon. Friend the Member for Wellingborough (Mr. Bone); the Minister has stolen my thunder—it is nice to have one's thunder stolen by the Minister, I suppose.

If we are to have responsible lending throughout the nations of Europe—in other words, through the European Union—and if the OFT is to give out licences, will we have to return to this place to invoke a European directive on a European credit Bill to police those licences? And will the subsidiaries be policed or licensed? My concern is that one cannot control subsidiaries. Consider how many credit cards the big five clearing banks issue through subsidiary companies—how many companies does a bank such as the Halifax own?

I defy anyone to know which company has actually issued a credit card. If one looks on the back of the piece of paper, there is a spiel, and right at the bottom it will say, for example, National Westminster bank or bank of Scotland. Let us consider the case of Barings bank—a disaster of epic proportions. If there had been lines of credit cards and lines of loans, what would have happened? How could the legislation have been enforced in this country, because Barings bank was taken over by the Dutch post office, ING? I do not know whether that is still the case, and whether an overseas company could now be pursued in similar circumstances.

Company law is unclear on enforcement. If a licence is given, what checks will the OFT make on whether that company is solvent? The matter rests outside company law. If a new bank were to come in, credit checks would have to be conducted, which could be difficult. What powers does the OFT have to enable it to do that? I am not sure whether such cases are provided for in the Bill. As the Minister knows, the worst legislation leads to the Minister having to come back to this House to amend it. The Bill contains sweeping powers, but this matter is complicated. If there is a European consumer Bill, and if we face the complication of overseas lending, it will be difficult for this place to regulate it.

The success or failure of the Bill may lie not in what the OFT can do, but in its manpower, which is not enormous. I hope that we do not see Capita or some other organisation creeping in to control such matters, because: first, it is not regulated; secondly, it is not part of government; thirdly, it will be appointed to do a job on a contract; and fourthly, we will have no say whatsoever in the long term as to its actual operations. Will the Minister tell us whether there is a safeguard to stop the OFT subcontracting such work? Lords amendment No. 4 mentions:

"the officer, the enforcement authority of which he is an officer or the OFT".

An officer could be anybody, presumably, providing that they are given the power to do the job. There is no reason why such work could not be given to one of those very large companies that do an enormous amount of work within government. Will the Minister confirm that that is not the case? If it is the case, what are the safeguards? If there are safeguards, will they be included in an amendment, so the OFT cannot use them as an excuse to stop people lending, to make people worried about lending or to make companies that might want to lend think that they will not touch such things, because they involve outside influences?

Peter Bone (Conservative, Wellingborough)

My hon. Friend is making a powerful speech, and he has touched on the resources of the OFT. Does he envisage that the OFT will have to review all the licences when the law comes into force? What effect will that have on the manpower of that organisation?

Ian Liddell-Grainger (Conservative, Bridgwater)

My hon. Friend has made a valid point. As he has said, the rate of company acquisitions in this country is enormous. Credit lenders, both large and small, are taken over daily. If one buys a fridge from, for example, Comet, one enters into some form of credit agreement, which can be sold by that company to another credit company. Will the OFT check each such company from the start?

Stewart Jackson (Conservative, Peterborough)

Is my hon. Friend concerned about the efficacy of evidence taking in respect of the OFT, given the example of supermarkets, where there have been concerns about—for the want of a better word—reprisals against people who have given evidence to the OFT?

Ian Liddell-Grainger (Conservative, Bridgwater)

My hon. Friend has made a valid point. I was interested to hear my Front-Bench colleague, my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) discuss Lord Sainsbury, who issues quite a lot of credit lines to people who subscribe to his supermarket chain. There is nothing wrong with that—but how on earth would it be policed if the OFT did not have a database or background information? As I have said, I defy anyone to work out who is doing what. Will the OFT have the power to force those companies to let it know about such changes on a set date? Will such companies have 28 days or 14 days for compliance, and how will someone know whether their account has been moved?

I am sure that most hon. Members have mortgages—one or two of us have more than one—and one must know from whom one is borrowing money. There is no guarantee that the OFT will be able to police such matters in the long term. I am not convinced that the resources will be available for the individual companies to be put into their slots for the long term and controlled by the OFT.

Governments are very good at cutting resources, and we have seen too many examples of such organisations being slimmed down, in terms of manpower and resources. The Rural Payments Agency is a good example. If it goes wrong, who is responsible?

The Bill is delightful and will provide protection, but the underlying problem is that when big companies start to play, they do not care who they hurt. If they start to hurt the most vulnerable people in society, the credit unions and others are left to pick up the pieces. If we then do not let the OFT do its job, or we do not give it the powers, or it does not have the resources, the Bill will be worthless. I ask the Minister to ensure that that is built in.

Gerry Sutcliffe (Labour, Bradford South)

I said to colleagues that I expected this debate to be over quickly, on the basis that the Lords amendments were all agreed and there had only ever been one Division on this Bill both this time and before, when its predecessor was lost for lack of parliamentary time. I therefore had reasonable expectations that we would not go into the detail that we have tonight.

David Davis (Conservative, Haltemprice and Howden)

So did we.

Gerry Sutcliffe (Labour, Bradford South)

Well, perhaps other issues have had an effect. We have had a good debate, which was conducted in the right spirit. We had some robust contributions, which did not necessarily hone in on the Lords amendments before us this evening.

I apologise to the hon. Members for Hertford and Stortford (Mr. Prisk) and for Kingston and Surbiton (Mr. Davey) for not welcoming them to their new responsibilities. We have had discussions in Committee recently and I am beginning to see those hon. Gentlemen far too often for my liking. We continue to have good natured debates.

There was reasonable support for Lords amendment No. 1, so I hope that everybody is happy with the distinction between "his" and "the debtor's". The wording is transparent and will provide the opportunities that we need. On Lords amendment No. 2, I am grateful to the hon. Member for Angus (Mr. Weir), who has raised many issues about legal certainty and judgment. I take on board his comments and thank him for his congratulations on the amendment.

The main amendment for discussion was Lords amendment No. 3, on the OFT's responsibilities in relation to irresponsible lending. There was confusion in some minds about the distinction between the unfairness test and the responsible lending function that the OFT will be able to take into consideration when performing its licensing function. I refer hon. Members to the debates on previous stages of the Bill, in which we tried to clarify why we were supporting that function for the OFT. I do not think that the hon. Member for Bridgwater (Mr. Liddell-Grainger) meant to attack the OFT, and it is true that the Bill will have resource implications for it and bodies such as the trading standards authorities, which act as enforcement authorities on behalf of the OFT when requested.

The hon. Member for Kingston and Surbiton raised the point on data sharing made previously by the hon. Member for North Norfolk (Norman Lamb). It is important, and the three Front Benchers have been talking to APACS and others about it. I have also talked to colleagues in the Department for Constitutional Affairs, and we will consult shortly on the issue.

Mark Prisk (Conservative, Hertford and Stortford)

What I did not hear from the Minister on amendment No. 3 was whether there was a particular reason why he changed his mind and accepted it. What was the one thing that led the Government to accept the amendment, when they were so reluctant to do so previously?

Gerry Sutcliffe (Labour, Bradford South)

It is easy to answer that. It was the power of the argument, especially from some of the noble Lords, from their experience on various boards. Lord Borrie had also been involved with the OFT. It was the weight of discussion and the opportunity for the OFT to have that power in the licensing function. I make the distinction between the licensing function and the duty to lend responsibly.

The Lords amendments are important to our discussion. We have gone through all the aspects thoroughly, both this evening and previously. The Bill has been well consulted upon. It became part of the process following the consumer credit White Paper, which again was fully consulted upon. The Legislative and Regulatory Reform Bill stands alone in that it has not completed its passage through the House. In amendment No. 5, we rightly acknowledge and respond to the concerns of the Regulatory Reform Committee in relation to clause 68. I have dealt with the point about data sharing.

Implementation is a key issue. A timetable will be produced. We are cognisant of the fact that there need to be IT systems changes, and experts from the industry will be seconded to the Department to offer advice and assistance when we draw up the various regulations.

This has been a thoughtful debate, and I hope that the House will support the Lords amendments.

Lords amendment agreed to.

Lords amendments Nos. 2 to 5 agreed to.