Lords Sitting of 28 June 1972

Preamble
The House met at half-past two of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Rochester):
The LORD CHANCELLOR on the Woolsack.

LORD ADEANE
Lieutenant-Colonel the Right Honourable Sir Michael Edward Adeane, G.C.B., G.C.V.O., having been created Baron Adeane, of Stamfordham in the County of Northumberland, for life—Was, in his robes, introduced between the Lord Hamilton of Dalzell and the Lord Nugent.

REDUNDANCY AND GOODS DELIVERY SERVICES
2.41 p.m.
LORD SHINWELL: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they have any information on the effects of delay in delivering goods of an industrial and domestic character due to the policy of redundancy which has been in operation.
THE EARL OF GOWRIE: My Lords, I am not aware of any tendency for firms to concentrate redundancies on service and delivery staff, but if the noble Lord will write to me giving any evidence in his possession I will have further inquiries made.
LORD SHINWELL: My Lords, I am grateful to the noble Earl for that Answer, but is he aware that there are many complaints, not about production but about the delivery of goods that are ordered, because sometimes people who order goods from industrial firms have to wait several weeks, and the reason given for the delay is usually shortage of labour? How far is that shortage of labour attributable to the policy among industrial firms, during the past two years, of dispensing with labour and creating redundancy?
THE EARL OF GOWRIE: My Lords, in general it is a matter for the commercial judgment of firms, who find it necessary to decide, in consultation with the representatives of the workers involved, what types of staff they are to discharge. That is not exactly a matter for the Government.
LORD SHINWELL: My Lords, would the noble Earl not agree that it leads to inconvenience, frustration and irritation when goods are ordered and weeks elapse before they are delivered? Does it not also inhibit production in the long run? And may I venture to ask the noble Earl whether he will accept a constructive suggestion from me; namely, that the Government should approach the C.B.I., who represent the majority of industrial firms in this country, ascertain their views and then discover whether they are prepared to conduct an investigation into the complaints?
THE EARL OF GOWRIE: My Lords, I have had such a sleepless night trying to work out what the noble Lord meant by "policy of redundancy" that I shall be absolutely delighted to look into his suggestion with great care and to bring it to the attention of my right honourable friend.

FINANCING OF PUBLIC CAPITAL EXPENDITURE
LORD BARNBY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, since it is now widely accepted that changed conditions have superseded the basic policy on which the White Paper on Full Employment (Cmd. 9725) was based, they will now consider reverting to the earlier policy of meeting public capital expenditure out of long-term borrowing from the private sector instead of out of taxes as at present.
THE LORD PRIVY SEAL (EARL JELLICOE): My Lords, the achievement of price stability and full employment remains the objective of the Government. However, I cannot agree that the method of financing public sector capital expenditure urged by my noble friend would necessarily help towards this end.
LORD BARNBY: My Lords, does the noble Earl the Leader of the House recall that previously some statutory public bodies were required to turn for their finance to the market? This had a disciplinary action as it necessarily was founded on past performance and the efficient administration of their utilities.
EARL JELLICOE: My Lords, I do so recall; but my noble friend will also recall that the system was changed in 1956; and it was changed, as I understand it, because it was felt, and I think rightly, that the nationalised industries were inevitably backed by the Government and that their debt is therefore equivalent to gilt-edged. In these circumstances it makes sense for the Government to do all the necessary borrowing on their own account and to on-lend the nationalised industries through the National Loans Fund. I would point out to my noble friend that this policy was endorsed by the Radcliffe Committee in 1959, and indeed by the Select Committee on Nationalised Industry in their Report in Sessions 7 and 8.
LORD BARNBY: My Lords, may I put a second question? Since my noble Leader has referred to Cmd. Paper No. 9725 of 1956, may I ask whether the attention of the Government has been drawn to the research paper put out on March 7 of this year by the Economic Council, in which they stated that excessive taxation leads to increased "stagflation"?
EARL JELLICOE: My Lords, I thought it was my noble friend who had referred to Cmd. Paper No. 9725. Be that as it may, the Government are of course aware of the Paper to which my noble friend alludes, although I must confess that I personally have not yet given it the close attention which it deserves and which it will have from me. I will merely say, pending that close attention, that this Government do not need to be convinced of the evils of excessive taxation, as I think their record has amply demonstrated.
LORD POPPLEWELL: My Lords, would the noble Earl say what the rate of interest is when these publicly-owned undertakings borrow from the Government? Are they still expected to show a return of 10 per cent., and is that taken
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into account before any subsidies are underwritten?
EARL JELLICOE: My Lords, I think that is another question, and as I have no idea how to answer it at this moment I should like to defer my reply until the noble Lord has tabled it as a separate Question.
LORD AVEBURY: My Lords, would not the noble Earl agree that one can compare the rates of interest charged on loans from the Consolidated Fund with rates of interest that are available in the private sector, and that if one looks at the public expenditure programme of the Government to 1975–76 one can calculate the difference in the burden on the taxpayer which would follow from adopting the suggestion made by the noble Lord, Lord Barnby, which would impose a very great additional burden on the taxpayer? Would it not be a good idea if future issues of the public expenditure forecast were to include a table showing how much of the expenditure was to be financed from borrowing and how much from taxation, and the additional cost that would arise if the borrowing element were financed by going to the market?
EARL JELLICOE: My Lords, I shall certainly be glad to bring the noble Lord's suggestion to the attention of my right honourable friend the Chancellor of the Exchequer or the Chief Secretary.

CONSUMER CREDIT: THE CROWTHER REPORT
2.49 p.m.
BARONESS PHILLIPS BARONESS PHILLIPS rose to call attention to the Crowther Committee Report on Consumer Credit; and to move for Papers. The noble Baroness said: My Lords, I beg to move the Motion standing in my name on the Order Paper. I am grateful for the opportunity to open a debate on this subject of importance and topicality, and I am deeply grateful to those noble Lords who have agreed to speak in the debate. At one stage I felt rather like the King in the Bible who found that of three invitees to his son's wedding one had five yoke of oxen and had to go and see them; one had purchased a field and had to go and look at it, and one had married a wife and therefore could not come; but our final

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count-down is a most distinguished, star-studded list.
This Report was presented in March, 1971, and it took two years to complete. It is a fitting tribute to the work of the late Lord Crowther and to another Member of your Lordships' House, the noble Lord, Lord Hirshfield. It is a splendid document of social, economic and legal significance and it was difficult to decide which aspects to include in my introduction to the debate; or perhaps it would be more accurate to say that it was difficult to decide which aspects I must exclude. However, having examined the list of eminent speakers, I am sure that they will cover any aspects of the subject that I do not cover.
So far, this Report has not been debated in either House, although in Parliamentary replies the Minister has indicated that studies are being made. I wish to indicate how important and far-reaching this subject is. One need only look at some of the figures quoted in the Report to appreciate its importance. In 1969, instalment credit extended by the finance houses amounted to £492 million. The Under-Secretary of State for Trade and Industry forecast in May a further substantial increase in hire-purchase debts over the next 12 months; the figure outstanding at the end of March was £1,678 million. During the 10 months to March, 1972, he said, there had been an increase of £301 million. My Lords, this is big business and it affects everyone. The Crowther Committee made clear what they were discussing when they said:
"We have taken 'credit' to mean either the deferment of payment for goods delivered or services rendered at once or the straight lending of money."
At the present time, as your Lordships will be aware, there are many ways of financing credit. There are moneylenders, check and voucher traders, loan societies, building societies, assurance and mortgage brokers, retailers, mail order houses and all the various institutions concerned with consumer credit—hire-purchase information services, the credit reference bureaux and debt collectors.
The granting of credit goes way back into history and there is nothing immoral or dishonourable about it. One might say that the only immoral part would be if one did not honour the credit one had been granted. Our language is full of
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expressions like, "I give you credit for being a sensible man", or "That action is much to his credit." The practice of lending money goes back so far that we have references to it in plays and stories, and we all know about the tragedy of the debtor who languishes in prison. This has been immortalised by writers in many stories and in songs and prose. It is elementary to remind your Lordships that the poorer the borrower the greater the amount of money he will have to pay in interest to borrow his money, and in this connection the Crowther Report said:
"The less educated and poorer members of the community through ignorance of the credit market and of the protection provided by existing legislation are freequently in the position of paying higher interest rates than are justified by their relative credit worthiness."
The laws which govern credit have grown up piecemeal and I believe that some of the major recommendations in the Crowther Report are those which deal with the reform of the legal framework. Indeed, the Committee pointed out that the sheer complexity of the law meant that they were unable to recommend anything less than a complete abolition of the present credit laws and the need to replace them with two new Statutes, the Lending and Security Act and the Consumer Sale and Loan Act.
At present the hire-purchase laws say that a person takes goods on hire and that after he has had them on hire for a certain time and has paid the hiring charges he has the option to buy the goods at a nominal sum. This is what the agreement says, but the purchaser of the goods understands something quite different. He understands that he is buying the goods but is paying for them on instalments. The borrowing of money in this set of circumstances has two aspects, the loaning and the selling, and the need for protection can be better appreciated if both aspects are recognised. It is suggested by Crowther that the existing hire-purchase regulations, which include a cooling-off period of three days for agreements signed at the home of a purchaser (this was originally aimed at doorstep salesmen), should be extended to cover agreements for amounts over £30 signed in a shop or place of business and that the contract documents and any advertisements should be required to show the true annual percentage rate of interest charged.
As an illustration of what happens to-day, I will quote from an article in the Guardian in May last. One of the newspaper's reporters went to buy an automatic washing machine. She went to two shops in my borough of Hammersmith and to the London Electricity Board. The recommended price was £124. In the first shop the cash price was £109, and she was told that if she bought the machine over the relevant period, the total credit cost would be £123. The true annual rate of interest was 14·7 per cent., but the shop quoted, rather vaguely, a 7½ per cent. service charge. In the next shop the cash price was £120, and there she 'was told that if she paid over the full term, she would pay £158 in credit, or a true annual rate of 35 per cent., although the shop quoted about 11 per cent. At the London Electricity Board the cash price was £114 at a total credit cost of £136, or 18 per cent. as a true annual rate, although she was quoted 10 per cent. Under the present law a finance company has no obligation to show in its advertising or in any other way the cost of the service that is being operated. It is difficult for the ordinary man or woman to find out or understand for what he or she is paying when buying goods on deferred terms. The finance houses, including the banks, do not make it any easier to compare the true cost of borrowing.
The Crowther Committee also suggest that defective goods bought under a loan agreement linked to purchase should become the responsibility of the lender. There are constant examples of large pieces of equipment—for example, central heating appliances—being purchased through finance houses which appear to be connected with the installer, yet if anything goes wrong or if the company doing the work goes into liquidation, the consumer is unable to get redress against the finance company. The suggested alteration in the law would further see that the buyer had rights concerned with the fitness and quality of the goods, and the finance house behind the seller would be liable for any misrepresentation made by the seller.
The complicated nature of these deals was brought out clearly in some cases outlined in the Sunday Mirror of May last. Some families had bought home
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freezers. Before these appliances were even delivered the firm supplying them had collapsed. The unfortunate clients then discovered that they were committed to pay for the next three years, under a moneylender's agreement, for articles which they had never received. Or consider the case of a buyer of a colour television set who signed an agreement to pay for it over 156 weeks at a total amount, plus insurance, of £317. The interest—it was called a service charge—was £127, making a total credit price of £445 to be paid back at the rate of £2·85 a week, giving a rate of 30 per cent. The actual cash price of £240 was not stated in the agreement. Nor was it stated whether the £317 included insurance. The purchaser decided to pay it off rather faster than the three years, and in the first 12 months he paid on average £20 monthly off the debt. He then decided to clear off the remainder, which included three years' interest. The seller put him in touch with the finance house and there followed a series of angry letters, which were not answered, and telephone calls, and finally, because he was a persistent man, a settlement figure of £140 was arrived at. He had saved £50 but for borrowing the money for one year he had paid 75 per cent. interest. The Crowther Report recommends that in all credit transactions a debtor who settles ahead of time should be entitled to a rebate of charges calculated according to statutory formulæ, providing that the debtor is not behind with his payments and that the agreements are not for less than 20 weeks or £30.
Linking with goods supplied on credit is the popular system of hiring or renting goods where no loan, and therefore no credit, is involved. On this the Report has a very critical comment. It says:
"Where a T.V. set is rented for a substantial part, and perhaps the whole, of its useful life, then whatever the transaction may be in law, its economic content is such as to place it on a direct par with the hire-purchase of the same article … We think the public regards them as two alternative means of attaining the same object, and at least some of the protective and regulatory provisions that attach to one should clearly attach to the other."
What of some of the other matters mentioned in the Report? Credit cards are now becoming part of everybody's equipment for coping with modern life. Over the past five years the "Barclaycard"

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business has built up to 1·5 million contributors, and other companies, not unnaturally, are moving in. I feel that we are moving to what might well be called a "cashless society"; yet how little do we know about it. The Report says:
"Information is power and beyond a certain point may require to be controlled".
Behind the issue of every credit card is a build-up of what one can only describe as "snooping". I will not anticipate the findings of the Younger Committee, which we hope to have very soon, but credit rating systems can be an invasion of privacy to an alarming degree. There is an exchange of information none of which the person holding the card knows about, and those of you who hold a Diners Card, as I do, can quite obviously see that one's address is traded to other firms, mainly those offering me very expensive articles which I have not the money to buy.
The Crowther Committee expressed concern at the growth of credit bureaux and the dangers posed by records being collected about individual members of the public which were made available to subscribers to commercial bureaux. I think your Lordships can see the potential danger of this. We are told that our credit rating will soon be more important than a reference. I would remind your Lordships, that if you do not pay promptly on your credit card, your credit rating may well drop and may never be reinstated. So that if at some stage somebody does ask about you, you may get a shock if you knew how you were described. Luckily, however, you will not know; naturally, your Lordships always pay your bills very promptly.
The other major recommendation of the Committee is the establishment of a Credit Commissioner. His main function would be to operate a scheme of licensing for all businesses which deal with consumer credit. In addition, he would have other important jobs: he would make regulations about such things as the form and content of documents; he would recommend to Parliament changes in the law; he would ensure that the law is carried out and enforce it where necessary; and he would act as an Ombudsman to educate the public in the use of consumer credit. On this the Report says:
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"In learning to spend wisely the consumer can he helped to a very considerable degree by suitable education and by ready access to proper advice."
Or again—and how well we know this in the consumer field!—"prevention is always better than cure". If one thinks of the shopper in this market, I think a comparison might be made this way: if we buy an electric kettle which costs £4 to £5 we know the brand, the price and the guarantee. We know whether it is made to a safety standard. We know its design and we know that it is covered by the Electricals Approval Board. But on the purchase of a car the financial situation and the complaints procedure and guarantees are almost conspicuous by their absence.
So far as I can discover, no one has spoken against the findings of the Report. Those concerned with check trading houses have written to me expressing their approval and no one would fault their attitudes or indeed their performance in the modern business world. The Finance Houses Association are on record as accepting the proposals. So I am asking Her Majesty's Government to implement this Report. We have had the release of unrestricted credit to the consumer, and this must be accompanied by the changes which are recommended by the Committee.
My Lords, may I quote again one of the wise things mentioned in the Report:
"Our view is that at present consumers in Great Britain, either individually or as a group, are not making such extensive use of consumer credit as to outweigh the considerable benefits which they derive from its use."
In other words, no criticism is attached to the use of credit. In the gracious Speech we had these magic words:
"Legislation will be brought before you to promote active competition and fair trading and to extend customers' protection in the sale of goods."
So far I have seen no evidence of any legislation which fitted this particular pledge. Here is an opportunity for the Government to give protection and education to the consumer. My Lords, I beg to move for Papers.
3.6 p.m.
LORD BARNBY: My Lords, my purpose in intervening is to associate myself with the views of the noble Baroness and to express my conviction that it was very

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timely that this subject should be discussed. I would congratulate her on the skill and lucidity with which she deployed the various illustrations which will enable Members of the House to understand something of the intricacies of what is a complicated question but one which from a social point of view is of supreme importance, having regard to its effect on the comfortable living of the lower income sectors of the country. In her many references and illustrations the noble Baroness of course referred to the Crowther Report. It would be timely in that respect to express our thanks for that Report and also our sadness at the sudden passing of its Chairman our brilliant colleague. It is now four years since the previous Government promised that there would be an Inquiry. It is now 1972 and, as the noble Baroness has said, the Report recommended that there should be early legislation and met with very little opposition. The Report covered those many years and is an example of dedicated service to the community. Its discussion in your Lordships' House will, I think, bring out the many sides of this complicated question.
My desire is to ask the indulgence of the House because I have to declare an interest, as I have always been interested in this credit buying. The noble Baroness referred to check trading of amounts up to £30, with vouchers for larger amounts. That, of course, refers to the lower brackets. It is estimated that 25 to 30 per cent. of all purchases in this country are on credit and that in the check and voucher business, 65 per cent. is done by one company, the Provident Clothing and Supply Company. That company is named in the Report as doing about 65 per cent. of all the business done in the check and voucher category. That enabled anybody who, like myself, was on the board for quite a long time (I am no longer. though I am still a shareholder) and therefore familiar with the details of this business, to realise the extent to which it is of great service to the community.
In the recommendations for legislation, it was agreed not only that legislation is needed, but that when it comes it should be comprehensive and not piecemeal; that it should embrace the complicated system which the Moneylenders Acts
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of the past made more complicated. Therefore, the structure of the proposed legislation should be uniform and cover all credit transactions. This kind of business was given a tribute in the early part of the century with the assumption that the majority of people in the country are honest. The basis of it is that these commitments should be honoured. It is also a tribute that families in earlier days who were thriftless and wasteful were converted to a much better style of correct and honest living. The Report, if I may make a quotation from it, says:
"We urge that reform of the existing legal tangle is badly overdue, and … liberation of the consumer credit industry … from the antiquated provisions …".
I know from practice the many angles of hardship that sometimes arose from the difficulty of interpretation of the conditions of the Moneylenders Acts and certain Acts through the last century. The noble Broness gave several instances, and paid tribute to the Crowther Report. It is impressive that that Report is a unanimous Report, and that is an additional reason why the Government should agree to implementation of its recommendations.
I said that I approached this from a good deal of personal experience and enthusiasm for what is made possible by consumer credit. Those who feel that everything should be paid by cash and that there should be no increase of debt are out of date. Governments, incidentally, give good enough examples of the practice of increasing their total indebtedness. I will not attempt to go into the details of the Report itself which has generated this debate—that will be dealt with by succeeding speakers—but recently in this House I was much impressed by the noble Lord, Lord Leatherland who, in supporting the subject that he was talking about described his earlier life, which interested me greatly.
May I support the urgent social need by personal experience for credit trading in a proper form? When in due course I had left the university, having secured a degree, I started in my father's business, appropriately at the bottom and in due course graduated further. I remember being sent out by my father to visit a very prominent local manufacturer, who subsequently went into politics; he was

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a prominent member of the Liberal Party and reached the Cabinet. I was sent down to make a sale, and after I had discussed it with him he patronisingly said to me, "Young man, remember that the promising way of profitable trading is to make sure that there should be a pool of unemployed people at the mill gates." That rather startled me, having just come down from the university with liberal ideas, and I felt that this was a hell of a business to be in.
My recollection goes back to my native city of Bradford whence the Provident Clothing originated. I remember the early days of this century, when there was no "out of work" pay, no Welfare State, the position of the poor families by Thursday night was that there was little food in the house and prospects of considerable distress. They could go to a check trading company and, on the strength of their character, could get a check which would tide them over their difficulty. Let me assure your Lordships that in those early days the distress frequently was great. This kind of credit trading provided the means whereby hardship could be avoided, and whereby, we believe, more thrift was introduced into the community. It is with that little illustration, which your Lordships' indulgence permits me to give, that I heartily support the plea of the noble Baroness for proper and swift legislation to implement the Report which motivates this discussion, a Report which may be beyond the reading enthusiasm of many of your Lordships because it is a ponderous Report. I hope the Government will, impressed by what the noble Baroness has said, within measurable time, perhaps this afternoon, to give us expectation of early legislation advantageously to codify all permissive credit trading.
BARONESS SUMMERSKILL: My Lords, I wonder whether the noble Lord, after his very interesting exposition, could tell me what interest the poor paid in the old days when he lent them a pound or two?
LORD BARNBY: My Lords, it is interesting that the particular company with which I was associated have not changed their charges since the early part of the century.
BARONESS SUMMERSKILL: May I know how much it was?
LORD BARNBY: About 5 per cent.
3.20 p.m.
LORD AIREDALE: My Lords, I do not think there can be many of your Lordships who have had the advantage which the noble Lord, Lord Barnby, had, of having received advice from a Liberal Cabinet Minister. I should like to join in the tributes that have been paid to the late Lord Crowther and his Committee for the assiduous hard work which went into the compilation of this excellent and very comprehensive Report. Once upon a time, a county court judge, towards the end of a rather hard day's work in court, said rather wearily, "Too much of the time of this court is taken up by people entering into contracts which they do not understand with people whom they do not know to buy goods they do not need with money which they do not possess". That, I suppose, is roughly the kind of situation which led to the setting up of the Crowther Committee and to the publication of their excellent Report.
The Report is riddled with technical details, but since I think that it would not make for a good debate if one were to go too deeply into technicalities I shall try to avoid that. One of the main recommendations, and the one which interested me the most, is the recommendation for the appointment of a Credit Commissioner. He will be the newest recruit to that small band of special Commissioners who have been appointed in recent years, starting with the familiar Ombudsman, who was such a success that we were told last March of the appointment of a Health Service Commissioner. We are told that alongside the new local authorities which will be set up in two years' time there will be a local authority Ombudsman. In parenthesis I would add that this will be not a day too soon. There are many of us who think that the priority was wrong and that a local authority Ombudsman should have come first, because the average citizen is far more likely to have brushes with his own local authority than with Whitehall. However, it was done the other way round.
I suppose there may be critics who say, "Isn't this special Commissioner movement too grandmotherly, cosseting people whom Conservative Governments

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never cease to say must stand on their own feet"? If there still obtained any real equality of bargaining power between the buyer and the seller, such as existed in the old days when the law of contract was being evolved, I think I should agree that the special Commissioner movement seemed too grandmotherly, but in these days of the specialist and of big business it cannot any longer be said that the purchaser has any sort of equality of bargaining power with big business on the other side. The noble Baroness mentioned the motor-car industry. If I may say so, I believe that things are much better to-day than they were a few years ago, but the purchaser of a car has precious little bargaining power vis-à-vis one of the four or five manufacturers of cars. The special Commissioner is thoroughly justified in many fields nowadays, but the Commissioner suggested in the Crowther Report is very different indeed from the special Commissioners I have mentioned so far. He is to have executive power; he is to have power to issue and revoke lenders' licences, to make rules about things like misleading advertisements and the calculation of finance charges, without being answerable in Parliament for the conduct of his executive functions. He is to have enforcement powers, including power to prosecute people for breaches of the regulations which he himself has made. He is to be a schoolmaster, educating the public in consumer credit matters, and he is to be an Ombudsman. I left the Ombudsman until last because that function seems to be very low in the list of priorities in the Crowther Report. In paragraph 747, under the heading "Grievances" the Committee say:
"The Commissioner should have a complaints department."
The Committee could not very well say less than that, because earlier in the same paragraph the Report says:
"Complaints must always be one of the chief sources of information about malpractices."
My Lords, I cannot feel that an Ombudsman is going to command much public respect if he is seen to be merely part of a department carrying out multifarious activities. Surely an Ombudsman ought to be seen to be the champion of those who have grievances to air and to direct nearly all his energies to paying attention to the grievances which come
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before him. Therefore I would say, keep the Credit Commissioner primarily as an Ombudsman. By all means let him be an educator as well; by all means let him run an information bureau. But let this be information not only for members of the public but also for the appropriate Government Department as to the malpractices which he, as Ombudsman, will presumably know more about than anybody else in the country; and let the executive functions remain the functions of a Government Department, with a Minister answerable in Parliament for the exercise of those executive functions. One criticism made by the Report is that the consumer credit field is at present dealt with by more than one Government Department. By all means let the whole subject be gathered into the purview of one Government Department, with one Minister answerable in each House. I submit to your Lordships that the Credit Commissioner should be primarily an Ombudsman and should not be expected to carry out executive functions as well.
3.28 p.m.
VISCOUNT HANWORTH: My Lords, I know your Lordships' House has been sitting late recently, and therefore I will be as brief as I can and will not go over points which have already been made, except in so far as I may want to emphasise them if I think they are of particular importance. First of all, I should like to thank the noble Baroness, Lady Phillips, for introducing this subject. Because of its importance one feels it should have been debated in this House or in another place before now. This Report is almost exceptional because it is universally considered to be a first-class Report and its recommendations seem to be agreed to by almost everyone. From the consumer angle there are three really important recommendations. Although these have already been mentioned I should like to list them now.
First, there is the rate of interest, which has to be stated. I should like to give another example of the sort of thing which is happening at present. Secondly, it recommends that there should be only one method of obtaining credit, or rather of seeing that the credit has something behind it, which is called a chattel mortgage. This of course eliminates the large number of different methods of giving

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credit which exist at present. The previous speaker read these out. There are at least six or eight recognised methods, all of which have slightly different rules, and the consumer finds it hard to know which to select. It makes life extremely complicated. A third recommendation with which I want to deal is the Credit Commissioner. I should like to give one example here of how misleading rates of interest can be. There is a company called Financings (Guarantees) Limited who advertise very widely, particularly in papers like the Guardian and the Daily Telegraph. Their activities were reported in Money Which?—that is one of the Consumers' Association publications—for December, 1971. The firm advertises, saying, "Pay out less. Switch all your monthly payments to a single bank loan." Nowhere does the advertisement say that the true cost to the consumer is something like 22·3 per cent. per annum. How can the consumer know unless he is given this sort of information?
Our hire purchase system is one which has grown up. It developed out of an absurd legal fiction whereby a person takes goods in theory on hire and after he has had them on hire for a certain time and paid the hiring charges he has the option to buy them at a nominal sum. In other words, the reason for this was not logical; it was purely from the point of view of producing a convenient legal fiction. Nobody thinks of it as being a hire agreement or an option purchase; it is in reality a system for buying goods by instalments.
As has been previously mentioned, there are a great many other ways of obtaining credit, all of which have their merits and demerits, but in the end, from the consumer's point of view, they give very much the same answer, except that the consumer does not know what he is paying for it. The Government have in fact implemented one of the provisions of the Crowther Report; they have eased credit restrictions. This has simply opened the floodgates. They have done this, I have no doubt, not because they wanted to implement Crowther but for other reasons; but I think it is highly unfortunate that they should, so to speak, have put the cart before the horse and opened up the floodgates before the consumer has got the protection which implementation of the Crowther Report would have given.
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I realise that this is a very complicated Report, and I realise also the difficulties that a Government Department has in producing legislation. Nevertheless, the Report was published in March, 1971, and so far nothing has escaped except, I believe, a paper which is being circulated for comment, dealing with the method of expressing the rate of interest. I am told that this is a very long and complicated paper. One really feels that with something of this importance, which everybody agrees is a good thing, legislation should follow as soon as possible, and the Government really must depart from their normal procedure in dealing with this legislation and see whether they cannot produce something rather more quickly. At the present rate of progress we might assume that we shall not see Crowther fully implemented until something like 1984. I make one suggestion on this point: that if the Credit Commissioner were appointed now a great deal of the detail might be left to orders made by him, with whatever approvals might be required from other quarters, because he would rapidly get to know what the difficulties were. I am pressing the Government, instead of going in for a vastly complicated Bill which probably would run to almost the same number of pages as Crowther himself, to see if they cannot produce something more simple and get on with the job.
There is another factor here, and that is enforcement. Crowther suggested that this should be done by a quite separate body, which I believe was going to come under the Credit Commissioner. However that may be, we have an organisation already in being which deals with a large number of problems arising from enforcement, and that is our weights and measures. I should have thought that the time had come when the obvious course was to broaden the scope of the weights and measures authorities. This means recruiting extra staff. It probably means getting in new types of experts. If the Government are satisfied that they are going to implement Crowther, it will be very useful to do this in advance and to lay the framework. In any case, an increase in the numbers of weights and measures officers and their staff could do nothing but good for the consumer. Finally, I should like to know quite clearly how many civil servants are at present

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being employed on this Crowther Report. I can only assume from the results that it is totally inadequate.
3.37 p.m.
LORD DAVIES OF LEEK: My Lords, I have listened to the interesting speech that has just been made, and I hope to emulate the example of the noble Lord who has just sat down; but I would reiterate the noble Lord's appeal for an increase in the number of inspectors of weights and measures. The basic reform of any type of credit, or any type of sale and consumer fairness, depends upon adequate employment of people who will enter into this profession of inspectors of weights and measures—and who, by the way, should receive remuneration that is commensurate with the responsibility of the job.
I was introduced to credit very young in a mining valley in Senghenydd, where that terrible explosion occurred in 1913. I learned about credit because we had a very rich old woman living down the street—she had at least £60 in the bank. She used to lend a "bob" at a penny a week, and the poor people would go round to borrow off Mrs. Evans, and say, "Now girl bach, will you lend me a shilling until pay day?" So one shilling would be paid out, and everybody thought how generous the old wench was because you only paid back 1s. 1d. at the end of the week, but it was something like 420 to 430 per cent. I only wish that I could get in on that racket with noble Lords in this House! This experience taught me very young the difference between the flat rate and the real rates of interest. It was a lesson that I have remembered all my life.
Before I went to grammar school and got scholarships I went to an old-fashioned elementary school where we learned all about stocks and shares. That was before ever I took this funny exam, called the "11-plus". The appeal I would make, speaking particularly for women's "lib", is that once again in our education we should teach the girls an understanding of the meaning of rates of interest. This should be thoroughly taught in the schools, because it is rather pathetic to discover how difficult they find it. It is a strange anomaly that I can go into a working men's club or a
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pub and put 5s. on a horse, and I will be told like a shot how much I have won if it is 11 to 10 on, or 5 to 1; but when I ask them about rates of interest they are flummoxed.
I do not want to reiterate the points my noble friend Lady Phillips has raised in this valuable debate, but to make the appeal that much more publicity should be given to these fundamental facts. This sounds condescending. I hope that no noble Lord will think that I am meaning to be. But the ordinary people who have to live and deal in this difficult, brittle world when buying things on credit should really understand what they are paying.
I was delighted to hear the noble Viscount, Lord Hanworth, quote from Money Which? I remember that issue, and also the one in September containing a reference to the Hire-Purchase Act 1967 which is supposed to control the way things are sold and advertised. The Act says that when something is sold on credit the following information must be given: (1) the amount of each instalment; (2) the number of instalments; (3) how often the instalments have to be paid; (4) the amount of the deposit; (5) the cash price of the goods; (6) the total credit price of the goods. Ostensibly under the law that information is supposed to be on display and available; but it surprises a shopkeeper when someone asks for it. My wife is a mathematician and one day she went out to buy about £300 worth of curtains on this principle of credit. She was told the flat rate. But unfortunately for the manager of the shop, who she insisted should come forward, she had worked out the real rate of interest and it was nothing like flat: it was something like 17¼ per cent. My wife demanded that 17¼ per cent. should be displayed on the counter as the rate of interest. To some of us this may be a little jocular, but to people who are struggling in this inflated and speculative society in which we are living it touches the core and the realities of life.
I took the trouble to look up the Old Book. I see two right reverend Prelates on the Benches opposite, and they remind me of my upbringing. I could find only one reference to interest and that was in the New Testament. It was in the Parable of the Talents about which the Tories are always telling me when I

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make a socialistic argument. I could find plenty in the Old Testament that would crush that. Extortionate rates of interest are nothing new in society. It is one of the animal instincts within us which, if we want to live in a civilised manner, we must learn jointly and co-operatively to crush. In the Hellenistic period, from about 323 B.C. up to just before the Crucifixion, the rates of interest were about 20-odd per cent. in Egypt, and Dear Old Brutus afterwards invested his money in Cyprus at 10 per cent. flat rate—I have not been able to find out the real rate. It is nothing new in society. People say it is a natural instinct in society, but if we allow natural instincts to hold sway I do not know what kind of civilisation we shall be living in. Conseqeuently, I cannot accept that argument which is on a three-legged stool one leg of which is very wobbly.
My noble friend Lady Phillips and others have said that by law the true rate of interest should be declared. I feel that an Ombudsman (that is an effective and dynamic phrase) is necessary. I hope that the promise in the Queen's Speech will be implemented and that ultimately by law we shall insist that all true rates of interest should be declared. I can see a great economist on the Benches opposite, but for those who cannot do mathematics I would say that one would be roughly right if one always doubled the flat rate. That would be very near the true rate. That is a formula that even a noble Lord who is a Bishop or a miner can understand.
We are living in a world with a vast expansion of credit. Despite the wealth and background of many noble Lords—and I had the privilege in different circumstances of knowing some of their backgrounds—they were brought up to pay for everything. Quite a few of them lost everything on gambling, but they were taught in their homes and public schools to pay for things. So, too, were the mass of working people. In a Scottish miner's home or in a Welsh miner's home credit was one of the things which was resisted. In my own home we did not buy things until we had the cash to pay for them. It is no use thinking that we can get back to that stage. We are in a new era and, whether we like it or not, an intelligent use of credit is necessary to get the necessities for the good life.
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There ought to be some kind of national insurance to cover defaulters. Probably I am a bit gullible, but I have still enough faith in human nature to believe that 90-odd per cent. of humanity are good people. Once we give up that faith there is no hope of getting the world into a decent state. I believe therefore that some kind of social insurance scheme should be brought in. Indeed the Government have been doing it. The "lame ducks" of dear old John Davies—bless him!—are now waddling to success on golden crutches. This is absolutely true. The poor Tories have learned the value of credit. I wish they would be honest about it and not pretend that the floating pound is not devaluation. As some old woman said to me, "They are so poor that they need all this rate of interest to float the damned pound." Credit to-day is big business, my Lords, and because it is big business we have to watch the sharks and cheats.
There is a nasty by-product—I refer to investigations into people's lives to see whether they are creditworthy. I hope that the Government will protect the privacy of human beings. Too much of our privacy is being lost. I have gas inspectors coming into my home, whether I like it or not, to look at the cooking stove. Somebody else conies along to look at the plaster on the wall to see if it is hygienic. Somebody else comes along to see if I am burning good old Welsh coal instead of anthracite because I am making the place smoky. We now have people secretly examining us and asking local authorities and bank managers if Mr. X, Mr. Y or Mr. Z is creditworthy. While there is a reasonable need, before credit is given, to know the stature of the person receiving the credit, we must not encourage this snooping into the private lives of people.
That is the end of my notes. I could go on, but I think I have said something different from what has been said. I want to congratulate the noble Baroness, Lady Phillips, sincerely on having drawn our attention to this. I am sure that we shall get a pleasant answer from the Government. Whether or not they can implement all that has been suggested, I hope they will realise the vital value of this to the mass of the good people of Britain who have to work to make Britain great again.
LORD REDESDALE: My Lords, following immediately after the noble Lord I feel like a very inferior newcomer coming after "the top of the bill". His really was a notable performance, and very sincere indeed. Perhaps I may make my contribution in the same vein, though the quality will be much lower. I am sure the noble Baroness will not object if I say how indebted we are to her, when we are talking about credit, for raising this subject to-day. The noble Lord, Lord Davies of Leek, raised a very interesting point when he talked about the true and the quoted rates of interest. I will not labour the point that the noble Baroness and various other noble Lords have raised about the quoted rate and the true rate; but the noble Lord, Lord Davies of Leek, said that you can double the flat rate. In fact, you nearly can double it. I hope your Lordships will forgive me if I sound just a little prosaic in actually stating what it is, but I think it is quite an interesting point.
It all goes back to (I think it is) the Moneylenders Act 1927, when somebody first tried to put down the true rate of interest. Since then, it has become somewhat more sophisticated. If we take the Hire-Purchase Act—or, to give it its proper title, the Advertisements (Hire-Purchase) Act 1957—and if we say, for instance, 6½ per cent. flat rate for six months, the true rate is 11·06 per cent. If we take it at 6½ per cent. over three years, the true rate is 11·92 per cent. Now I am not complaining about the Hire-Purchase Act and the formula, because it is a very good one; but as the period gets longer and the amount goes up, it unfortunately has a few discrepencies. In fact, it does not give as true a figure as it might. As to the Crowther formula, there are two which are quoted, and I am really talking about the second one, which comes in paragraph 14 of Appendix IV, in the Second Volume. I am afraid I cannot possibly set it out, because it is quite a complicated formula and we do not have any visual aids here. Let us all see what this particular formula would give, using the same figures. I said that the true rate for 6½ per cent. over six months is 11·06. Using Crowther, it goes up to 11·5. When you look at it over three years—I originally quoted 11·92—you see that it goes up to 12·5 per cent. We have, in fact, three formulae.
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I do not want to bore your Lordships for a long time, but the point is coming when we must have a rationalised formula for determining interest. I know the noble Lord, Lord Davies of Leek, can do these fantastic sums about what the "odds on" are, but I have never been able to do them. All I know is that it is higher in terms of cost and I hope he will not mind about that. I know how proud he is of being Welsh, but he talked about "hire" purchase. In fact, spelt with a "gh", "higher" purchase is probably very true. But the time has come when we ought to have a rationaised formula for evaluating true interest. It has been said in the past that people are not aware of what they are going to pay. We appreciate that; but people are becoming much more aware of this, because we are moving into a credit society—and we are doing so because there is a need for credit. The noble Lord said, "It is big business". It is only big business because people need it. It is fulfilling a need; and, therefore, I do not think we should decry it—and I am sure the noble Lord would be the first to agree with me on this point.
If we do need credit—and we are becoming more sophisticated in how we take on these terms—then we should have a set rate. There is all the legislation which has gone before—that is, the Moneylenders Act 1927 and the Hire Purchase Act 1957—and, presumably, the legislation which is proposed in the Crowther Report. I have not said this earlier, but all of us are indebted to all those who served on this Committee, such as, of course, Lord Crowther. His death was very sad; and it has been a great loss to us all. But it was very nice to see Lord Hirshfield, who was here earlier, who did so much work on this Report. To come back to it, this Report shows that there is a considerable need for a rationalisation of the situation. When it comes to these formulae, people are going to be prepared to accept it.
Now it can get somewhat out of hand if you look at the true lending rate, which appears in the American legislation, because within the actual interest payment there is in fact the legal cost of preparing a hire-purchase agreement, which comes into it. The American legislation tries to separate it out. I think the intention there was good: they were

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trying to show that you have to pay this much for interest, you have to pay that much for the actual charge of carrying out the legal agreement, and the rest is the capital repayment. I think that in fact they have gone too far. This is not what people are interested in. What they are interested in at the end is what they actually have to pay above the cost which they would have had to pay if they had put notes down when they bought the product. Therefore I feel that we do not want to have a complicated formula, but what we should have is a consistent formula—and Crowther's second formula, as I have said, is this. Therefore I hope that the noble Earl, when he replies, may he able to hold out some hope that all this legislation will be brought into line in the not too distant future. All of us, I know, ask for the Government to do something immediately. I appreciate that this Report came out over a year ago. When it came out it was acclaimed, and action took place. For instance, Barclays, when they produced their special private loans in April of that year, said that the true rate had to be shown, as recommended in Crowther. So things have started to happen.
There are many other aspects of this extremely full Report which unfortunately we cannot discuss yet. I am not saying that this debate is premature, but there are aspects of it which will have to be discussed again later. There will have to be other debates on this subject, I feel. For instance, we come to this other subject, which is credit rating. This is a very sore subject—and I hope noble Lords will hear me out on this point, because I am trying to be impartial and objective about it. Credit is needed. If you are extending credit to somebody who is seeking it, you must know that you are going to be repaid. Crowther goes into considerable detail on this subject. There are various classes of people who, for one reason or another, cannot repay: either they are the chronic type of borrower, who inevitably take on more commitments than they can possibly satisfy; or they are people who become sick. They take on a certain amount and, when they take it on, are perfectly capable of repaying; but they become sick and therefore they cannot repay. There is a recommendation that an element of insurance should be built in. The only trouble about building in insurance is that, although I know
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Crowther says it perhaps could be done within the cost, I have a feeling that, with everything going up, that statement is not really true. I do not think we can accept it. Therefore insurance would put up still further the cost of borrowing money.
Lastly, the people who really concern me are the people who are going out for fraud. There are not a great many but there are more in this country than in many of the other European countries. This is a sad fact. Whatever business you are in you have to appreciate that there is a certain number of people who are out to defraud the company from which they are getting their product. It is a pity to penalise the ordinary consumer because of the other people—I appreciate that—but we cannot be blind to this fact and we have to appreciate that it exists. Two of these classes—as I have said, those people who unfortunately always take on more commitments than they can meet and those people who are fraudulently trying to obtain goods—come within the same category on the basis that the end result is the same: they still owe money and the company is probably not going to get the full amount back.
If you look at their credit rating, you see that people of this sort start to build up a record. Distasteful as it may be to some, it is essential to build up records on credit rating if you give extended credit. Crowther has dealt with this in a most sensible and objective way. The Report goes through all the facts in some depth as to the people who inevitably are going to have bad debts. Therefore I feel that if you are going to extend credit you must do something about isolating these people. I favour the setting up of a Government bureau, because there is a lot of information which ought to be retained by the Government—information such as insurance, payments and everything else. It may be thought that this impinges on the privacy of the ordinary person. We are going to hear a lot more about this in the Younger Report, but we ought to accept that a certain amount of this information, much more than has been available in the past, must be garnered. It will have to exist, but nobody has yet answered the question: "How are we to garner it?". I should not dare to go forward at this stage and say that there

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are proposals. Further study on this subject is essential so as to see how the credit bureaux can operate; because they will have to operate in the future.
4.1 p.m.
LORD DONALDSON OF KINGSBRIDGE: My Lords, if I may follow on the last point, I agree with what was said about credit rating but the noble Lord has not mentioned what seems to me to be far the most important thing, that people who are lending should be under an obligation to find out whether the people to whom they are lending are a reasonable risk, because a great deal of the trouble which arises in the lower income groups comes from forced sales to people to whom money never should have been lent. Crowther hints this. The Report quotes evidence to show that nearly all the cases of default are the result not of fraud but of disaster, of illness, of accident, or of falling out of work. I agree we must protect the noble Lord's company and all companies so far as we can against fraud; but let us not make this our first point.
The debate has been made agreeable by the extreme shortness of the speeches which is a result of the extreme complexity of the subject. I hope that I can do as well as other noble Lords. Geoffrey Crowther is someone that many of us counted as an admired friend. I have come across few brains worthy of more respect than his and the radical, bold and innovating sweep of this Report shows the quality of the man. I doubt if anyone else in England could have done it as well as he and it is certain that nobody could have bettered it. Last year the Financial Times organised a two-day conference on the Report. Lord Crowther took the chair on the first day and I was pleased and flattered when he asked me to take the chair on the second day. When I thought that I would speak on this Report I thought that, having been through it all, it would not be difficult. But I had forgotten everything in it and I read it almost as a novel. It is well written and full of interesting ideas.
To-day we have largely confined ourselves, unfortunately, to the same part of the Report about which I intended to speak. Perhaps my noble friend Lord
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Janner as a lawyer will be talking about the first of the two Acts which Crowther suggests. We have all been talking about the second: the Consumer Sale and Loan Act. The first is very complicated and difficult and deals with the whole of our hire purchase and other law of this kind, not in relation to the small consumer but to the large company. We may perhaps hear something about that.
In the preamble, the Report speaks about two crucial areas of inquiry; first, the legal framework in which consumer credit operates and here, characteristically, he says that "this we find badly in need of reform". The proposed new legislation is to be based on two fundamental points. First, the extension of credit in a sale or hire purchase transaction is essentially a loan—a point which my noble friend brought out—and, second, the new legal structure should apply uniformly to all forms of security interest. In other words, scrap what you have and have an absolutely simple system based on a simple conception dealing with the complexities on the edges. The second crucial area (and nobody has touched on it to-day) is the question of Government control of terms. Crowther said that as at present operated it is operated not in the interests of honesty or consumer protection but as an instrument of economic policy. He goes on to say that the terms control will find no place among the weapons of economic policy and the power should not be retained even for use in emergency.
I am not going to argue this. The Government have ceased this particular kind of interference with the economy but, I think, for quite different reasons. It would be an interesting argument if we had a couple of economists here. We do not seem to have them; and I do not propose to open such an argument myself. A large part of the Report is concerned with this particular point. I do not want to rival in childhood stories my noble friend Lord Davies of Leek who showed his ability to conjure wit and enjoyment out of a dry subject even more than usual to-day. I learned all that is worth knowing about hire purchase about 40 years ago at Cambridge. I bought for ten shillings a month over two years Groves' Dictionary of Music and Musicians. The calculation was that as I did not keep accounts except down to the nearest

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pound per month, ten shillings a month was the equivalent of free. I still have that book. It is still the best edition. It is better than the more recently issued one. This seemed to me to show that there is nothing intrinsically wrong with hire purchase if you use it intelligently.
I am chiefly interested here in the protection of the consumer by the new Consumer Sale and Loan Act. My interest stems partly from my late chairmanship of the Consumer Council and partly from my present chairmanship of the National Executive of the Family Service Units. Both bodies are referred to fairly frequently in the Report, the Consumer Council for obvious reasons and the F.S.U. on more than one occasion as the kind of social agency which can deal with the family in trouble when the law has failed to do so. The Report's description of the problem of these low income families, its genesis and effect is quite exceptional in its compassion and understanding. Again and again one is struck by the realistic approach to the problem of people struggling under pressures which are too much for them, confused, unhappy, incompetent but probably innocent. It says:
"Some people are naturally reckless. They are the possessors of the acquisitive urge to a high degree, yet lack the ability to control their spending. … There are many, particularly in the low income group, who are not so much reckless as improvident. … They have little or no sense of values and are not motivated by rational considerations … and will spend a slice of their income not on articles they really need but on other less important items … Many families through no fault of their own find their income quite insufficient for their needs. … To persons in this position the need to borrow may become acute. … Such people are peculiarly vulnerable to harsh and oppressive terms."
The Report goes on to give substance to this by stating that in 1967, 345,000 families, including over a million children were living below the standard currently rated for supplementary benefit.
The Report recognises that the consumer must be treated as an adult and that the law can do only so much to help the weak and vulnerable. No legislation, by itself, can right wrongs or solve social problems, but the changes proposed, which I should like quickly to look at, provide significant protection in many cases. The proposed legislation aims at redressing bargaining inequality, controlling trading malpractices and providing
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some protection for the defaulting debtor. We have already heard of a number of things designed to do this, and if I repeat one or two it cannot be helped. Disclosure of certain information will be insisted on; as, for example, the true interest rate, and here I should like to take up the question with the noble Lord, Lord Redesdale. What is important is that there should be an agreed formula, I do not think it matters much what it is.
There is the prohibition against false statements in advertising, which I think already exists in law, but anyway, here it is reinforced. There is the elimination of exclusion clauses, which has been recommended by the Law Commission. That has been a really bad feature of this area of life for many years. There is also the question of providing some relief for defaulting debtors—some should be allowed to keep the goods, and in some cases payment by instalments should be allowed. To enforce these provisions—here I disagree with the noble Lord, Lord Airedale—a Credit Commissioner is proposed. An Ombudsman cannot enforce things. The value of a Credit Commissioner would be that he could see that the law was carried out; he would not have to go to somebody else to ask that it should be. I would much rather that side of his work was stressed and the complaint side, which will exist all the time, treated as secondary.
The Report recommends a certain number of things outside the legal framework, particularly consumer education, and here we may all, I hope, regret the passing of the Consumer Council which was so wantonly put down a few years ago. The Report recommends that there should be some obligation (but does not go into what it should be; I mentioned it earlier) on the part of the lender to investigate the credit-worthiness of a client. Also it notes the obstacle to a solution of petty claims by litigation. It states:
"The law protects least those whom it is designed to serve most. The low income consumer is particularly liable to oppression, yet he is usually unable, through ignorance, fear or sheer inability, to manage his affairs, to avail himself of the protection offered by the process of legislation. … The expense is likely to be out of proportion to the resulting benefit."
In this context the Report refers to the Consumer Council publication Justice out

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of Reach, prepared by Miss Susan Marsden Smedley, which reveals the total inadequacy of the present recourse by individuals to the county court for justice for small claims. We know that since this Report a most interesting experiment has been started in Manchester in the shape of a small claims court. I hope that the Minister can give us the latest information about it because this is something which, if it has any success, should be publicly financed and widely spread. Lastly under this heading I should like strongly to echo the Report's regret that the late Administration of Justice Act failed to appoint an enforcement officer in the county courts, with the attached social services, which was recommended by the Payne Report. I protested about that very much at the time and I am happy to do so again.
My Lords, there is one other point to which I should like to draw attention. The Report makes some very penetrating remarks about the relationship of interest rate to credit-worthiness. This has been referred to before, but it is worth seeing exactly what is said in the Report. It refers to evidence of loans under £200 carrying rates of from 50 per cent. to 80 per cent. per annum, and while admitting that some borrowers are such a bad risk that there is nothing extortionate in charging very high rates, yet concludes that:
"there is a level of cost above which it becomes socially harmful to make loans available at all."
This is done constantly for money by poor, bad, inefficient, grasping firms against harmless people; not, I think, by the better firms, but it is done again and again. Someone said that they wanted to catch the sharks; I want not only to catch the sharks defrauding the companies but also the companies which are trying to defraud the people. The final recommendation, with which we should all agree, is that the moneylenders' recommendation that an interest rate of 48 per cent. per annum should be regarded prima facie as harsh and unconscionable should be extended to all consumer transactions.
I think I have said enough to show that this Report is not only of great importance commercially but also stands in its own right as an innovating social
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document. No Government may be expected just to pick it up and agree to implement it as it stands but, echoing my noble friends, Lady Phillips and Lord Hanworth, and others, I think that this, being as it were the first review, we should ask the Government to express general agreement with a few of the more fundamental recommendations, in relation particularly to the protection of the consumer. My Lords, do the Government agree that all consumer credit, as defined in the Report, should be subsumed under a new Consumer Sale and Loan Act? Do the Government agree that a Credit Commissioner should be appointed, with duties approximately as indicated in the Report? Do the Government agree that all those firms or individuals engaged in the business of making consumer loan or sale transactions, or as intermediaries, or as advisers, should be subject to licensing by the Credit Commissioner? Do the Government agree that true interest rates, as defined, should, by law, be disclosed in advertisements and all other references to the transactions? If we can get an affirmative view on those fundamental points I think that the very complicated and detailed discussions, which must follow in the end, could wait. I believe that this Report is of fundamental importance to the happiness and prosperity of very many people and that in broad general terms its proposals are right. I congratulate my noble friend most heartily on her courage and application in tackling such a very difficult subject so clearly and lucidly.
4.17 p.m.
LORD GAINFORD: My Lords, it is a pleasure to take part in another debate initiated by the noble Baroness, Lady Phillips. I am very sorry that I have had to miss hearing not only her opening speech but also almost everything that has been said after it, except for a large part of the speech of the noble Lord, Lord Donaldson of Kingsbridge. This was due to the problem, referred to yesterday by the noble Lord, Lord Shepherd, of having to combine attendance at your Lordships' House with that at one's place of employment. Not only do I regret missing what has been said, but also I have a fear lest anything I say now may be mere repetition. If that occurs I must most sincerely beg the indulgence of your Lordships.

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There are three subjects I wish to speak about in connection with credit: hire-purchase, bank overdrafts and credit cards. Hire-purchase is a scheme which has proved to be useful and very beneficial to the trade, but I do not like it. When some essential item is required it can be a good investment, but not if used to purchase non-essential luxuries. Opinions will differ as to what these are, but there must be many cases where something is bought because it is attractive, or in fashion, or because it enables the purchaser to maintain a status symbol. Yet, before long, the attractiveness has gone, but the debt still has to he paid by regular deductions from income to cover the price and also the interest.
In some shops there is a certain scheme in use which I believe is termed "extended credit". Payment is made by a few monthly or weekly payments, and if the full price is paid within six months or some other agreed time no interest is charged. If something is worth having then it is worth saving for. There are many forms of savings which offer quite good rates of interest so that investors have a chance of their money keeping up with the increasing cost of living. Saving up for a future purchase may sound like good advice but there are two fears lurking in the background. The first is that by the time the amount required is saved the price of the article has gone up. Again, the interest from savings can beat that problem. The second is that it may no longer be available. If such be the case, the makers have probably discovered some flaw and removed it from the market.
I should be grateful to hear whether any of your Lordships are able to give any advice as to the possibility of greater discounts being offered for spot cash. Although some traders do specialise with success in selling cut-price for cash they have to face the cautious public, who tend to think that a cut price indicates that there must be a catch in the bargain. Hire-purchase may be a good investment but it is an investment which must be considered very carefully.
I now come to bank overdrafts. The Report we are discussing in this debate indicates that this is the most flexible form of credit available. Although interest is charged it can, existing legisla-
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tion permitting, be used and an allowance claimed against income tax. An overdraft can mean good business to a bank, and is also a sign of trust. Most banks welcome the possibility to grant an overdraft. In fact it seems that the attitude towards this scheme has changed. About forty years ago there appeared a cartoon by the late H. M. Bateman of the man who paid off his overdraft. It depicted a cheerful man leaving the office of his bank manager who had a hearty smile on his face; the staff of the bank were cheering wildly. Now the threat to pay off an overdraft may be met with a phrase such as, "Oh dear!".
I now turn to the matter of credit cards. Again I express a personal opinion as I am a member of two credit card organisations and I use them a great deal. I believe that, while in this country their use is steadily increasing, in America they now have a very regular part in the way of life. I recall another cartoon joke—regretfully I do not remember the artist—of a man in an American restaurant asking whether it was quite in order to pay cash for his meal. Application for credit cards can involve a little investigation into the applicant's circumstances and income, but once accepted the owner of a card needs to carry far less cash with him. This is particularly useful for shopping or dining out on a Saturday now that banks do not open on that day, though some have devices where one can put a card into a slot and a set sum of money comes out from another part of the machine.
Credit cards are being used for many services: meals, shopping, hotels, car hire and travel; and subject to certain controls they can be used abroad. They also have a two-way influence. An establishment which displays the label of a credit card organisation can be relied upon to be up to a required standard. Credit card companies also investigate any complaint by a member of lack of service. It is a compliment to an establishment where one has received good service to recommend it for inclusion in the organisation. Payment is usually demanded each month when an account is sent. Delay of over a month may mean that interest is charged.
My Lords, I have really given you a few opinions. Credit is an investment and it can be a sign of prosperity. It is

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hoped that this interesting debate, of which I have unfortunately missed so much, can find ways whereby credit itself and its means will prosper.
4.27 p.m.
THE PARLIAMENTARY UNDER-SECRETARY OF STATE, DEPARTMENT OF TRADE AND INDUSTRY (THE EARL OF LIMERICK): My Lords, in opening may I echo the words that have been used welcoming the opportunity afforded by this Motion to debate the Report of the Committee on Consumer Credit. In so doing may I do two things? First, I would echo the regret expressed that the premature death of Lord Crowther has deprived us of his contribution to our deliberations. I am sure that it would have been notable, and in line with the content of his Report. The second is to express thanks for the contributions we have heard in what has been, if I may say so, not only an extremely well-informed and interesting debate but also a very useful and good-humoured debate which I hope that my contribution will do nothing to spoil. My worry is that so many points were raised and I have such a mass of material with which I shall seek to answer them that I shall almost certainly at some time lose my place in the music. I hope that if this happens the House will bear with me.
Since the 1545 Act to repeal the mediaeval usury laws the history of consumer credit legislation has been one dealing with particular problems as they have arisen. We have as a result now reached the position where the terms of a consumer credit transaction, depending on its nature, might be governed by any one or more of the Pawnbrokers Act, the Moneylenders Act, the Hire-Purchase Act, the Advertisements (Hire-Purchase) Act, the Bills of Sale Act or the Companies Act. Each of these Acts imposes differing rules and it is an understatement to say that it needs much expertise to find one's way round this legislation. There can be very few consumers at the moment who could say exactly what were their rights under agreements which they have signed, let alone how their rights would be different if they had chosen to enter upon another particular form of consumer credit agreement. Indeed, many to-day think that they are
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entering into a hire-purchase agreement when they have in fact contracted a personal loan.
This present legal tangle was understandably and strongly criticised by the Crowther Committee. Their central recommendation was that transactions should in future be regulated according to their essential function and not according to their outward form. In other words, as far as possible all forms of consumer credit should be regulated in exactly the same way and the rights and privileges of borrowers and lenders should be the same no matter what form the credit might take. This is a straightforward and welcome approach.
Reference was made by the noble Baroness, Lady Phillips, and my noble friend Lord Gainford, to the sort of society into which we are entering; the "cashless society" is a phrase we hear. Running through our deliberations and in my thoughts as I seek to draw the threads together is the realisation that the incursion of rules, regulations, legislation, into the field of consumer credit changes the very nature of the field in which we are dealing. There may even be a danger that by going too far one could influence people, merely on the terms of the deal, to enter into credit transactions where these may not be appropriate; to borrow more than they need or for longer than they need. I can say without hesitation that we accept that there is need for major reform of the law in this field. In drawing up plans for this, the Crowther Report provides very adequate guidelines. It is a massive work with its 400 pages, the result of two years' intensive labour, but is not a blue print, with all details considered. It is not something that can be given to a Parliamentary draftsman with the instruction, "Please draw up legislation on this". It left a considerable amount of work to be done before the exact shape of reform could be seen.
We have now reached an advanced stage in our studies of the issues and this afternoon I should like, as well as picking up some of the points which have been raised, to share with the House our thoughts on some of the more important issues. Our plans are that any new legislation should, so far as possible, give the same protection no matter the form of credit. This was one of the cardinal

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points made by the Crowther Committee. Another primary task must be to redress the imbalance in bargaining power—referred to by several noble Lords—between the financier and the debtor, to protect the weaker party and to prevent exploitation. It must control trading malpractices: yet at the same time it must give the lender adequate protection for his money and create for him an atmosphere in which his legitimate business can flourish.
There is another point we must not fail to take into account. We live in a world that is changing very rapidly. This is a truism, applying as much to credit as to other facets of our lives. By way of examples, during the past few years we have seen the introduction on a large scale of personal loans linked to the purchase of consumer goods, the growth in the use of credit cards and the development of the so-called trading voucher. We must expect, clearly, further innovations. However, to avoid having to legislate for each new form of credit as it develops, and thus once again start the old pattern of piecemeal legislation from which we are trying to escape, it is essential that any new legislation should be made as flexible as possible. It should be drafted with the intent of covering new forms of credit as they appear, as well as those currently practised.
Sin takes many and sophisticated forms in the field of consumer credit and is not confined to the lenders. There is a minority of borrowers who enter into agreements having little or no intention of completing them. A balance is needed which prevents current malpractices and their development in new form by either lender or borrower, yet avoids imposing unreasonable burdens on either side in the vast majority of cases where the parties behave reasonably and honourably, to their mutual benefit.
Another general point concerns the enforcement of the law. Enforcement must, on the one hand, be sufficiently rigorous to give the consumer in practice the protection intended but, on the other hand, it must not be applied so rigorously as to inhibit the lender who is genuinely seeking to break new ground—perhaps to the advantage of the consumer. Any legislation will have to cover a vast range of transactions, of all sizes and types. It
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will have to cover, at one extreme, the £10 loan granted to someone in very straitened circumstances to tide him over the weekend—and in passing it may be perhaps that inflation is responsible for the reference to £10 whereas the noble Lord, Lord Davies, was speaking about one penny on a shilling per week—and at the other extreme a £1,700 loan to a prosperous person who wishes to purchase a motor car. The general principles of the protection will be the same, but the differing circumstances will in some ways call for differing safeguards.
Lastly, we must try and see what effect our proposals will have on existing patterns of trade and behaviour. Hire-purchase was not so very long ago the most prevalent form of credit purchase. It is now rapidly losing ground. It can be argued that this is in large measure due to the passing of the 1965 Hire-Purchase Act. This gave protections to the consumer entering into hire-purchase agreements but did not give him these protections if he signed some other types of agreement. This is clearly an important factor to take into account in our present deliberations. It is a strong argument for devising a framework which is sufficiently general to cover all types of transaction.
In considering and developing the Crowther Committee's proposals, we are inevitably uncovering a number of problems which are not easy of solution. However, I am pleased to be able to say that our consideration has now reached the point where officials are putting technical points arising to those interests most concerned—to representatives of the financiers, retailers and traders, consumers and those in the legal profession. This is so that we may have the benefit of their considered opinions before the Government make final decisions. To many of the problems—I shall be developing this point later—there is no one right answer and we must find the solution which offers the best balance of advantage to the community as a whole. Let me stress here that if, in the course of this speech, I dwell on the problems I would not wish to give the impression that there are only problems. We accept a vast amount of the Crowther Report as being entirely right. On many issues we see our way ahead clearly and it is

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unlikely that there will be controversy. We are concerned, however, that the package as a whole must be right or we shall be losing a great opportunity to establish a reasonable framework for consumer credit over the next generation.
I was asked about the timing of legislation which the implemention of a substantial number of the Crowther recommendations will entail. I wish I could give a precise reply. It is difficult because this comes at a stage at which I cannot say when legislation will be introduced. This is a complex field and the legislation will be complex—the more so because we are looking at a consolidation measure which will replace much existing legislation. We are developing the Crowther Committee's proposals and we are consulting the main interests concerned. We want to produce a sound package which will stand the test of time. Of course we should like, if possible, to introduce legislation in the next Session, but I am sure noble Lords will understand that I can give no undertaking on that point. The House is probably aware of what my right honourable friend the Minister for Trade said in another place on June 26 in answer to a Question as to whether it would be possible to introduce legislation on the Crowther Report in the next Session. He said, if I may quote:
"That is our hope, and I hope that it will continue to be the case."—[OFFICIAL REPORT, Commons; 26/6/72, col. 993.]
To my right honourable friend's hopes I should like to add my own; and perhaps I might just add that there has been no change in those hopes during the last 48 hours. Perhaps when I have finished my remarks it will be more obvious that there are many implications which have to be carefully worked out.
During the course of our debate to-day the point has been raised of the true cost of credit, and to this I should like now to devote some time. In a way this is one of the most important points. The Committee recommended that there should be disclosure in credit advertisements and in agreements of the true rate of charge, expressed both as a sum of money and as a percentage per annum, on the amount borrowed. At present there is no legislation generally requiring lenders to show in a standard manner the
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true cost to the consumer of the granting of that credit. The Committee criticised this state of affairs as not showing the man in the street the cost of credit and as failing to encourage competition as between different credit grantors in the same field and between different forms of credit. However, before going on to discuss this recommendation, there is one important point that I must make. In order to choose rationally between alternative offers of pure money loans, the consumer needs to know the amount of the loan, the number and amount of the repayment instalments and the amount of the credit charge in percentage terms. If the loan is linked to the purchase of goods, he also needs to know the cash price of the goods. A cheap loan which is available only in association with the purchase of goods at a cash price higher than that available elsewhere may not be a wise choice at all. Unless the borrower takes into account all these factors he may get the worst, rather than the best, buy. If the borrower appreciates this, the "true" rate of charge will be one factor, but only one factor, in helping him to decide on the best credit bargain. It is essential to bear this in mind when discussing disclosure of true rate of charge, otherwise one tends to concentrate on disclosure of the cost of credit to the detriment of disclosure of other elements of the transaction and these may be just as important.
The House will have noticed that I have referred to the "rate of charge" rather than the "rate of interest". This is because the Committee recommended that in making the calculation the whole of the borrowing costs should he taken into account. These should include not only interest on money advanced but all ancillary charges which the borrower pays as part of the transaction. They are to him the total cost of the credit. It is easy to see the argument behind this. If one does not include ancillary charges—commissions, setting-up costs and the like—there is the opportunity of advertising "cheap credit" but at the same time demanding excessive compulsory ancillary charges which effectively make it very expensive credit. On the other hand, to insist on the inclusion of all these charges could produce anomalies. For example, a retailer may insist for perfectly good and commercial reasons that a customer who buys from

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him on credit should pay a compulsory insurance or maintenance charge which represents value for money, yet to include this in the calculation may make his credit look relatively more expensive than a straight money loan. A reasonably balanced formula is not easy to achieve.
Other anomalies may arise. The cost to a lender of setting-up a loan does not vary greatly in relation to its size or length. Accordingly, a short-term small loan w ill carry a high percentage rate of charge which might make it appear, if the customer takes only this into account, uneconomic as compared to a larger, longer period loan. Will this open a danger that consumers will opt for bigger and longer term loans than they really need? No simple formula will do for the varying types of credit available. There are loans where the interest is at a fixed rate; loans where it varies according to bank rate; loans which require instalments to be paid before the credit is advanced; and credit taken without prior arrangement. The cash price of the goods must be the basis on which the rate of charge for credit is calculated. This poses a dilemma. As the House will know, there is no one single cash price: it varies from shop to shop. If credit charges are calculated in inflated cash prices the cost of credit may be made to appear small when in reality it is large.
The last aspect I want to touch on in this connection is the scope of disclosure in advertising. The Committee recommended that the cost of borrowing should be disclosed in all advertisements in which reference is made to credit being available. This will mean a very great change in the advertising habits of retail establishments and financial institutions in this country.
The principle of disclosure is one with which very few people would disagree, but I hope that I have said enough to show that there are complexities which demand investigation and consultation before legislation can be drafted. This consultation is going on currently with about 30 bodies in the classes that I have mentioned. I have noted with great interest the remarks made by my noble friend Lord Redesdale and the noble Lord, Lord Donaldson, about the way in which this calculation is made and the types of formulae being used. One must
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recognise that there are mathematical imprecisions in any formula that is adopted. I agree with what the noble Lord, Lord Donaldson, said, that the important point is to have a single formula which is common to all and is understood by all.
LORD REDESDALE: My Lords, would the noble Lord give way for a moment? When talking about this formula could he clear up one point? Presumably on some loans there is a rate of tax relief based on the interest. I wonder how this would apply in the future, or how he sees it applying.
THE EARL OF LIMERICK: My Lords, in another context I might say that this is something of another question. It has been an anomaly that hire-purchase instalments are not tax deductible. Interest payments on loans in certain circumstances, and during certain periods of recent history, have been tax deductible. This is something which we have very much in mind in looking at the whole problem.
My Lords, I should like to turn now to the subject of the regulation of the cost of credit, which is another of the areas in which it is much easier to express what we all agree to be a desirable principle than to see how it may be implemented. Under a provision of the Moneylenders Act the court, when it is satisfied that the interest in any transaction is excessive, may reopen the agreement and readjust the terms of settlement. The Crowther Committee suggested that this provision should be extended to the whole field of consumer credit. This is a prime example of consumers having protection if they enter in one particular form of credit transaction, but losing it if they enter into another. There is, therefore, no hesitation in expressing approval for the principle of this recommendation. However, even here, practical problems appear in giving effect to it. The courts have in the past found it desirable to have a guideline as to when interest is excessive: and the figure of 48 per cent. per annum is written into the Moneylenders Act. We are by no means certain that this figure would be appropriate for the many and diverse forms of consumer credit that would be covered by any new legislation. Thus a rate of interest which would by any standards be excessive for

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a medium-sized, long-term, well-secured loan may be quite inadequate for a very small loan of few days duration only.
Additionally, if this provision were applied to the interest payments only, an indefensible position could be created. The argument here is comparable to the one developed en the cost of credit calculation. A low interest rate only might be charged, but it could be buttressed by excessive ancillary charges—such as setting up charges, brokerage fees and so on. These charges would then be outside the scope of the court's consideration. We have looked at the possibility of specifying different maximum figures for particular classes of transaction, but have not found this very satisfactory. We have also examined the possibility of not specifying any particular rate of charge to guide the courts in determining what may be excessive but leaving it to the discretion of the courts to examine each case on its merits. Here one must recognise that divergence in practice between the courts might arise. There is no simple, obviously right solution here.
LORD DONALDSON OF KINGSBRIDGE: My Lords, is the figure of 48 per cent. regarded as too high or too low? I should have thought that as a maximum figure is was acceptable. There may be occasions when one ought to go a great deal lower. Is the suggestion that this is sometimes not high enough?
THE LORD CHANCELLOR (LORD HAILSHAM OF SAINT MARYLEBONE): My Lords, may I step in to help my noble friend as this is not really a question for him? I think the noble Lord will find that it is written into the Moneylenders Act as a prima facie guide to what is in effect harsh and unconscionable.
LORD DONALDSON OF KINGSBRIDGE: My Lords, with respect, we are talking about this rate as a guideline. The noble Earl said that the Government were not sure what that level should be. My point was whether this was a guideline for a maximum.
THE LORD CHANCELLOR: My Lords, I thought the noble Lord was asking about the figure of 48 per cent. I should not have intervened; I isunderstood him. It is not for me to say what will be the case in the future.
LORD DONALDSON OF KINGSBRIDGE: My Lords, I was asking about the 48 per cent. figure.
THE EARL OF LIMERICK: My Lords, if I may explain, in case I have unintentionally set the House off on a wrong scent, I was not concerned so much with the figure. Whatever the figure may be, one can say that there is a figure above which anything would generally be accepted as being extortionate. I was talking of the problem of definition. If you look at the rate of interest you may find that effectively the cost of the credit is very much higher when you put in the ancillary charges. It is how we calculate the ancillary charges that poses the problem in finding whatever maximum we may have in mind from time to time. I hope that that clarifies the point.
I should now like to deal with the question of cancellation of agreements, which has been referred to although not in any detail. It is one which I should like to introduce myself, because there is something here that we might well consider. It is that at present anyone signing a hire-purchase agreement on the doorstep has a cooling-off period in which he can rescind the transaction. There is reason to believe that this provision has stopped many abuses in doorstep sales which we have seen in the past. However, in this field, as in many others, certain credit grantors have evolved new practices falling outside the scope of the protection given by Parliament to the consumer by offering agreements which do not involve hire-purchase. The Crowther Committee therefore recommended that this protection should be extended to all types of credit agreement which are signed other than on trade premises. The Committee went on to consider whether the right of cancellation should be extended also to all consumer credit transactions which are signed on trade premises. They decided against this on the ground that the original provisions were designed to curb special abuses which might arise out of the blandishments of some doorstep salesmen. They were not designed to give a right of withdrawal from a transaction simply because it is in the nature of a consumer transaction.
However, my point is that my postbag suggests that there is at least one type

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of credit transaction where the consumer needs special protection, whether the agreement is concluded on or off trade premises. I refer to loans secured on the borrower's home, generally referred to as second mortgage business, although it may in fact involve the first mortgage. There are many transactions in which loans of this kind constitute quite a reasonable method of raising finance and where the entire transaction is conducted in the best traditions of British commerce. But in too many cases consumers do not appreciate that by giving their home as security they may be putting their home at risk and causing difficulties and hardship for themselves and their family if they have to move, or if they die and have not insured the loan property. I am convinced that we must consider very seriously the need to extend the right to have second thoughts on loans, no matter where they are signed, whenever they secure the private house of the borrower—except, of course, where the mortgage is given in connection with the purchase of the property itself: I would not wish to interfere in any way with the business of building societies or others granting straightforward mortgages for house purchase.
Another matter that has been referred to is the growing practice of entering into consumer rental agreements. The Crowther Report is confined for the most part to credit arrangements. But the Committee devoted some attention to rental agreements. They pointed to the fact that not infrequently the consumer entered into a rental agreement believing it was a hire-purchase agreement and that eventually the goods would belong to him. Furthermore, rental agreements are frequently thought of as an alternative to a credit sale with a maintenance contract, even though in law ownership does not at any time pass to the hirer. The Committee drew the conclusion that, looked at in terms of the hirer's financial commitments, many rental agreements are virtually indistinguishable from hire-purchase agreements. This suggested to them that consumer rental agreements should come within their proposed legislation and in particular, that the court should have power to grant a hirer relief against forfeiture of the use of these rented goods in certain conditions. I would not disagree with the Committee's basic con-
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clusion that although rental companies are not lenders their activities are closely competitive with certain forms of lending. I do, however, question whether the Committee's recommendations go far enough. There are other areas in which persons renting goods may need protection. These include protection against the wiles of persuasive doorstep salesmen, against the use of terms in contracts which are unfair to the individual, against advertising which can misrepresent the terms of an agreement. We are therefore considering carefully how the rental trade should be covered in any forthcoming legislation to make sure that the consumer gets protection reasonably similar to that proposed for true credit transactions.
I should like to devote a few moments now to the subject of the Consumer Credit Commissioner which has been raised by a number of speakers. A consequence of the piecemeal approach which has been adopted towards legislation in the past has been that the arrangements within the Government machine for the control of consumer credit have also been piecemeal. There are at least three Government Departments which have some form of responsibility. Not only is this so, but' much of the legislation is self-enforcing and no Department plays an active part in its enforcement. The Report suggests that in future one Department only should have a general responsibility. But it went on to recommend that the basic responsibility should be delegated to an autonomous official body which, it recommended, should be an individual to be called the Consumer Credit Commissioner. His duties would include not only administering the licensing scheme but also making regulations under the proposed legislation, enforcing the legislation and educating the public in the use of consumer credit.
The Committee recognise that the arguments whether this person should be independent, or should operate from within a Department, were not one-sided. Public opinion also appears to be divided on the subject. What is clear is that some of the duties proposed for the Commissioner would not seem appropriate to an independent Commissioner—and I listened with great interest to the arguments of the noble Lord, Lord Airedale, which I thought bear directly on this point and

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which I should like to read again with interest after the debate. For example, a Commissioner making regulations under an Act is in an area where a Minister should have direct responsibility to Parliament. Whether a licensing system is capable of keeping people out of business, or putting them out of business, and whether questions of this sort should be the direct responsibility of an outside agency or of a Government Minister, is perhaps more a matter of debate; but there must be doubt on the point. The industry itself appears to be fairly evenly divided on this question. On this point, in addition to what was said by the noble Lord, Lord Airedale, I paid great attention to what was said by the noble Lord, Lord Donaldson of Kingsbridge.
The Crowther Report, on the question of the Ombudsman, recommended that one of the fun tions of the Consumer Credit Commissioner should be to act as an Ombudsman by receiving and considering complaints from the public about consumer credit grievances; he should confine himself to matters of principle, since he would be swamped if he tried to deal with individual complaints. It is a most interesting and helpful distinction which has been drawn in this debate between the administrative functions; and here I confess to sharing doubts about divorcing the use of discretionary powers from Ministerial responsibility to Parliament and the function of the Ombudsman proper. I might mention that the noble Lord, Lord Crowther, himself attended a Finance Houses Association conference held last autumn at which his Committee's Report was considered. He then agreed that a better expression than "Ombudsman" could have been adopted. The job of an Ombudsman as normally conceived is to investigate complaints of injustice resulting from acts of maladministration in public bodies. The British Ombudsman, the Parliamentary Commissioner for Administration, covers broadly central Government and it has recently been proposed that there should be comparable machinery for investigating complaints about local government. I am sure that we shall want to have more thoughts on this subject before coming to a final conclusion.
I will now turn to some points raised specifically by noble Lords in the course
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of the debate. If I fail to mention everybody by name or to cover every point—some of them have already been dealt with in a general way—I hope I may be forgiven; and if anyone feels he has not been adequately answered I hope he will let me know. The noble Viscount, Lord Hanworth, raised a point about chattel mortgages. Here the Committee recommended that the taking of security in the form of chattel mortgages should be made easier. This is something else that could have important social consequences—giving security, for instance, in the form of domestic furniture for a loan to be used for semi-luxury purposes, and then the loss of the furniture when there is a default on the loan. If this is accepted, I think we should probably agree that there need to be safeguards for the consumer; and this is a point which the Government are certainly looking at.
The noble Lord, Lord Donaldson of Kingsbridge, referred to the Manchester arbitration scheme for small claims. This is an interesting experiment. As the House probably knows, it is being financed by the Nuffield Foundation as an experimental research project. The parties in small consumer disputes agree in advance to abide by the findings of an arbitrator appointed by the Manchester Law Society. This scheme has been in operation for only nine or ten months and it is not a part of the official machinery of justice. Much depends on the extent of its use and the degree of public acceptability which it attains. I think it is perhaps a little too early to judge its applicability to the country at large, but it is an extremely interesting experiment which is being watched with close attention as it develops.
In opening the debate the noble Baroness, Lady Phillips, referred to credit cards, as did the noble Lord, Lord Gainford, subsequently. The Crowther Committee recommended that credit cards should be governed by the generality of the proposed legislation, and this must obviously be right. It is another form of credit-giving and credit-taking. The Committee also thought that some specific protection for credit card holders might be desirable—for example, where a card is lost—but the exact degree of protection must be drawn with care so as not to inhibit new developments, which again may be of long term benefit to the consumer.

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The noble Baroness, Lady Phillips, also raised the point about credit reference bureaux. This is a sensitive and difficult area and the Committee suggested that some control was needed but that the exact form could not be drawn up until the general principles of privacy law had been suggested by the Committee on Privacy. I understand that this Committee is to report shortly and we will then consider how their findings should apply in the consumer credit field.
The noble Viscount, Lord Hanworth, raised two other points to which I might refer. He expressed the hope that the fact that 15 months had elapsed since the Report was published, and that the Consultative Document was a complex one, would be a reason for expedition. I sympathise with his wish but I might point out that the Consultative Document is long and complicated because this is a long and complicated subject, and therefore this would be a reason for hastening a little more slowly. We are entering a legislative field which will affect the lives of many citizens in the country and we must be sure that we have a package which will stand the test of time. Therefore I do not think it is right to press on with this with such speed that we lose the consultation which will lead to considered conclusions.
I should also mention that the noble Viscount referred to the consultation taking place on the cost of credit. Such consultation is indeed taking place, but the cost of credit is only one matter out of several on which we are consulting interested parties, and there will be more to follow. The noble Viscount asked about the number of civil servants involved. I cannot give a precise answer because so many people are involved at different times and in different ways. It is not so much the quantity as the quality of civil servants, and here we have people who have devoted a great deal of attention to this Report and who are now putting their ideas into an extremely sensible acceptable form.
I should now like to make a few general remarks in conclusion as to where we stand on this subject. Before closing, I should like to comment on what appears to be the most complex and far-reaching part of the Crowther Report. The Committee came to the conclusion that they
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should not suggest reform of the law on consumer credit in isolation. They went on to suggest many proposals for the restructuring on logical and functional lines of the basic law of lending and security in general, which of course applies right across the field, whether the credit is provided for business or for personal consumption. In the business field, their proposals included establishment of a register of security interests where secured lenders could record their interest. Beyond this their proposals looked to codifying and clarifying existing law and the introduction of some quite new principles. The Committee, however, made it clear that they had "not attempted to consider all the problems"—to quote their actual words. Their proposed new law would affect practically every business transaction in the land, and representations which we have received from major commercial interests since the Report was published have shown that there are indeed many problems, the full implications of which have not been brought out in the Report.
Central to the Committee's proposals in this field is their proposed register of security interests. We can so far find no convincing evidence that, were such a register to be established, it would be sufficiently used to justify its existence. One can argue that once the opportunity were provided, lenders would use it, but this is by no means certain and a great deal of investigation and consultation will be needed before a decision can be reached. Furthermore, the implications of such a register for the present land registration procedures and registration in my Department's Companies' Registry of security given by companies would have to be very carefully considered. I do not think we want a situation where registration of security interests takes place in several different places.
If the proposal for a register is in question, the basis of many other of the Committee's suggestions must also be questioned. For example, the complex rules to govern third party rights, which the Committee began to draft but did not complete, are predicated on the existence of such a register. It is by no means certain that, when fully elaborated, such rules would be less complex and easier to understand than the present rules, which are based partly on Statute

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and partly on precedent. If no register were to be established, the Committee's proposals for third party rights would fall and we would either have to leave the law as it now stands or work out a new set of rules using the Committee's principles as a starting point.
My Lords, I think that what I have said shows that although the Crowther Committee carried through a major task most commendably, the issues are not cut and dried, nor is the prescription certain. This is particularly true of those proposals which would affect consumer lending. However, when we are ready to go ahead with consumer credit legislation we should not allow this to be delayed merely in order to cover lending and security generally at the same time. But these difficulties must not allow us to lose sight of the objective. The Report provides guidelines on which we can build effective new credit legislation to the benefit of all consumers. It is essential, however, that this legislation should be right in all its complex details as well as in its basic principles. A great deal of work has already been done in considering the proposals and in giving them substance. At the present time, we are having consultations with interested parties on some of the more detailed technical aspects. Once all this preparatory work is complete we shall be in a position to tell the House what we intend to do.
5.9 p.m.
BARONESS PHILLIPS: My Lords, I should like to thank those noble Lords who have taken part in this debate, particularly as I feel that in some measure some of them were making a personal response to an invitation which I gave them. Perhaps I might remind the noble Lord, Lord Donaldson, that I emphasised the fact that the Document was a remarkable one. As he said, it is a social and economic document and provides a legal framework. In my attempt to maintain my own reputation for making the shortest speeches in the House perhaps I cut mine down a little too much, but we have already shown that there is a tremendous amount of ground to be covered. Some points were reiterated while others were not touched upon. Nevertheless, this has been a useful debate.
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Yesterday I was at a large meeting, attended in the main by women, dealing with consumer affairs. The hope was expressed there that I should to-day receive from the Government an indication of what they intended to do about the Crowther Report. Having heard the Minister's reply, I am not certain what to report on this subject. I think I can say that the Minister has given us hope; he used the word "hope" several times and I must in charity say that he has given us hope. However, some of the noble Earl's remarks reminded me of the small child who was being taught in a convent. A priest approached the child and asked "What was the Holy Ghost?" The child obviously did not know but tried to cover up by speaking for some minutes, concluding with the words "Well, it's a mystery." The priest replied "My dear, it is not quite such a mystery as all that." I had the feeling this afternoon that the Minister was engaged in a similar exercise, pointing out that it was a complicated Report; that any new legislation would have to be flexible; that enforcement would have to be rigorous and that the framework would have to be general. None of us dissents from those sentiments. The noble Earl went on to say that the Department were talking with consumers. I am not sure who the consumers are, and I should be interested to receive a letter from him on the subject. I would be delighted as a consumer to come forward with my views.
The noble Earl then said that we could not have an undertaking that legislation on the Report would be implemented in the next Session. I would remind your Lordships that when the Government wanted to get rid of the Consumer Council they acted with great speed. The same happened when they wanted to get rid of the Prices and Incomes Board. They have produced two enormous measures, the Industrial Relations Act and the Housing Finance Bill, both of which are extraordinarily complicated and one of which is already proving difficult to work. Legislation on the subject of this debate, we are told, is so complicated that it cannot even be thought about immediately. I have a little money in the building societies. They have no difficulty in telling me the percentage I am paid on the money I

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am lending them. The calculation necessary to give me that information surely involves no more than what we are seeking in another context. I gather that the noble Earl, Lord Limerick, is nodding his head in agreement with me.
THE EARL OF LIMERICK: I was in fact shaking my head, not nodding.
BARONESS PHILLIPS: People want to know, when they are spending their money, the terms that are being applied. They would be happier if they were told the loan charge, the insurance charge and the brokerage rate. Some time ago I was presented with a bill in a restaurant and a certain sum of money was written against an item marked "M/C". On inquiring about the item I was informed that it was the music charge. There is no difficulty in stating exactly what people are paying for.
I cannot pretend that I have not been disappointed by the Minister's reply. The noble Earl would not expect me to say anything different. I shall continue to ask Questions on this subject. My noble friend Lord Davies of Leek said that this issue touched the very core and reality of life. It certainly does. I am glad that tribute was paid to the weights and measures officers. I attended their conference, and I know that they are a dedicated group of people. I still believe that a Credit Commissioner should be established, and I continue to hope that the Government will think a little more about the consumer. With those comments, I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

MILFORD DOCKS BILL
Brought from the Commons; read 1a, and referred to the Examiners.
UNITED REFORMED CHURCH BILL [H.L.]
Returned from the Commons agreed to, with Amendments; the said Amendments considered and agreed to.