CONSUMER CREDIT BILL [H.L.]

HL Deb 02 May 1974 vol 351 cc199-263

3.24 p.m.

LORD SHEPHERD

My Lords, I beg to move that the House do again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Lord Shepherd.)

On Question, Motion agreed to.

House in Committee accordingly.

[The EARL OF LISTOWEL in the Chair.]

Clause 37 [Death, bankruptcy etc. of licensee]:

THE CHAIRMAN OF COMMITTEES (THE EARL OF LISTOWEL)

Before I call Amendment No. 43, I should point out to the Committee that if it is agreed to I cannot call Amendment No. 44.

LORD ABERDARE moved Amendment No. 43: Page 19, line 17, leave out subsection (2).

The noble Lord said: I should like to say that I have no intention of trying to move this Amendment into the Bill, so the noble Lord, Lord Airedale, may be assured that we shall reach his Amendment No. 44. Amendment No. 43 is a probing Amendment relating to Clause 37(2), which states: … regulations may specify other events relating to the licensee on the occurrence of which the licence is to determine. This Amendment seeks to ascertain what the Government had in mind in regard to the "other events" on the occurrence of which the licence is to determine. I beg to move.

LORD JACQUES

The original Bill divided the events into two categories. The first is where a licensee dies, is adjudged bankrupt or becomes a patient within the meaning of Part VIII of the Mental Health Act 1959, and that category is also in the present Bill. But the original Bill also laid down other events, which were somewhat different. These included the situation where a liquidator, receiver or manager had been appointed to a body corporate or unincorporated body of persons; where the Official Receiver became liquidator of a licensed company; where a trustee was appointed under or in pursuance of a composition or scheme of arrangement to which Section 16 of the Bankruptcy Act 1914 applies, or a deed of arrangements to which the Deeds of Arrangements Act 1914 applies.

This is a pretty comprehensive list, but there is still doubt as to whether it is sufficiently comprehensive. At the moment it is not intended to add to this list and it is considered preferable to specify events in regulations, so that they may be varied in the light of experience rather than that we should attempt to mention every eventuality in the text of the Bill. With that explanation, I hope that the Amendment may be withdrawn.

LORD ABERDARE

I am very grateful for that explanation, and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD AIREDALE moved Amendment No. 44: Page 19, line 21, leave out ("determine") and insert ("terminate").

The noble Lord said: We read in the first line of Clause 37 that a licence is to be terminated in certain circumstances. When we reach line 21 on page 19, we read that a licence "is to determine". When we were last in Committee I was reminded by the Minister of the importance of the consistency of a Bill. I do agree, because if Parliament does not use the same word twice when it means the same thing there is always a danger that lawyers will start arguing that Parliament must have meant something different, because if Parliament meant the same thing Parliament would have used the same word. I think the same word is really intended in both cases here: at any rate, the meaning is the same. I beg to move.

LORD JACQUES

I am still of the opinion that the Bill should be unambiguous and consistent. This Amendment improves the Bill and I have pleasure in accepting it.

On Question, Amendment agreed to.

Clause 37, as amended, agreed to.

Clauses 38 to 40 agreed to.

Clause 41 [Appeals under Part III]:

3.30 p.m.

LORD ABERDARE moved Amendment No. 45: Page 21, line 13, leave out ("on payment of the prescribed fee (if any), and").

The noble Lord said: I am very confident in moving this Amendment because it is certainly consistent and certainly improves the Bill, and I hope therefore the noble Lord will also accept this Amendment. We very much welcome the inclusion of this clause in the Bill giving an appeal to the Secretary of State. This matter was debated in another place under the previous Government and strong feelings were expressed during the Committee stage on the fact that there was no appeal procedure. My honourable friend Mr. Heseltine (who was then in charge of the Bill) gave certain assurances that he would be considering that point. Though there is a right of appeal to the Secretary of State, it is only, "on payment of the prescribed fee". Admittedly "(if any)" follows those words. It seems to me unfair that a person who has a grievance, who feels that a decision of the Director General of Fair Trading is not correct and who has the right of appeal, should have to pay a fee for the privilege. I believe he should be able to appeal without having to pay a fee. I wonder whether there is a precedent for the charging of a fee for an appeal to the Secretary of State. It seems especially unjust if in fact he is given the benefit of the doubt and the Secretary of State allows his appeal. Therefore he has right on his side, and it seems unjust that he should have to pay a fee in order to establish that he is right. On the other hand, if he was wrong and lost his appeal, then under subsection (3) the Secretary of State may make a direction for the payment of costs by any party to the appeal. This would seem to be the fair way to approach it: to allow the person to appeal and then make it possible for the Secretary of State to allocate the costs to any party; in other words, to the party that had lost the appeal, as normally happens. I hope that noble Lords will feel able to agree that this is a good Amendment. I beg to move.

LORD JACQUES

I am personally in complete agreement with the noble Lord, and I have been authorised to accept the Amendment.

On Question, Amendment agreed to.

LORD WELLS-PESTELL

The purpose of this Amendment is to correct a misprint. Clause 32(5), not 31(5), empowers the Director to give directions authorising a licensee (whose licence is revoked or suspended) to carry into effect agreements made before the revocation or suspension. The item in the Table appended to Clause 41 gives the licensee the right to appeal to the Secretary of State against the Director's refusal to give such a direction. I beg to move Amendment No, 46.

Amendment moved— Page 21, line 35, leave out ("31(5)") and insert ("32(5)").—(Lord Wells-Pestell.)

On Question, Amendment agreed to.

LORD WELLS-PESTELL

Your Lordships have agreed on no fewer than eight occasions for the insertion of the word "standard" in place of "personal". With your permission, I will not go into the reasons again for that. I beg to move Amendment No. 47.

Amendment moved— Page 21, line 38, leave out ("personal") and insert ("standard").—(Lord Wells-Pestell.)

On Question, Amendment agreed to.

3.35 p.m.

LORD REDMAYNE moved Amendment No. 48: Page 21, line 47, at end insert— ("Refusal to grant an The Licensee.") application, or the imposition of unreasonable conditions, under section 64(4).

The noble Lord said: Clause 64(4) was drafted particularly for the nine or so mail order agency houses to take account of the peculiar nature of their business, and provides that regulations in respect of their business may be made specially by the Director. I hope when we come to that clause I may say something about that. It seems to them that if they are accepted as a special case in the Bill, it is sensible that they should have a right to appeal against any regulations so made, and I beg to move the Amendment to that effect.

LORD JACQUES

This Amendment attempts to mix the water with the milk; we intend that the water and the milk should be kept entirely separate. The Table on page 21 of the Bill sets out the cases where there will be an appeal to the Secretary of State, who will appoint assessors to deal with it. The matters in which provision for appeal is made fall into two classes. One consists of decisions as to the fitness of a person to have a licence, and the other consists of decisions as to whether to allow enforcement of agreements made by, or on the introduction of, unlicensed traders. In both categories the facts of the particular case and the individual trader's conduct are highly relevant. In both cases the Bill lays down criteria for the Director's decisions. These are all concerned with licensing. It is a matter of vital importance when a licence is refused; it makes it impossible for a person who has entered a chosen profession to carry on in that profession. The decisions which are made in this field are semi-judicial decisions, and it was thought right that there should be an appeal to assessors appointed by the Secretary of State, and, indeed, on a point of law, to the High Court.

But under Clause 64(4) with which this Amendment is concerned, there is an entirely different position. Clause 64(4) empowers the Secretary of State to make regulations setting out circumstances in which the Director may release a licensee from the requirements in Clause 64(1)(b). The Director has to make an administrative decision, not a judicial one, as to whether and how a licensee can be exempted without prejudicing the interests of debtors or hirers. Because it is an administrative decision we feel that this is not a case where there should be an appeal to the assessors. If the Director General was to have all his administrative decisions questioned in this way his life would not be worth while. This does not mean that anyone who fails to get the concession—and that is all that is provided for in Clause 64(4), that somebody may ask for a concession—he has a right to appeal to the Secretary of State and the Secretary of State has the power within this Bill to give directions to the Director General. We think that that is the proper course.

LORD REDMAYNE

That seems very reasonable. Since I am not as familiar with this Bill as I should be, can the noble Lord tell me where the Secretary of State's powers are laid down?

LORD JACQUES

It is open to the Secretary of State under Clause 2 to give the Director directions as to the exercise of his powers under Clause 64(4).

THE EARL OF LIMERICK

I have listened carefully to the arguments of the noble Lord, Lord Jacques. He put them over very clearly. Would it be right to say that there is no case anywhere in the Bill where an appeal is allowed against administrative decisions of the Director? Is the noble Lord able to say that this is a distinction which is maintained throughout the Bill, and that appeals are granted only in the case of the not granting of a licence to the respective licensee, and there is no procedure elsewhere in the Bill for an appeal on administrative decisions?

LORD JACQUES

To the best of my knowledge and belief the only cases from which there is an appeal to the assessors appointed by the Secretary of State are those in the Table. In all other cases there is an appeal against the Director's administrative decision to the Secretary of State, and the Secretary of State can then give directions. There is this clear distinction.

LORD REDMAYNE

In view of what the noble Lord has said I beg leave to withdaw the Amendment.

Amendment, by leave, withdrawn.

Clause 41, as amended, agreed to.

Clause 42 agreed to.

Clause 43 [Advertisements to which Part IV applies]:

On Question, Whether Clause 43 shall stand part of the Bill?

THE EARL OF LIMERICK

This is purely an idea that I should like to mention. Clause 43 extends control over advertising, as was foreshadowed in the White Paper, to mortgage transactions exceeding £5,000. These transactions are distinguished by three features: they are generally the largest transaction undertaken by the individuals concerned; they are generally very long term, and thirdly, they are subject to change in interest rates at the discretion of the lender. The regulations will require disclosure of the true rate of charge. I want to raise the question, without now expecting an answer, of whether it was contemplated that the advertisements might perhaps make it clear that, unlike the generality of consumer credit agreements, the lender has the right to vary the rate. I think I am right in saying that many people who take mortgages are probably unaware of this right and are somewhat taken aback when it is exercised.

LORD SHEPHERD

I think I am correct in advising the noble Earl that the lender will be able to make it quite clear that the rates he is advertising are variable. Clearly it is to the advantage of the consumer that, if interest rates fall, as we all hope they will, he should take the benefit of the variable rates. My understanding is that in an advertisement of this character it will be made clear that the variable rate does apply.

Clause 43 agreed to.

Clauses 44 to 47 agreed to.

Clause 48 [Definition of canvassing off trade premises (regulated agreements)]:

3.44 p.m.

LORD WELLS-PESTELL moved Amendment No. 49: Page 24, line 24, leave out ("his employee or agent") and insert ("any other individual").

The noble Lord said: The purpose of this Amendment is to remedy a slight weakness in Clause 48 which defines canvassing off trade premises. Subsection (1) defines canvassing as attempting to persuade the consumer or "his employee or agent" to enter into an agreement during a visit for that purpose which has not previously been requested.

Under the present wording it might still be permissible for a salesman to go to an address, knowing that the householder was likely to be out, and canvass the householder's relations or friends without coming within the definition of canvassing by using the justification that they were not the consumer's "employees or agents". The Amendment accordingly brings within the definition of canvassing off trade premises members of the consumer's family and other persons who are not his employees or agents. The purpose of this Amendment is to remedy a slight weakness. I beg to move.

On Question, Amendment agreed to.

Clause 48, as amended, agreed to.

Clause 49 [Prohibition of canvassing debtor-creditor agreements off trade premises]:

3.48 p.m.

BARONESS YOUNG moved Amendment No. 50: Page 24, line 39, after ("offence") insert ("other than in the case of individuals exempted by the Director.").

The noble Baroness said: The main purpose of this Amendment is to seek clarification of this clause and to remove what appears to be an injustice. If I understand it correctly, this clause makes it an offence to canvass debtor-creditor agreements off trade premises except for canvassing overdrafts on existing current accounts where the Director General has permitted this.

Under the clause only the clearing banks which allow current account facilities are to enjoy this exemption. It has been put to me that there are other financial institutions which also offer current account facilities and have done so for many years without complaint, and it seems difficult to understand why such institutions should not also enjoy an exemption by the Director General. I should have thought it more logical to grant exemptions based on the facilities offered, and the reputation of the credit granter, rather than on the basis of the kind of institution offering the facilities.

The purpose of the Amendment, therefore, is to make this possible. It will not, I believe, weaken the clause because no institution would enjoy exemption except by a decision of the Director General. I believe it would remove what must appear as an injustice to some financial institutions offering current account facilities which cannot be exempted as the clause stands but which are institutions of long standing. Although this may not necessarily be an argument that would appeal to noble Lords opposite, by extending the exemption it would help competition between the banks and other financial institutions, and in so doing could offer a better service ultimately to the consumer. I hope that this Amendment will be acceptable to the Government. It may well be that the Amendment is not correctly worded and if this is so I am all too familiar with the difficulty and would quite understand it, but I should be grateful to the noble Lord who is to reply if he would say that he will at least take it away and look at it. I beg to move.

LORD SHEPHERD

Despite the charm of the noble Baroness and still being a reasonably honest man, I regret that I cannot accept the Amendment. It raises an issue which we shall be discussing at greater length on later clauses dealing with those accounts which other noble Lords are seeking to have exempted from the provisions of this Bill. I should like to say, however, that it is not just the clearing banks who will have the opportunity of operating current accounts which are exempted from the provisions of this Bill. There could be quite a number of other important organisations which in the public mind do not rank as banks. If the Amendment were to be accepted, however, any creditor exempted by the Director would be able to canvass cash loans of any description to consumers at home or elsewhere. The Director would be under very great pressure to grant exemptions in a wide variety of cases with no guidance in the Act as to the sort of cases which would merit such exemption. Moreover, the canvassing of cash loans away from business premises, which is already prohibited to moneylenders at present, is not a practice we wish to see permitted.

The Crowther Committee recommended that the ban should be made general and, except in the special case of current account overdrafts, we can see no reason why general exemptions should be allowed. If credit businesses wish to approach potential customers for cash loans they can do so by advertising, direct mail and, if necessary, by telephone and obtain written consent for a visit.

This is an important protection for the consumer who, in the relaxed surroundings of his home, might otherwise be pressurised into unwise cash borrowing. This is something we do not wish to see and we believe that if the Amendment were put in the Bill it would make this possible. With that explanation, perhaps the noble Baroness will feel able to withdraw her Amendment. I think the philosophy of the noble Earl, Lord Limerick, when in his Department responsible for this Bill, might incline his sympathy towards me in this particular position.

BARONESS YOUNG

May I thank the noble Lord, Lord Shepherd, for that answer, and perhaps press upon him a further question? If I understood it correctly that other organisations will enjoy exemption, can he say what they are and how they will be chosen?

LORD SHEPHERD

They will be chosen by the Director General on a judgment as to how those organisations conduct their business. I. do not think one needs to advertise any particular company; but there are a number of organisations—I will mention one, United Dominion Trust—who operate current accounts and provide overdrafts. They are the kind of organisations which the Director General would consider. I drew the noble Baroness's attention to this only because she referred to the clearing banks specifically. It is not just the clearing banks who will have the opportunity of this exemption.

Amendment, by leave, withdrawn.

3.52 p.m.

LORD MAIS moved Amendment No. 50A: Page 25, line 10, leave out ("to overdraw") and insert ("to obtain credit")

The noble Lord said: May I first associate myself with the remarks made on Tuesday last by the noble Viscount, Lord Amory, and by Lord Seebohm, and express my appreciation to the noble Lords, Lord Shepherd and Lord Jacques, and their Department for the courtesy and assistance they have given us outside this Chamber when dealing with one or two rather complicated matters. The fact that these meetings were held may have facilitated the solutions to many difficult problems that might have arisen.

Turning to the Amendment in my name, the reason for raising this point—and I hesitate to do so in view of the reply given by the noble Lord, Lord Shepherd, to the last Amendment—is that the Bill as it stands makes it extremely difficult for a manager to discuss in detail the various alternatives available to the customer. It is essential that a bank branch manager, in particular, should feel reasonably free to discuss the affairs of the customer and recommend what is best for him. The clauses and the penalties in the Bill at the moment have significance; for the bank branch manager, as you know, often visits in their homes those customers who may not be able to visit the bank. Their homes do not qualify as business premises. Often the branch managers go in response to an oral request on the telephone. These visits are very useful, and are sometimes essential from the point of view of the customer. Let us take as an example the widow who has just lost her husband. She needs advice and is not in a mood to visit or is otherwise unable to visit a branch. As things stand at the moment we feel that the branch manager is in some difficulty over giving people advice without committing an offence. The manager would be able to agree to an overdraft on an existing current account but not to borrowing being taken on a loan account. The latter many customers might prefer and it may be in their own interests. Similarly he would be unable to suggest financial assistance at all to an existing customer who had only a deposit or savings account.

The Amendment seeks to remove these difficulties by allowing the manager to suggest methods of current account borrowing either by overdraft or by current loan account, whichever best suits the customer's needs. It does not seek in any way to allow him to advocate personal loans or to offer borrowing facilities to non-customers. While there is no evidence of abuses of existing bank practices in this connection it is accepted in the context of the Bill that such abuses would be unwelcome. We find it very difficult to differentiate between an overdraft account and a current loan account; they are so close to each other. We feel that this Amendment would enable a bank manager to offer the alternative. I hope that the noble Lord will give this Amendment serious consideration. It will give more flexibility.

LORD SHEPHERD

Would my noble friend agree that we also discuss Amendment No. 51B, which I believe goes with No. 50A? I am first of all grateful to my noble friend for his very kind remarks. I enjoyed the meetings. I believe they were very helpful—both to those who came to see me, and, particularly, to me, since then was the first time I began to understand the complexities of the Bill. But I am sorry that having rejected the Amendment of the noble Baroness, I cannot possibly do anything about meeting the point that my noble friend Lord Mais has put down. The effect of the Amendment would be to enable the Director to allow by determination certain creditors to canvass any credit drawings on a current account, for example, overdrafts and loan accounts. The canvassing of overdrafts has been allowed because a current account facility must already be existing. It would not make much sense to prohibit the taking of loans on a facility already opened; but a loan account is specially opened—just like a personal loan—and we consider a loan account should be treated on the same basis. What we are seeking here to do—and I recognise that it places some restriction or difficulty on a bank manager—is to protect the consumer, the potential borrower, in his home from being visited and canvassed (and perhaps pressurised, as we know has happened in the past) into taking loans of this sort. We think that the consumer or potential borrower should be protected.

For these reasons we do not wish to see loan accounts canvassed away from business premises. If a credit business wishes to approach a potential customer for a loan account away from business premises it can do so, as I said to the noble Baroness, by advertising and by direct mail. Since my noble friend mentioned the word "telephone", I may say that of course under the Bill it is now possible for canvassing and conduct of business to be done by telephone, in the sense of obtaining a written request for a visit in order to pursue the negotiations for a loan. I think that in the general context of the Bill, and of the principle behind it, it would be quite wrong for the Government to go any way further than they have in the general relaxation provided for the banks and other organisations who conduct current account and overdraft facilities.

LORD MAIS

I thank my noble friend for his comments. I still feel that there is some confusion between loan and current loan accounts. I know that this matter comes up again later and I will not delay the Committee by going through it twice; but there is little or no difference between the two. In both cases the interest is calculated on a daily basis; the customer can at any time close the account. It is completely flexible and there is virtually no difference between the two; but there are advantages to the customer sometimes in current loan accounts—and it is the current loan account that we are asking for and not loan accounts generally. Perhaps we could build on the collaboration that we have had from the noble Lord in the past few days and ask him to look at this again, so that perhaps at another pleasant meeting we might come to a satisfactory compromise.

VISCOUNT AMORY

The noble Lord, Lord Shepherd, has been patient in listening to this point being made; it has been made on several occasions. It is that in practice the difference between an overdraft and a current account loan is a very small one indeed. He is clearly scared that if he accepts this point he will be in trouble with loans generally; I am sure that that is his view. I wish he could have been persuaded that in practice these two things are very close together. So we are left still with the rather ridiculous situation that a bank manager off the premises can refer to overdrafts with the utmost purity, but should he mention the term "current account loan" he would be guilty of a great impropriety. That seems to us a rather absurd situation, but I think it is the situation and, if the Bill is to stand as it is, presumably it will mean that some very detailed instructions will have to be given to bank managers to keep them on the straight and narrow path here. I wish the noble Lord could have accepted what has been put so lucidly by the noble Lord, Lord Mais, that in practice the overdraft and the current account loan are in many cases almost identical.

LORD CLITHEROE

I do not actually have to declare an interest, but I think I should remind the Committee that I was for many years the director of a bank. I no longer am. However, I feel very sympathetic indeed towards the Amendment which has been moved and also to what my noble friend Lord Amory has said. I hope that the noble Lord, Lord Shepherd, who I know has taken a great deal of trouble to get this matter right, will give it further consideration.

LORD SEEBOHM

I very much hope that we may have a further discussion on this question when we come to Amendment No. 62 on Clause 74, because this is something upon which I personally should like to express my views at some length. I do not think that in speaking on this particular Amendment it is the time to do it, but may we have an assurance that we shall have time on Amendment No. 62 to discuss the subject again? I should as a practising banker like to make some comments.

LORD SHEPHERD

I would assure the noble Lord that if there is an Amendment on the Order Paper it will be called, even though we may have discussed it in some detail earlier on, so far as the general principle is concerned. I am sorry; I should like to be conciliatory, but I cannot undertake to give the Committee an assurance of further consideration in the sense that I have any possible hope of changing either my view or that of my right honourable friend, the Secretary of State for Prices and Consumer Protection. I think that noble Lords who say there is very little difference between a current account and a loan account in terms of an ordinary consumer are being less than fair. A current account is normally an account with an active life. Money is being put into it, and drawings are taken from it. Sometimes it deliberately goes into an overdraft facility, and sometimes it may do so by accident. But it is an account in which there is regular contact between the debtor and the creditor. The loan account is quite different. It arises as a consequence of specific negotiation; and in the general interest of consumers, recognising what loan accounts could be and the problems they have caused in the past, these two things should be treated quite separately.

I do not believe there are many bank managers who are going to be inconvenienced by the provisions in this Bill, by being prevented from discussing at a golf club or perhaps at some cocktail party whether their client wishes to have a loan account. It is quite true that it would be illegal for a manager to canvass but if in a discussion on an overdraft the client were to say, "Is there another procedure by which we can overcome my temporary financial difficulties?", then I am sure it would be right for the bank manager to say: "Yes, there is. Come to my office to-morrow morning and we will deal with the matter quite within the law." As I have indicated earlier, we are going to have a very full discussion on this question, and I would suggest that my noble friend Lord Mais should withdraw his Amendment, and not move Amendment No. 51B, and we can give the matter further consideration in the Committee later on. But I must be fair, frank and honest with him in saying that I do not offer him any hope at all in the subsequent Amendments.

LORD MAIS

In view of the noble Lord's assurance that we shall have an opportunity later to discuss the matter, I beg leave to withdraw Amendment No. 50A, and I do not propose to move No. 51B.

Amendment, by leave, withdrawn.

THE EARL OF LISTOWEL

Before I call Amendment No. 51, I should mention to the Committee that if this Amendment is agreed to I cannot call Amendment No. 51A or Amendment No. 51B.

LORD SHEPHERD moved Amendment No. 51: Page 25, leave out lines 12 to 16 and insert—

1. "(a) the Director has determined that current accounts of that description kept with the creditor are excluded from subsections (1) and (2), and
2. (b) the debtor already keeps an account with the creditor (whether a current account or not)."

The noble Lord said: Clause 49(3) allows the canvassing, off trade premises, of overdraft facilities on existing current accounts where the Director has made a determination allowing this. The Amendment, which has been made in response to representations from the Committee of London Clearing Banks, slightly extends the exemption to apply in any case where the person canvassed already has an account with the creditor, whether a current account, a deposit account, a savings account or any other sort of account. This will allow the clearing banks and large finance houses, whose current accounts are likely to be exempted by the Director, a little more flexibility in dealing with their customers. Bank managers will be able to raise the question of overdraft facilities with their customers when meeting them socially or at home without having to ask themselves whether the customer concerned has a current account. Any abuse, which is most unlikely, could always be controlled by the threat of withdrawal of exemption by the Director. I beg to more.

On Question, Amendment agreed to.

Clause 49, as amended, agreed to.

Clause 50 [Circulars to minors]:

On Question, Whether Clause 50 shall stand part of the Bill?

4.9 p.m.

BARONESS YOUNG

May I raise two points on this clause, for clarification? I am absolutely in favour of the principle behind this clause, which, as I understand it, is that minors should be protected from unsolicited advertisements encouraging them to enter into credit agreements. I understand that minors are defined as those persons under the age of 18. My first point is that in subsection (2) of this clause it appears to be assumed that anyone in a school or other educational establishment for minors is under 18, when in fact in many secondary schools there will be boys and girls of 18 and over. Is it therefore to be an offence to send advertising material to them; and, if it is, is it true that it is not an offence to send it to them if they are not in a school? We should be quite clear about this.

The second point I would raise is a more general one. What about the case of a very young married couple? We have read in the newspapers recently of several cases of 16-year-old girls still at school but married, and of course there are other examples of couples aged 16 or 17 who are married. They are exactly the kind of people least likely to have any capital at all and most likely to need credit facilities of some kind. Are they to be denied them if they receive any information by post, and does there not appear to be some inconsistency in that the law allows them to get married but will not allow them to receive this kind of material through the post, though they may receive it in other ways? I should be very grateful for the noble Lord's comments on these points.

LORD SHEPHERD

If there is any inconsistency, it has been operating since 1892 because Sections 2 and 3 of the Betting and Loans (Infants) Act 1892 containing these provisions, have been extracted and placed into the Bill, and I am advised that no difficulty has as yet arisen.

In regard to young married couples—I am not going to be led into the question whether it is right or wrong, but it is a fact—if a married couple under 18 wish to receive advertising material they can do so by asking for it. In regard to the sending of advertising literature to places where minors are to be found—for instance, schools—but where there are adults, I am sure that the Committee would not wish advertising material for credit to be sent indiscriminately to such establishments, but the staff or those over the age of 18 may obtain such material by request. I am quite certain that if they need credit or feel that they can sustain the high interest charges, they will be able to find sources from any newspaper which advertises.

The general feeling is that we should maintain the position which has operated satisfactorily since 1892 but, if the noble Baroness has any particular problems or has heard of any, I should be very willing to consider them. However, the Department is not aware of any difficulties and this principle is based on an Act which has seen considerable service.

BARONESS YOUNG

I thank the noble Lord, Lord Shepherd, for that reply. Since the Act of 1892 the age of majority has come down from 21 to 18, and it is for that reason that this point arises. I entirely accept the general thesis that it is not a desirable practice to send unsolicited material to minors, but of course we now have this unusual situation that, by law, we have adults—and possibly married adults—in school.

LORD SHEPHERD

True. If the noble Baroness is aware of any difficulties I shall be very ready to consider them; but, as I say, when I considered this matter the Department was not aware of any problems.

Clause 50 agreed to.

Clauses 51 to 56 agreed to.

Clause 57 [Withdrawal from prospective agreement]:

4.15 p.m.

THE EARL OF LIMERICK moved Amendment No. 52: Page 28, line 3, leave out from ("(whether") to end of line 4 and insert ("at the time it is received by him, and if not so received shall be ineffective.")

The noble Lord said: I think it might be convenient for the Committee to consider Amendment No. 58 which also stands in the names of my noble friend Lord Aberdare and myself. The Amendments are concerned with the practicalities and with fair play. I think that the point which they seek to make is apparent by comparing subsection (3)(a) and (b), and the question must arise why there should be these differences of treatment. In the one case notices shall take effect at the time of posting and in the other they are to take effect at the time of receipt. Of course there is a much more fundamental difference—namely, that, as the Bill stands, notice of withdrawal by a debtor from a regulated agreement is deemed to be received at the time of posting whether or not it is actually received by the creditor at all. How can anyone react to a communication which he has not received? What would prevent the debtor, who for whatever reason decides later that he wishes he had given notice of withdrawal when in fact he gave none, claiming that he had posted a letter within the cooling-off period? The same point arises on Clause 69, the subject of Amendment No. 58. In respect to that clause it is probably more important, since it deals with the cancellation of an executed agreement within the cooling-off period.

At this stage, I am asking for elucidation only of what, prima facie, are quite unreasonable provisions. I note that Clause 88(3) gives what seems to be a much more normal provision. I do not immediately see the reason for these distinctions, nor do I see why as a minimum some proof of posting—a certificate of posting perhaps by recorded delivery—should not be demanded. I appreciate the underlying thought that it is more important that the right of genuine cancellation should not be lost than that the lender should have the right of enforcement against an unwilling borrower. However, as I have said, as the Bill is now drafted and bearing in mind the far-reaching effects of the cancellation provisions in Clause 69, I believe that it now requires too little evidence that the lender has genuinely sought to cancel within the statutory period. I beg to move.

LORD SHEPHERD

I thank the noble Earl. I think he will agree, if he casts his mind back, that there is a similar provision dealing with cancellation in the Hire Purchase Act 1965. This Amendment would, as the noble Earl says, alter the provisions so that the debtor's notice of withdrawal would only have effect from the time when it was received by the creditor. It would put the debtor in the same position as the creditor whose notice of withdrawal under subsection (3)(b) only takes effect when it is received by the creditor and it would also bring the debtor's position into line with what it would be under the normal law of contract.

The reason for the debtor's special position with regard to the service of a notice of withdrawal is to ensure that he is fully aware of the exact moment from which the withdrawal takes effect. As well as being in writing, the notice may also be given orally—that is provided for in Clause 57(2)—and it may be given to the negotiator as well as the creditor. In each case, the debtor will know the exact moment from which his rights and duties under the withdrawal provisions take effect. This is necessary if, for example, the goods have been delivered to him in advance of the agreement being made. He has a duty to take reasonable care of them for 21 days from the date of withdrawal, as provided for in Clause 72. If the debtor's posted withdrawal notice took effect only from the date of its being received, the debtor would not be certain when his rights and duties under the withdrawal notice dated from. He could be kept in suspense for a considerable time, and it would be open to an unscrupulous creditor to deceive the debtor as to when the withdrawal notice was received.

This provision is important in two areas—the withdrawal from a second mortgage (Clause 58), and withdrawal from an agreement not yet fully executed. In both cases the creditor can protect himself by not providing the credit until the document has been fully executed. I hope that the noble Earl will feel that although this provision appears to be rather one-sided as between a creditor and a debtor, it is a necessary provision in the consumer's interests but at the end of the day it must be for the creditor to make up his mind on the negotiations—and the client with whom he is conducting his negotiations. Having said that, if there are any genuine difficulties that the noble Earl may have in mind, I should be very happy to look at them; but as I said earlier, these provisions are in the Hire Purchase Act 1965. We are not aware of any great difficulties; we think that it is right in the consumer's interests to follow the experience of the 1965 Act and to include these provisions in this legislation.

THE EARL OF LIMERICK

I am naturally grateful to the noble Lord for that explanation. I do indeed recognise the antecedents of this provision. I should like to study more carefully what he has said. I have no intention of pressing this Amendment; I have no specific instance in mind, but I should be grateful if he could just give a little more attention to this question—that a debtor, if he wished to withdraw from an agreement after the conclusion of the cooling-off period, might come forward and say, "I posted a notice of cancellation. Evidently you never received it". I believe that there is a potential difficulty here, although as I say, I have no evidence that it has become actual. If the noble Lord is able to think a little more about that, I should be quite happy now to withdraw the Amendment.

LORD SHEPHERD

I know that my Department is in continual touch with the various organisations in this industry. I will see that they put that specific question to those concerned and will see what advice they can give me upon it.

Amendment, by leave, withdrawn.

Clause 57 agreed to.

Clauses 58 to 60 agreed to.

Clause 61 [Signing of agreement]:

4.23 p.m.

LORD ABERDARE moved Amendment No. 53: Page 29, line 30, after ("signed") insert ("or sealed")

The noble Lord said: When I first put this Amendment down it was to remedy what I thought was an omission, in that there was no provision for a document to be sealed by a corporate body. But if I am right the Government's Amendment No. 115C will overcome that difficulty and it states that: (2A) Any provision of this Act requiring a document to be signed is complied with by a body corporate if the document is sealed by that body. Therefore, I imagine that my Amendment is not necessary.

If I may take the opportunity to mention another point that arises upon this matter—I have not been able to give notice of this to the noble Lord, and if he will be kind enough to take it away, if he thinks that there is substance in it, I shall be very grateful—I should like to draw attention to the fact that it is not now normal practice for a mortgage to be signed or sealed by the lender. However, as I understand it, this clause would require a mortgage to be signed or sealed by the lender. The fact that it has not been so signed by the lender has not caused any problem and there has been no abuse, but there are very positive reasons against providing that a lender should sign the mortgage.

Under present practice, the borrower's solicitor does not release the mortgage once it has been signed by his client until completion, for the very good reason that by the mortgage the borrower pledges his property and undertakes to make payments. Naturally, then, the solicitor does not release such a document except in exchange for the lender's cheque. But if the Bill remains as it is, the borrower's solicitor will be obliged to release the mortgage to the lender before completion in order that the lender may sign it. I should have thought that solicitors would be very reluctant to do this, as they would take the view that it could be detrimental to the interests of their clients.

There is another reason why I think that it would create a difficulty. This is a very complicated reason and it is contained in a memorandum by the Law Society, who say that there are intricate and technical rules concerning the delivery of deeds and of escrows; the need for an agent to be authorised to deliver a document as a deed and other similar things which are so esoteric that under present practice they are normally ignored. But the provisions of this Bill would prevent these problems from being ignored and would create difficulties. I should be very grateful if the noble Lord could have a look at this point at a later stage, and see whether there is a difficulty when a lender has to sign in the case of a mortgage. I beg to move.

LORD SHEPHERD

In regard to the second point that the noble Lord raised I am advised that, in general, most mortgages are not covered by the Bill—and I think that he could refer to Clause 16. In other cases, I see no reason why a mortgage document cannot be separate from the agreement, thus getting over the difficulty that the noble Lord raised. However, I will certainly look at this matter and will write to the noble Lord. In regard to the purpose of moving the Amendment, may I say that we accept it in principle, but naturally, as usual, Governments are not particularly happy with the drafting. If the noble Lord will withdraw the Amendment, I will put down an appropriate Amendment for Report stage.

LORD ABERDARE

I am very grateful. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD ABERDARE moved Amendment No. 54: Page 29, line 43, after ("hirer") insert ("or his legal representative").

The noble Lord said: Subsection (2) of Clause 61 requires that in certain cases an unexecuted agreement must be sent to the debtor or hirer for signature, and that during a specified period the creditor or owner must not approach the debtor or hirer. This seems to overlook the fact that in many of the cases in question it is likely that the debtor or hirer will be represented by a solicitor. Where he is not represented, then I see the point of subsection (2). It gives him protection while he considers whether to sign the agreement. However, where the debtor or the hirer is represented, it would surely be usual to send the unexecuted agreement to the solicitor and not to the client, and the purpose of this Amendment is to suggest that the agreement could be sent either to the hirer or to his solicitor. I beg to move.

LORD SHEPHERD

I am advised that this Amendment is unnecessary. Where the Bill requires anything to be given to a debtor or hirer, this implicitly permits the document to be given to anybody who is, in fact, authorised by the debtor to receive this on his behalf. In particular this applies to a solicitor authorised to act for a debtor or hirer in a particular transaction.

The other matter is that this authority to act could be given to somebody else who is not a solicitor, and I am sure that the noble Lord will agree that if one were to include these words it would place that particular position in doubt. However, as I have explained, this Amendment is unnecessary.

LORD ABERDARE

I am very grateful, and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD SHEPHERD moved Amendment No. 54A: Page 30, line 1, leave out from first ("the") to third ("the") in line 3, and insert ("consideration period").

The noble Lord said: I beg to move this Amendment and to speak to Amendments Nos. 54B and 54C because they go together. At present, Clause 61(2)(c) prevents a creditor or owner approaching the proposed debtor or hirer for seven days after he has sent him an unexecuted land mortgage agreement for him to sign. The purpose of this is to ensure that the debtor or hirer is not pestered into signing, but it goes too far because it prevents the creditor or the owner from approaching him during the seven days, even though the debtor may have signed and returned the agreement in a day or so, thus specifying that he did not want to withdraw it. These Amendments allow the creditor or owner to approach the debtor or hirer either after seven days or when the debtor or hirer returns the signed agreement, whichever happens first. I beg to move.

On Question, Amendment agreed to.

LORD SHEPHERD

I beg to move Amendment No. 54B.

Amendment moved— age 30, line 7, leave out ("giving of the copy under section 58(1)") and insert ("beginning of the consideration period ").—(Lord Shepherd.)

On Question, Amendment agreed to.

LORD SHEPHERD

I beg to move Amendment No. 54C.

Amendment moved— Page 30, line 11, at end insert— (2A) In subsection (1)(c), "the consideration period" means the period beginning with the giving of the copy under section 58(1) and ending—

1. (a) at the expiry of seven days after the day on which the unexecuted agreement is sent, for his signature, to the debtor or hirer, or
2. (b) on its return by the debtor or hirer after signature by him,

whichever first occurs."—(Lord Shepherd.)

On Question, Amendment agreed to.

Clause 61, as amended, agreed to.

Clause 62 agreed to.

Clause 63 [Duty to supply copy of executed agreement]:

LORD SHEPHERD moved Amendment No. 54D: Page 30, line 31, leave out ("where subsection (1) does not apply").

The noble Lord said: I beg to move this Amendment and also to speak to Amendment No. 54E as they go together and correct a drafting error. At present, Clause 63(2) requires a copy of an executed agreement to be given to a debtor or hirer within seven days following the making of an agreement in a number of cases, including a case where an agreement was already signed by the other party when it was sent to him so that it became an executed agreement when he signed it. We do not feel that it is necessary that debtors and hirers should get further copies in this case. We feel that it is sufficient for them to have a copy which Clause 62(2) requires to be sent to them, together with the agreement when it is sent to them for signature. These two Amendments give effect to this view. I beg to move.

On Question, Amendment agreed to.

LORD SHEPHERD

I beg to move Amendment No. 54E.

Amendment moved— Page 30, line 34, at end insert— ("unless—

1. (a) subsection (1) applies, or
2. (b) the unexecuted agreement was sent to the debtor or hirer for his signature and, on the occasion of his signing it, the document became an executed agreement.").—(Lord Shepherd.)

On Question, Amendment agreed to.

Clause 63, as amended, agreed to.

Clause 64 [Duty to give notice of cancellation rights]:

LORD SHEPHERD

Amendment No. 54F is consequential on the Amendment I moved to Clause 63(2). I beg to move.

Amendment moved— Page 31, line 8, leave out ("where section 63(1)") and insert ("except where section 63(2)").—(Lord Shepherd.)

On Question, Amendment agreed to.

LORD SHEPHERD

This again is to correct a drafting error. Clause 64(1)(b) deals with notices and not copies. It is therefore wrong for Clause 64(2) to refer to a "copy" under subsection (1)(b); it should refer to a "notice" under subsection (1)(b) and this Amendment corrects that error. I beg to move Amendment No. 54G.

Amendment moved— Page 31, line 11, leave out ("copy") and insert ("notice").—(Lord Shepherd.)

On Question, Amendment agreed to.

LORD SHEPHERD

This again is a drafting Amendment consequential to the Amendment which I moved to Clause 63(2). I beg to move Amendment No. 54H.

Amendment moved— Page 31, line 17, leave out ("in a case where section 63(1)") and insert ("except where section 63(2)").—(Lord Shepherd.)

On Question, Amendment agreed to.

4.36 p.m.

LORD REDMAYNE moved Amendment No. 55: Page 31, line 21, leave out ("may") and insert ("notice").—(Lord Shepherd.)

The noble Lord said: It might be for the convenience of the Committee if I were to move Amendment No. 55 and at the same time discuss Amendment No. 56. As I said previously, subsection (4) of Clause 64 was inserted in the previous Bill as a result of a number of representations made by the Mail Order Traders' Association on behalf of the agency mail order houses and it was then accepted—and it is perhaps now accepted—that the existing methods of agency mail order give the consumers very real protection. The safeguards which their customers already enjoy could be summarised by saying that, first, no money is sent when the goods are ordered, unless it is required by Statute; secondly, that the consumer may have the goods at home on approval for 14 days, and thirdly, that the goods may then be returned through the local agent at no expense to the consumer.

There can be no sales pressure because the selling for a mail order house is done in a very localised way by a housewife acting as an agent and selling to only a handful of friends. Again the first instalment is paid only after the consumer has decided to make the purchase. The cash price is the same as the credit price and all goods are sold under an unconditional guarantee of quality, of which I have a very striking example here.

This subsection, as drafted, is of course only discretionary on the Director and I must say on behalf of these traders that if in fact the Director, under the Bill as drafted, should decide for any reason that regulations should not be made, it really would be catastrophic for their trading because it would destroy the whole existing system. Therefore in this Amendment I ask that the subsection should be mandatory on the Director.

Amendment No. 56 admittedly seeks to widen the discretion given to the Director in respect of this particular type of business so that he can extend his jurisdiction to the whole question of what is to be put in writing to the mail order consumer. The business is as it were, conducted on paper and as a trader myself I must say that it is a remarkably simple system.

I will not waste your Lordships' time with lengthy explanations, but this business is done by about nine major mail order houses. They have 3½ million agents, all of whom are housewives, dealing with 15 million customers, so that there are only five or six customers per agent. and the business—which runs at something like £750 million a year—is supported basically on five simple pieces of paper, of which also I have brought samples. There is the agency order form, to order the goods from the mail order house which the customer requires; there is the customer's sales form to complete the sale; there is the agent's return form to be used to send back the goods which the customer does not want; an agent's payment ticket which is simply to effect settlement of the agent's account and a customer's payments card which is the customer's record, which is very similar in type to a rent book or some such thing.

The important fact is that this paper does work and has done so for a great number of years. The prospect or the necessity for some alternative for very complex agreements to be handled by far from complex housewives is not really acceptable. Therefore, it is suggested in this Amendment that the existing systems, with some amendment no doubt, should be allowed to suffice and should take the place of the provisions of Clauses 60, 61, 62, 63 and 64 which are really designed for other purposes. Of course, I would make it clear that the other requirements of Part V, relating to antecedent negotiations and cancellations which would be in addition to the ability to return goods from a pool, would ail be binding as written.

In conclusion, I would mention that before rising to move this Amendment, a paper was put into my hands from the Consumers Association strongly objecting to the clause on the grounds that it was an unwarranted exemption for a particular class of trader. Now that I have explained, I hope lucidly, what a simple operation this is, I hope the noble Lord may see fit to accept these Amendments. I beg to move.

VISCOUNT HANWORTH

This Amendment goes far too far and, in my view, is against the whole spirit of the Bill. One may well have sympathy with the mail order method of trading but it is perfectly possible under the Bill for them to be exempt. They are trying to say that if they are exempted, if it is mandatory to exempt them from a great number of clauses of the Bill—and this really may go far further than the mail order people—it is in any case not necessary because presumably one trusts the Director of Fair Trading to take a sensible view here.

Another effect of this is that at present all credit sales are governed by the Hire Purchase Act 1965. The present Amendments would allow this time-proven protection to be done away with. There is no case whatever for making something which can be done by discretion far wider than it need be so that it can be abused in other areas.

LORD REDMAYNE

If I may interrupt the noble Viscount, I would make one point clear; namely, that for convenience I moved the two Amendments together. There is a considerable distinction, in relation to what the noble Viscount has said, between one Amendment and another.

4.43 p.m.

LORD SHEPHERD

My only criticism of the speech of the noble Lord, Lord Redmayne, is that it was put forward in such a conciliatory way that it hid the fact that if this Amendment were accepted, it would remove a very massive area of protection within the proposed legislation. Even for high-priced goods such as television sets priced at over £100 and sold by mail order, acceptance of this Amendment could take away from consumers, as the noble Viscount, Lord Hanworth said, the present protection they enjoy under the Hire Purchase Act 1965 for credit sales which are included in that Act—and mail order transactions are, of course, credit sales. We should recognise that the documentation provisions in the Bill are very important safeguards to the consumer, who can see precisely what he is letting himself in for, what his rights are, what he will have to pay, and when. If he is approached in his own home he has a cooling-off period during which he can study the agreement and change his mind if he wishes.

The agency mail order companies argue that they are in a special position because their agents are non-professional housewives who are the friends and neighbours of the people from whom they take orders; they do not use high pressure sales techniques, but rely in the main on simply leaving a catalogue for the neighbour to look through at leisure. Just because the agency mail order sales process is usually friendly and informal, it does not follow that the consumer should not have the basic right of examining on paper what he is committed to. Such companies already go through some process of agreeing credit purchase, even if it is merely signing a customer's card retained by the agent, and there is no reason why this could not be modified to conform to the regulations under this Bill. I cannot advise the Committee to accept Amendment No. 56. As I have said, it would be a massive cut in the protection which already exists.

With regard to Amendment No. 55, which in a sense is a paving Amendment to Amendment No. 56, it would be wrong to seek to lay a mandatory duty on the Secretary of State in this matter. Under Clause 44, where the Secretary of State is required to make regulations as to the form and content of advertisements, and under Clause 60 where the Secretary of State is required to make regulations as to the form and content of agreements, this duty does exist, but both powers involve truth in lending and are central to the purpose of the Bill. We wish these parts to stand out as being important. There will always be advertisements and agreements, so regulations will always be needed.

All other extensive powers in the Bill are permissive. We do not consider it would be appropriate to single out the particular regulations which are the subject of this Amendment for special treatment. They are no more and no less important than many of the other powers elsewhere in the Bill. It may be that later in time there will be no area where regulations are needed to be made because methods of trading have altered. Therefore, it would be wrong in these circumstances that the Secretary of State none the less had to make regulations. However, I can give an assurance that these regulations will be made well before the documentation provisions of the Bill come into effect, so that companies in the mail order trade have plenty of time to apply to the Director for the requisite determination. I have spoken a little longer than I intended, but these Amendments were taken together, as suggested by the noble Lord, Lord Redmayne. I hope that he will be willing to withdraw Amendment No. 55 and not to move Amendment No. 56.

LORD REDMAYNE

I think it would be reasonable that I should do that. There is a certain nervousness that the regulations might not be drawn, but I do not believe that is a practical possibility from what the noble Lord has said. I would have thought that those who put these words into my mouth will agree that they do not particularly seek to question what is done in another place. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 64, as amended, agreed to.

Clauses 65 and 66 agreed to.

Clause 67 [Cancellable agreements]:

4.50 p.m.

LORD WELLS-PESTELL moved Amendment No. 57: Page 32, line 18, after ("land") insert ("or is an agreement for a bridging loan in connection with the purchase of land").

The noble Lord said: This is a drafting Amendment required to bring Clause 67(a) into line with Clause 58(2)(b), which provides specifically for a bridging loan for land purchase to be excluded, together with an agreement for land purchase, from the requirement to provide an opportunity for the debtor to withdraw from a prospective land mortgage; for example, a second mortgage. A bridging loan agreement is effectively an extension of the credit agreement for land purchase. The loan is usually needed quickly and the borrower is normally legally represented. It is therefore sensible to exclude this type of transaction from the cancellation provisions. This the Amendment does. Not to so exclude them might hold up debtors from completing house purchases, which would not be in their interest. I beg to move.

On Question, Amendment agreed to.

Clause 67, as amended, agreed to.

Clause 68 agreed to.

Clause 69 [Notice of cancellation]:

4.52 p.m.

THE EARL OF LIMERICK moved Amendment No. 59: Page 33, line 25, at end insert— ("(6) Except with the consent of the creditor a notice of cancellation shall be for the hole of a credit.").

The noble Earl said: It would, I think, be helpful to consider together Amendments Nos. 59, 60 and 61 which all relate to partial cancellation by a debtor. This is a question I raised on Second Reading, when the noble Lord, Lord Jacques, practically invited these Amendments by replying—I think I have his words exactly—that there was a case for and case against and the matter could usefully be discussed in Committee. On April 9 the noble Lord explained the type of potential abuse against which this denial of partial cancellation is intended to guard. With the small minority of unscrupulous lenders I concede the risk that he defined. But for the vast majority, the reputable lenders and consumers who borrow in good faith, I cannot see that the suggested remedy would be regarded as satisfactory; namely, that the credit will not effectively be made available until the end of the 14-day cooling-off period. Human nature being what it is, the debtor or the hirer who, let us say for the sake of argument, is acquiring the use of a motor car under a cancelled agreement will want to drive it away as soon as possible after his decision has been made.

What, I wonder, will his reaction be if he is told, in effect, that he must wait a fortnight to protect himself against the risk that the financier will charge him too much, which, of course, a reputable financier would not do anyway, and then refuse a partial refund when he wakes up to it and seeks to cancel his agreement? I think his reaction would probably be to seek finance from a less reputable financier who gives him his accommodation at once without waiting for the expiry of the 14-day period and is prepared to run the risk, presumably at a higher rate of interest, that the occasional borrower may indeed insist on partial cancellation within the cooling-off period and cause him inconvenience, and cost him some money in unscrambling. Overall I do not think that that could be said to protect the consumer.

This is not a small or academic point, because the notices of cancellation covered by Clause 69 relate to all cancellable credit or hire transactions and also to link transactions. So that my object in moving these Amendments is to stir up the debate which was foreshadowed in our Second Reading. Hope springs eternal that the noble Lord in replying will say that he can accept them, but essentially I want to hear the counter-arguments more fully developed than was possible, naturally, in the context of our Second Reading debate, and to have an opportunity to consider whether a sizeable baby may not here be disappearing with the bath water. I beg to move.

LORD SHEPHERD

After this afternoon's debate I shall speak rather crossly to my noble friend Lord Jacques for having encouraged the noble Earl to put down these Amendments. As I suspect the noble Earl already realises, I shall have to ask the Committee not to accept them. The cancellation provisions of the Bill provide that in the case of a cash loan the debtor, on cancellation, is obliged to return as much as possible of the credit. If he returns less than the full amount he remains liable to pay interest on the balance. There is no obligation on the creditor to make the money available to the debtor before the expiry of the cancellation period and, therefore, if a creditor puts himself in this position we consider that he should take the risk. The Amendment would have the effect of making repayment of the whole of the credit a condition of cancellation, except with the consent of the creditor.

As set out above, the Bill provides that on cancellation of a cash loan the debtor (under Clause 71) is required to repay the whole or a portion of the credit, but if he does not repay the whole interest is payable on the balance. We admit that this is a very harsh provision, but it has been inserted deliberately to protect the consumer. As I said earlier, there is no requirement that the creditor must make the cash available before the expiry of the cancellation period, and he can, therefore protect himself. He can also make it available in a form that is not effective until the expiry of the cancellation period, for example, by a post-dated cheque.

The provision is designed to protect consumers against creditors who will thrust more money on them than they really require in the form of cash, knowing that they will be unable to resist the temptation to spend some of it. If then the consumer did so, according to the Amendment he would have effectively negated his entire cancellation right, unless the creditor agrees otherwise. We consider that this is one of the necessary provisions for the debtor and that no creditor need be harmed by it. At the bottom of my brief is the suggestion that the Amendment should be strongly resisted. I hope in those circumstances the noble Earl will withdraw this Amendment.

THE EARL OF LIMERICK

I think I achieved my object in provoking the debate and the fuller reply. That was the object of setting the Amendment down. The noble Lord, Lord Shepherd, gave a very carefully considered reply, which, naturally, I should like to study with the attention it deserves. Meanwhile, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 69 agreed to.

Clauses 70 and 71 agreed to.

Clause 72 [Cancellation: return of goods]:

4.58 p.m.

LORD REDMAYNE moved Amendment No. 61A: Page 36, line 33, leave out subsection (9).

The noble Lord said: I shall try to be brief about this Amendment. I put it down because I do not quite understand what subsection (9) means. Does it mean that agreements or transactions for goods in categories (a), (b) and (c) are not cancellable, or does it mean that being cancellable the goods are not returnable? The point I am getting at is this. If I buy a Christmas turkey or a bottle of whisky by mail order, or if I set in concrete a greenhouse which I purchased by mail order, I can understand that it is sensible that they cannot be returned. But there is a duty to pay for them and the transaction cannot be cancelled without payment. Equally, because the goods are either consumed, in the case of foods, or, in a sense, damaged by being installed, the customer must rely only on the supplier's guarantee as to the quality of the merchandise. I beg to move.

LORD SHEPHERD

The clause lays down what is to happen to the goods following cancellation. The clause sets it fairly well out. There is a normal responsibility for a person who takes goods on credit. Subsection (9) makes clear that the possessor has no obligation to return perishable goods for which he does not have to pay or, (b) goods supplied to meet an emergency … which must be paid for under the provisions of Clause 70(5)(b) or (c), goods which have been consumed or incorporated in any land or thing—for example, a central heating system which has been installed in a house, for which he again does not have to pay. The subsection further provides that no duty as to care, et cetera, shall lie on the possessor in respect of any perishable goods incorporated on his land.

I must say that when I saw this particular subsection I thought that this was particularly hard. But it was explained to me that the purpose of the subsection is to protect the consumer against an unscrupulous supplier who, having persuaded the consumer into a cancellable agreement, or his relative into a linked transaction, puts pressure on the consumer not to cancel the agreement by supplying goods before the end of the cooling off period in circumstances where it would be difficult for the consumer to return them. For example, frozen foods supplied under a transaction linked to a hire purchase agreement for the purchase of a deep freeze unit might be dumped at the consumer's door and partly consumed before they could be returned. A spare part of milking machinery might be supplied under a credit agreement during a breakdown, and could obviously not be returned as new if the debtor decided to cancel the credit agreement. The installation of a central heating system being purchased on credit might have been begun before the consumer decided to cancel, and the cost of removing it and making it good could by then become prohibitive. In all these cases we consider that it is impossible to return the goods, and in order to protect the consumer it is made clear that he is not required to do so.

I should have thought that here is rather the reverse of caveat emptor, "let the buyer beware "; it is a question here of the lender beware: make sure that when you enter into such an agreement that you are fully satisfied as to the standard of the potential borrower, and have a clear judgment on whether he will fulfil and execute his agreement before the handing over of goods. I think that this subsection is well known to the industry, and I should hope that they will be particularly careful, in the supply of goods to persons who wish to have a credit agreement like this, to ensure that they have a sound basis on which they could proceed for the lending of the credit.

LORD REDMAYNE

I think that that is very fair and is a very good argument, but it is taking a sledge-hammer to crack a nut. I wish this could be looked at again. On the argument which the noble Lord has used it is absolutely justifiable, but I suspect that there is a good deal of opportunity for a fairly well-worked customer's racket. Customers do operate rackets. Customers have terrible, had tempers on Boxing Day which are apt to show themselves on the days afterwards, and the noble Lord, Lord Jacques, knows that very well. I think this is something worth looking at again.

LORD SHEPHERD

I never refuse to do that. However, I never wish to mislead. I will certainly look with particular attention as to the consequences of the Hire Purchase Act 1964, which I think was re-enacted in 1965, where similar provisions apply. I am not aware of any difficulties, but I shall certainly consult with the Department.

LORD REDMAYNE

I am grateful to the noble Lord. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 72 agreed to.

Clause 73 agreed to.

Clause 74 [Exclusion of certain agreements from Part V]:

5.6 p.m.

THE EARL OF LIMERICK moved Amendment No. 62: Page 38, line 13, leave out paragraph (b) and insert— (b) a debtor-creditor agreement allowing the debtor either

1. (i) to overdraw on a current account or
2. (ii) to obtain a current account loan"

The noble Earl said: We come now to a matter of some substance. I would suggest that it would be convenient to consider Amendment No. 110 together with this Amendment. As it is the first time that I have spoken this afternoon on the subject of banks, may I briefly, and out of order, refer to an undertaking on our little difficulty on Clause 10 which was given by the noble Lord, Lord Shepherd. He said that he would put a letter into the post to me on Wednesday evening. I think that it should be equally on record that he was not only as good as his word but was even better. The letter was in my hands at half-past seven on Wednesday evening, and I am grateful.

This picks up the threads of the echoes on the earlier debates on Amendments Nos. 50 and 50A. Here we are not challenging a principle; we are looking at its application in practice, because this is a matter of substantial concern to clearing bankers. This concerns the proposed restriction of the facility on the current account loans which they widely and usefully make available to their customers. Can we look first at Amendment No. 110, which adds to Clause 184 the definition of a current account loan. This is done by reference to its two distinguishing characteristics: first, that interest is payable on a day-to-day basis; and secondly, that the debtor has the right to reduce or to cancel the loan without notice. It seems to me that these characteristics serve adequately to distinguish a current account loan from other forms of consumer credit, and these we agree should be regulated and documented in the ways prescribed by the Bill, particularly in Part V. It seems to me also that these characteristics identify the current account loan closely with the same features of the bank overdraft, which led to the recognition that overdrafts should be exempted from the documentation requirements.

I revert to Amendment No. 62, which would bring current account loans as well as overdrafts within the general exemption from the antecedent negotiation and documentation requirements of Part V. Why should these loans be so regulated if it is agreed that overdrafts need not be regulated? Why should the banks be driven, as they would be, to add complication and expense to the negotiations, and possibly to a large extent to cease altogether from conducting business on lines which have long been found useful by their customers, who are the consumers we seek to protect in this Bill? The only reason that I can think of—and it is a very respectable one—is that it is found that the exemption of current account loans would be open to abuses leading to the loss of the consumer protection which we are seeking for if they were so manipulated by unscrupulous credit givers other than the clearing banks. If this be so, as I assume, I should have thought that a little more time and ingenuity would have produced a solution which drew another reasonable, more helpful line, allowing this useful bank facility to survive.

I am aware that the Consumers' Association has sent out a circular to the effect that where abuse is possible a line has to be drawn somewhere, and I agree. But surely it is not beyond the wit of the draftsman to draw a line in such a way as not to inhibit this useful and widely used facility, which no one anticipates will be abused. The problem is a genuine one and it arises from the particular nature of the banker-customer relationship. I think we should here draw a distinction between the relationship of the customer and his bank manager, which is an on-going, day-to-day one, and the customer's relationship in one-off transactions which he may undertake with other lenders. The banker is, one might say, the residuary legatee for all the other financial transactions of his customers. They are reflected over his account; he borrows money from somebody else which is paid into the creditor's account and so on. Therefore it is a relationship which is different in kind and which demands a different consideration.

I should here like to draw attention to an exercise in the form of a flow chart which was drafted by the clearance banks for the guidance of their branch managers if the current account dealings with their customers fall, subject to the provisions of Part V of the Bill as it now stands. It is a most ingenious and interesting exercise, which is expressed in this flow chart form. Although it is longer than I care to remember since I played the game of Monopoly, I can only say that it reminds me vividly of that game. Having followed the various rules and exercised the options open to you, one ends up in the bottom right-hand corner with the statement that the banker goes to gaol and pays £200. But at least in the ordinary course of the game of Monopoly, when one passed "Go" one received £200. Here it is a question of payment. I also recall that in the game of Monopoly there is something called a chance card. I fear that if we get into this area of regulation on current account lendings, there will be an undesirable element of chance if one has to go into a post-mortem about some of these transactions.

We start off in our flow chart with the question: Is the banker soliciting someone to borrow money? We all know that in the normal social intercourse, at a cocktail party perhaps, the line between soliciting something and being solicited is a narrow one which many of us might find difficult to draw if the question were raised many months later: who raised the topic and in what connection? The last thing we want to do is to make offenders out of honest people conducting their business in an honest way, or to deny to the customers of the clearing banks what, by the use they have made of it over the years, they consider to be a useful and relevant service. I beg to move.

VISCOUNT HANWORTH

I must strongly oppose the Amendment. One entirely appreciates the necessity of exempting ordinary overdrafts. But a current account loan is a different matter altogether. So far we have not even heard from the noble Earl, Lord Limerick, why this causes banks such inconvenience. In many respects it is on all fours and certainly it is in competition with a number of other types of loan, for example personal loans and loans by finance companies and similar organisations. To exempt this weakens the Bill in an important way. I know that it can be argued there is not much difference between an overdraft and a current account loan. Nevertheless, there are only small shades of difference all the way along the line, and somewhere You have to draw that line.

I think that the Crowther Report was quite definite on this aspect and it would have considered that this Amendment represented a considerable weakening of the Bill. I cannot really see why such responsible organisations as the banks in England, as we know they are to-day, should not be delighted to show the lead on a measure which, at least, by conforming with the Bill gives the maximum information and the maximum protection to the borrower. I think that no case whatever has been made out for the Amendment and I hope that it will not be pressed.

LORD SEEBOHM

Perhaps I may try to make out that case. The noble Lord, Lord Shepherd, has made it clear what he thinks and I believe it is right and proper that I should be allowed to speak before he or the noble Lord, Lord Jacques, replies to the Amendment. Several arguments have been put forward. For example, why should this cause so much trouble for the banks? At no stage have the clearing banks talked of the trouble to themselves. They talk only about the millions of customers and the advantages to them.

I have for some time felt very concerned that the discussions that have been taking place, not only in your Lordships' House but outside in other places, have been discussions purely of terminology. I hope that the House will bear with me for a little time to see if I can clear this matter up. It is the one point where, I think, the Government have not felt able to meet us and to me it is really a question not of conflict but of terminology. There is a very strong similarity between the current account loan and the overdraft. They are not separate. They have one unique feature which I think is unlike any other form of lending I know; certainly it is miles away from the personal loan. As the noble Earl, Lord Limerick, has said, this feature is the charging of interest on a daily basis of interest rate which has fluctuated in keeping with the movements at a general level of interests, and is chargeable in arrears. In this way we have managed to ensure that our customers can get the cheapest borrowing in the market at any one time and that they will not have to pay any more money than is actually borrowed at any one time.

The contrast between that situation and the personal loan is, to me, completely different. The personal loan is where the interest is charged in advance and added on to the loan. I readily accept that in this particular case the customer needs every protection possible. What is more, there is genuine competition between banks, hire-purchase companies and other vendors of credit, and, in that case, there must be no differentiation whatsoever between the bankers and other people who lend on personal loan basis. I believe that personal loan is readily identifiable in all cases and that there is no confusion whatever in drawing a line between a current account loan and a personal loan. We all know that there is no provision for repayment on demand of a personal loan. We also know that there is no need to provide for all sorts of documentation on the current account loan at the present time. The personal loan quite rightly needs to be properly documented. At the moment there is no such documentation needed in current account loans.

To my mind, this Bill proposes legislation which will make an artificial distinction between the current account loan and the overdraft, which distinction does not in fact exist. We have in fact had extraordinarily good co-operation from the Government on this question of overdrafts, and I believe that if they gave it a little further thought they would realise that the current account loan should be treated in precisely the same way as the overdraft. On the question of terminology, I cannot help feeling rather sorry that, perhaps, after so many years, we have got used to talking about overdrafts and current account loans, whereas if we had talked about current account borrowing it would have covered the whole lot with very little more definition.

We are told that the current account loan is an entirely different animal, but the only point of difference which has been promulgated is that, in general, it is a premeditated lending, and that it is this capacity, the premeditation, which renders it necessary for inclusion within the full rigours of the proposed legislation. There is no substance in the suggestion that the consumer needs protection from the unscrupulous activities of a hitherto unknown lender in this case, because the ordinary loans are made available only to established customers, anyway. There is also no substance in the suggestion that ordinary current account loans are the subject of high-pressure salesmanship or any doorstep selling techniques. They are not even the subject of specific promotional advertising; they are merely made available to established customers on request.

In my view, it is quite illogical to contend that ordinary current account loans are more akin to personal loans than to overdrafts. Ordinary loans are but an extension of the overdraft arrangements. The interest system is the same, the terms of payment on demand are the same and the loan is made available through the medium of the current account, as is the overdraft. The true purpose of the distinction between a current account overdraft and a current account loan is to enable the less financially prudent to budget. There are all these points of similarity, and yet we are asked to accept that the artificial distinction of premeditation overrides all the other natural and positive distinctions between personal loans and ordinary current account loans.

The real point here, in effect, is: what is the consumer to gain or lose by this Part of the Bill? In terms of gain, I suppose it can be said that he will be provided in the future with some documentary evidence of his premeditation, but this seems to me to be the sum total of his achievement. In contrast, his losses are great. No longer can he rely upon an informal deposit of security with his bank as providing adequate collateral for his loan: he will be required yet again to call in person to sign the required documentation. No longer can his bank manager discuss with him the advantages of a loan in financial budgetary during the course of a visit to his home. This is not a stupid point at all. Many private customers who are ill can be seen only in their home, and it is there that these arrangements are very often made.

Perhaps, however, it is in terms of cost that the consumer will lose the most. In the long run, it is inevitable that the additional requirements of literally millions of pieces of paper and the additional administrative manpower required must reflect themselves in the price to the consumer. It may well be said that these costs can be absorbed quite easily by a bank, but this can be said about every single cost. Sooner or later it has to come back on the consumer.

Bearing in mind that there are millions of accounts involved—somewhere between 16 to 17 million customers are borrowers on overdraft or current account loans—I would ask your Lordships to consider this proposed legislation very carefully in terms of practicality and cost to the consumer, and decide whether the ends justify the means. As a practical banker, I have no hesitation in wholeheartedly supporting the proposed Amendment, and I would urge the Government to reconsider their position, if possible by means of definition, or by accepting this Amendment.

LORD JACQUES

We contend that a current loan account is somewhat different from an overdraft. There are two main differences. First, a current loan account is treated in a separate loan account; an overdraft account is also a current account; and the payments in and out are interspersed with other daily movements; for example, cheques in and out, standing orders, debit orders, et cetera. So that the two accounts are quite different in that respect. Furthermore, a current loan account cannot be created inadvertently in the same way as an overdraft can; it is something which is negotiated. It is granted only to current account holders in exactly the same way as a moneylender might advance new loans only to a previous customer; or in times of a credit squeeze a loan might be granted only to a savings account holder.

It would not be possible to limit only to clearing banks any further exemption that might be granted because current accounts go much wider than that. There are not only the clearing banks; there are the overseas banks, the merchant banks and those institutions which are treated as banks under Section 127 of the Companies Act 1967 for the purpose of exemption from the provisions of the Protection of Depositors Act 1963. Then, most numerous of all, there are those institutions with a certificate under Section 123 of the Companies Act 1967 that they can be treated as being a person bona fide carrying on the business of banking for the purpose of exemption from the Moneylenders Acts 1900 to 1927.

So it will be seen that if this Amendment were accepted it would apply not just to the clearing banks; it would have pretty wide application, because there is a large number of institutions which have current accounts and which would be able to have current loan accounts. Because an overdraft can be created inadvertently by a cheque being honoured or by an unexpected cheque being presented and honoured, we have found it advisable to exempt overdrafts from Part V. It would be difficult in practice to control such inadvertence so that overdrafts could be within Part V. In the case of the current loan account, there is an entirely different position. Current loan accounts are created, not inadvertently but by negotiation.

Finally, why not treat current loan accounts as overdrafts? First, they are considered to be on a par with personal loans. To exempt them would lead to a switch from personal loans to loan accounts. Lenders not now offering loan accounts would be tempted to offer such accounts. Furthermore, it is considered that the debtor should be told in writing of the full terms of his agreement, and this we can do only by bringing them within Part V. It would be quite impossible to grant an exemption to the current loan accounts of the clearing banks only. This would be against the whole philosophy of the Bill, and would give the clearing banks a competitive advantage over other lenders providing a similar facility. We regret that we cannot accept this Amendment.

LORD SEEBOHM

May I ask the noble Lord a question by way of definition? I believe the noble Lord, Lord Jacques, said we could not confine this to clearing banks. Is he assuming that the overdraft is confined to clearing banks?

LORD JACQUES

No. The Director General will have power to give the exemption from Part V to overdrafts, not on an institutional basis but as he so determines. His determination will not be on an institutional basis: it will be on the basis of the status of the firm and the kind of services it offers. That is in the Bill because the overdraft can be created inadvertently, and it would be unwise to try to subject it to Part V of the Bill. The current loan account is something quite different. It is not something which can be created inadvertently; it is something which is created quite deliberately, as any other loan is created and, in the same way as every other loan should have an agreement, so this should have an agreement. It is vastly different from the overdraft, which is created inadvertently.

THE EARL OF LIMERICK

I am grateful for what the noble Lord has said. While I understand what he has said, I am bound to tell him that I think it is most unsatisfactory. I do not think he has begun to answer the question which has really been asked. On this question of specific exemptions, this is the heart of the matter. If it is possible to give specific exemptions in the case of banks granting overdrafts—not necessarily confined to clearing banks, as the noble Lord has just said in reply to the noble Lord, Lord Seebohm—I cannot for the life of me see why it is not equally possible to make this distinction in the case of banks granting current account loans.

Here, we are addressing ourselves to a particular Amendment, but I honestly do not think that the noble Lord has considered adequately the broad principle concerned with the interests of the many consumers who, as customers of the banks, use and value this facility and would not wish to see it inhibited. It may be that the Amendment as it appears on the Marshalled List is not framed in precisely the best terms by which to approach this problem; but if there is a case—and I am convinced there is—for the continuation of this facility, we have had no explanation at all as to why it is not possible to deal with this by exemptions in favour of specified institutions as, to the best of my belief, is proposed in the case of the overdraft, and as is certainly the case regarding the other exemptions which have been discussed earlier this afternoon in relation to other clauses. I cannot regard the present position as satisfactory and I feel I must press the matter a little further.

I do not think it would be in the spirit of our discussions if I were to seek to divide the Committee, and indeed if I did so I do not know what would happen or whether there are sufficient Members present to achieve a useful result. Of course I am aware—indeed it is no secret—that there are to be discussions tomorrow afternoon between officials of the noble Lord's Department and representatives of the bankers. I think that at the very least the noble Lord might tell us that the matter will again be considered in those discussions to see whether some way might be found, on the lines I have indicated, to meet this point, without opening the way to the sort of abuse to which the noble Lord rightly drew the attention of the Committee, as indeed did the noble Viscount, Lord Hanworth. This is not what is being asked for by this Amendment and I would urge the noble Lord to reconsider the matter on the lines I have indicated.

LORD JACQUES

I thought I had answered the question. I shall have to try again. Why are we granting exemption to overdrafts?—because they can be created inadvertently, and it would not be practical to try to make them subject to Part V. That is the main reason. Secondly, exemptions will not be granted on an institutional basis, but they be granted by the Director, having regard to the status and services of the firm in question. So much for overdrafts. Now let us look at current account loans.

THE EARL OF LIMERICK

I am sorry to interrupt the noble Lord, but when he refers to the status of "the firm in question", does he mean the lender or the borrower?

LORD JACQUES

I mean the lender, the institution which is in a corresponding position to the bank.

THE EARL OF LIMERICK

That is the institution; exactly.

LORD JACQUES

But it would not be on an institutional basis. I think the noble Earl would agree that things would be on an institutional basis if we said, "Here is an exemption which would apply to the clearing banks". We are not attempting to do anything like that. The giving of overdrafts is not by any stretch of imagination limited to the clearing banks. It is far more widespread. In the case of the current account loan, if we were to give a similar exemption it could not be on an institutional basis. All institutions which had current accounts would have to be given the same facility of offering separate current account loans. Therefore the door would be opened much wider; and while we have good reasons for giving the concession in the case of overdrafts, because they may be created inadvertently, we can see no reason for granting a concession regarding a current account loan. This is something which is negotiated. There is an agreement; and all we are saying is that the loan should comply with the Act and that the agreement should be in the form provided by the Act. We believe that if we were to open this door it would then be opened very wide indeed, because one might get the position where some institutions who did not grant overdrafts but who are at present, and would be in the future, granting personal loans, could say, "Deposit £1 with us and open a current account"—and then they would give a current account loan, and because of the exemption of current account loans they would be able to get outside Part V. Acceptance of this Amendment would open that door wide, and we are not prepared to do that.

VISCOUNT AMORY

I should like to make one point. I did not think it was an essential of the case put forward by my noble friend Lord Limerick that this should necessarily be done on an institutional basis. As I followed his argument, it was based on the nature of the credit, and the case he was making was that the nature of a current account loan was very close indeed to that of an overdraft. The noble Lord, Lord Jacques, clearly does not accept that. I am forced back to the conclusion that what the noble Lord is really worried about is that, if he were to agree to this, some of the "fringe" lending organisations might find some way of abusing the situation. I cannot quite follow that argument myself, but that is the only ground I can think of on which the noble Lord seems to resist the essence of what is proposed in the Amendment. However, I think we are going to have very great difficulty in convincing the noble Lord, Lord Jacques; and perhaps my noble friend will have to do some further thinking as to whether some other opportunity might be found of having another "go" at the noble Lord, Lord Jacques, in order that he may explain the risks he sees which might be damaging to the interests of the customer.

VISCOUNT HANWORTH

It has been said by those speaking from the bankers' angle that it really does not worry them one way or the other. What worries them is that this would impose undue hardship on the borrower. I cannot agree wholly with that, but I think one might say that on the whole their borrowing is very often necessary and is a service. It is a good thing if the borrower realises precisely what he is doing and that the transaction is not made without a certain amount of thought. Everything that has been said so far has not convinced me that, although the documents and so on that have to be produced may be onerous, the whole position is made utterly clear. I cannot see any case at all for not following Crowther here, and following also other instances of personal loans.

THE EARL OF LIMERICK

The noble Lord, Lord Jacques, in his reply left me in some difficulty. I have no desire to be unreasonable. He said that I had not understood his arguments, but I can assure him I shall study very carefully what he has said. On the other hand, I do not think he quite took my point that, while I was not insisting that this Amendment had been framed in the best possible way, because I appreciate it may go wider than is desirable, we are both aware that there is to be a meeting to, morrow afternoon. If at this stage as I am minded to do, I should further consider the evidence that has been put forward to see whether it is possible to revert to the matter at a later stage, it would certainly be reassuring if the noble Lord would say now, before we leave the subject, that this would be one of the matters discussed, if only for clarification, at the meeting which is to take place to-morrow afternoon.

LORD JACQUES

I have no hesitation in giving that assurance. I failed to give it earlier only because I was so wrapped up in my argument.

Amendment, by leave, withdrawn.

Clause 74 agreed to.

Clause 75 [Liability of creditor for breaches by supplier]:

On Question, whether Clause 75 shall stand part of the Bill?

LORD ELTON

I should like to seek reassurance on two areas which are concerned here. Clause 75 aims to add extra protection to the debtor by means of making the creditor jointly and severally liable with the consumer for a misrepresentation or breach of contract. This is the first area of concern. Under certain circumstances this would mean the debtor, when aggrieved, would not be able to get his money back in exchange for the unsatisfactory goods. So long as the supplier is solvent and accessible the debtor is all right; under the Sale of Goods Act he can have recourse against the supplier and be recompensed in full. Should the supplier go bankrupt, abscond or become otherwise unavailable, the debtor's only recourse is to the creditor. The creditor's liability is expressed in subsection (1) as being only for damages for a misrepresentation or breach of contract.

I am advised—though I am not too expert in legal terminology—that in some circumstances this situation would result in the debtor not being able to get a rescission, he would not be able to get cash back for a faulty piece of equipment, but only damages for restitution to the condition in which it should have been when sold. We all know how annoying it is to get 12/6d. back for a hexagonal nut, when what one really wants is to return the bicycle, or article, get the money back and forget all about it. If we may have some assurance that the wording of this clause is such that the debtor taking action under Clause 75 is at least as well-protected vis-à-vis the creditor as he would have been under the Sale of Goods Act had the supplier remained solvent, this would be a considerable help and an improvement to the Bill.

The second area in which I should like to express a reservation relates more of less specifically to credit card agencies—and perhaps I should declare a small interest as the holder of a Barclaycard. The concern is the protection of the aggrieved debtor who in this case would be potentially myself, I suppose, but whom one should see not as myself, nor as a young executive on the "make" but as a 65 year old lady flustered and unsure what to do. She should have recourse to the supplier in the first instance when she is not satisfied with the goods which she has been sold while using a credit card. The supplier is to be defined as the person with whom she dealt over the counter. It should not be defined as the credit card agency, who has this joint and several liability, which is quite proper in some circumstances. She ought to be able to go to the village shop, the chain store or the motor car agency, and not have to write to somebody in Southend or Northampton whom she has never seen. The result will not merely be to reduce vastly the amount of work for the credit card agencies, but also to simplify the procedure for the debtor.

It is possible that the statutory indemnity which is written into subsection (2), which gives the credit card agency the right of indemnity against the supplier, would have the effect in practice of meaning that eventually the normal practice would be for the aggrieved debtor to have recourse against the supplier in the first instance. But why can the Bill not say this so that the law is understood by the protected debtor as well as by the lawyers? This is important not only because of the debtor, but also because of the position of the credit card agency; they could become involved in a large volume of work which is not connected with their experience. Their expertise is in cash, credit and credit worthiness. The supplier's expertise is in supplying goods that are serviceable for the purposes for which they are sold.

If the supplier becomes insolvent or absconds then the credit card agency is very much involved, and its expertise and judgment are in question, because they should not service a firm which is likely to default in this way; to involve them therefore is just. But to involve them when it is perfectly possible for the debtor to receive recompense from a supplier is unnecessary and involves them in work to which they are not accustomed, and which will not be profitable to the debtor. Therefore, if the Government can see some way of making this point clear, which may be implicit in the Bill, I shall be most grateful.

5.46 p.m.

LORD JACQUES

May I congratulate the noble Lord, Lord Elton; I understand it is his maiden speech from the Box. I hope we will hear him often from the Box—but the Opposition Box and not the one in font of which I stand. He has raised an important point and I think that I should deal with it in two ways—first in general, and then in particular. The idea of the joint and several liability is not new. We already have it in hire-purchase, conditional sale and credit sale. But strong representations were made to the Crowther Committee that it should also apply to agreements where there are the three parties, the creditors, suppliers and debtors. Instances were given where the supplier had gone bankrupt or disappeared and the unfortunate debtor was left with an obligation to repay his loan to the credior but with no redress against the supplier. But there were other representations. The representations that were made to the Crowther Committee were not restricted to bankruptcy and disappearance. There were numerous other cases of suppliers who were rather ruthless, stubborn and evasive. They used tactics which put off the debtor; and, consequently, although the supplier was not bankrupt and had not disappeared, the debtor could get no satisfaction from him but had to continue to pay the full instalments to the creditor.

After a full consideration of the representations the Crowther Committee came to the conclusion that, when there was a business relationship as between the creditor and the supplier, they were in a joint venture from which they both expected to profit. Consequently, they should be jointly and severally liable for the claims by the debtor against the supplier. I am in a position, having been in the retail trade all my life, to go farther than that and tell your Lordships from practical experience that many of the large institutions in this country, which act as the creditor in the token trade, not only receive a charge which they make to the debtor, but also take up to one half of the retailer's entire profit. There are cases where they take a complete half. These are not small institutions. There are important well-known national institutions getting 12½ per cent. from the retailers on the tokens which are handled. The creditor is not in this joint venture for nothing; it is joint in the sense that in this case he is taking half of the profit. We believe that, in general, the Crowther Committee were absolutely right.

Let us now take the bank credit card which, of course, is a newer creation. First, I would point out that here, again, there is a joint venture. The bankers do not give this service for nothing and they do not restrict their charge to the debtor; they also have a commission from the supplier. If the banker has a commission from the supplier, there is a joint venture between the banker and the supplier and there should be joint and several liability. But we would admit that in the case of the credit card there is a little difficulty and we have tried to overcome it. There are two elements in the credit card; the element of a monthly account, and the element of longer term credit. For example, some people use the credit card as a sort of monthly account. Instead of having a monthly account with a number of stores, they have only one account with a Barclay Card or Access or some other one, and they present their card and make one payment at the end of the month. There is a case for that being exempt, because if it were an ordinary monthly account settled at the end of the month it would be exempt.

There is also an important second element, where the card is used for longer-term credit. We have had discussions with the institutions concerned and have tried very hard to get over this problem. We have a provision in the Bill that the joint and several liability will not apply unless there is a single item of £30 or more in value. For all other single items there is no joint and several liability, and the representatives of the card companies agreed that this would exclude practically the whole of what could be described as the monthly account element. So we have gone out of our way to try to meet the point of the card people, and we believe we have met it fairly and reasonably.

Of course the card people have a remedy in their own hands so far as joint and several liability is concerned. Once they grant an agency they give the supplier some status, and their remedy is to have a greater choice in selecting their agents. They could choose those suppliers who would give them less trouble in respect of their joint and several liability and who would meet their obligations. Consequently, there would never then be any call on a creditor to meet a liability which was really that of a supplier. Furthermore, the Bill provides that if a creditor is called upon to pay he has a right of indemnity. So they could choose suppliers against whom they would have a successful right of indemnity. We are concerned not only with bankruptcy and disappearance, but to see that a debtor is able to use the influence of a creditor in order to get a fair deal from a supplier. It is the creditor who has given the supplier the status, and it is he who should help the debtor to get a fair deal from him. We therefore feel that the provisions in the Bill are extremely fair. I would further say that we are now taking exactly the same line as the previous Administration took in all their negotiations with the people concerned.

Regarding the other point raised by the noble Lord about the limit of the liability upon the creditor, we take the view that if something is bought for £100 and its use is quite disastrous and gives rise to damages of £200, which in law are a liability of the supplier, then that should also be part of the joint and several liability of the supplier and the creditor. I understood that to be the point raised when the noble Lord talked of not being able to get a rescission.

VISCOUNT COLVILLE OF CULROSS

No.

LORD JACQUES

Can the noble Viscount explain to us what is the point.

VISCOUNT COLVILLE OF CULROSS

If my noble friend will allow me, it is a technical point and if the noble Lord has not had it explained to him in legal terms nobody will blame him for not being able to give an answer straight off. Perhaps I may explain what it is. Clause 75(1) refers specifically to a claim for damages in relation either to misrepresentation or to a breach of contract. The noble Lord, Lord Jacques, has rightly said that this covers a case where the damages involve not only the equivalent of the price of the article but some consequential damages as well, because the article has caused more damage than its actual cost. That is one set of affairs. That is a perfectly ordinary claim for damages.

But both in the case of misrepresentation and also in the case of ordinary contract, there is another thing you can do. You do not sue for damages at all. You simply say, "This contract was to buy a kettle and you sold me a saucepan. There is complete failure to honour the contract; there is no contract. I am going to give you back the thing that turned out to be a saucepan and you must give me back the £31 which I paid for it." That, of course, is a rescission of contract and it is not covered, according to my reading of Clause 75(1). It seems to me that if the noble Lord, Lord Jacques, is saying that the greater should be the liability of the credit card agency as well as that of the supplier when the saucepan blows up and causes a lot of damage, then so also should it be in the lesser case of the rescission of a contract where there was no contract at all but where a fundamental condition had been breached. I do not think that those circumstances, where you want to get the whole thing set aside and go back to where you were before any idea of contract arose, are at all covered by the Bill and I wonder why they are not. It seems to me that bankruptcy by the Access Card or the Barclay Card people should also be covered.

I will give the noble Lord a moment to read the carrier pigeon's message—which was always kindly accorded to us when we sat on the other side. I do not know whether he was going to deal with the second point raised by my noble friend Lord Elton, but, if not, can be at some time tell us how the arrangement will work out. I understand the principle that you have joint and several liability and can sue the credit card agency as well as the supplier, but are we not going to get into a situation where, if I advise a client who has bought faulty goods on a credit card arrangement, there is absolutely no reason why I should ever bother with the supplier at all? I am not interested whether they are solvent or insolvent, or difficult or easy to sue. I know that the credit card agency is good for the money and I shall automatically sue the credit card agency instead of the supplier. It is perfectly true that the credit' card agency has an indemnity against the supplier.

LORD JACQUES

More than an indemnity; it can insist on the supplier being a party to the court proceedings.

VISCOUNT COLVILLE OF CULROSS

I was coming on to that. According to the Rules of Court under Clause 75(5), they can join the supplier and that is right. But it seems to me to turn the ordinary legal process on its head. One would normally have expected to sue the person who sold you the article, in the way that you do under the Sale of Goods Act. You go for the retailer who supplied the article and only if you do not get success with him do you go against the credit agency or credit card organisation. That is the ordinary way of proceeding. Can the noble Lord, either to-day or at some other time, tell us how this provision will ordinarily work? Does he expect the ordinary defendant in a suit of this sort to be, as a matter of course, a credit agency, or does he expect the aggrieved plaintiff normally to have recourse first of all against the shop and only bring in the credit agency as a second defendant or in the case of default by the supplier. That is what we want to know: how it is expected to work in practice. If those two questions cannot be answered to-day, nobody would be more forgiving than I; but they are important to understanding how the Bill is to work in the courts.

LORD JACQUES

Let us be clear. I am not trying to be a lawyer; my knowledge of the law is elementary. Therefore I am not going to try to give legal answers to the questions which have been raised. I will only say that as rescission is concerned, we now understand the point raised and will look at it. So far as the question of suing the debtor first is concerned, I do not think—

VISCOUNT COLVILLE OF CULROSS

The noble Lord means "suing the supplier first".

LORD JACQUES

I do not think the debtor should be put to inconvenience. It means he can be compelled to have two bites at the cherry: he can sue the supplier and after that, if he fails to get the money even after a court orders the supplier to pay, then he can sue the creditor. Surely it is right that he should have the facility of suing them jointly and getting the whole thing over in one fell swoop. That is surely the way to protect the consumer.

VISCOUNT COLVILLE OF CULROSS

I think the noble Lord has now really put his finger on what everybody is afraid is going to happen. I understand that one wants to have the complete certainty that, whoever you sue, the debtor is going to get his damages in the end. I understand the consumer protection side of this and it seems to me, with great respect, to make the utmost sense. But are we going to get into the situation where the supplier is never the defendant? He would be the person who gives the indemnity to the credit card agency, but this never involves him in any court action—or not necessarily so. The person who bought the faulty goods will, as the noble Lord now admits, automatically sue the credit card agency. This means that no shopkeeper is ever going to be joined in the first instance in a suit at all. It will be for an internal arrangement between the credit card agency and supplier to idemnify the credit card agency for any damages which have been gained.

This is fine from the point of view of the consumer; but it seems that the shopkeeper is going to get away with a great deal. There is never to be any suggestion that the shopkeeper has been selling faulty goods. He is never going to suffer the ridicule of being the defendant in a court case where it is shown that he has sold goods that he ought never to have sold and which he ought to have known, and did know, were faulty. This is another substantial protection for the consumer, that there is the danger that the shopkeeper is actually put into the county court to show why he should not make good the damage which his faulty goods have caused. In those circumstances, unless we think about the procedure more, he is going to get away with this every time and the defendant is always going to be only the credit card agency.

Would the noble Lord consider this? I believe in the value of the publicity. This is the point of having court hearings in public, that the defendant if in the wrong is shown to the world to be in the wrong; and the shopkeeper does not like to be a defendant and to be shown to be in the wrong when selling faulty goods. These also are powerful protections in the public interest. At the moment, the way this is going to work is going to remove this protection. I do not know what the answer is. Perhaps they could be joined the other way round. Perhaps you sue the shopkeeper and automatically the credit agency is joined as a second defendant so that you do not have any question of two law suits, which I agree is undesirable. You can draft this either in the Bill or in the Rules of Court so that it is the supplier (who, after all, is primarily in default) who takes the "rap" first, and in the same action you also get a judgment in default, if the supplier does not pay, against the credit card agency; so that you do not have two separate actions. Nevertheless, the onus is really on the supplier to show why it is that he should not pay. I believe that it would be beneficial to look at this. It is not the principle that we are concerned with, just the machinery. If the noble Lord could consider it again I should be grateful.

LORD JACQUES

I should like to draw the attention of the noble Viscount to the Crowther Report which specifically rejected the idea that the debtor should first sue the supplier and then, if he failed, should "have a go" at the creditor.

VISCOUNT COLVILLE OF CULROSS

I agree, and I said so.

LORD JACQUES

The supplier can be joined as a defendant in any action.

VISCOUNT COLVILLE OF CULROSS

Yes, I agree.

LORD JACQUES

Then why not leave it at that?

VISCOUNT COLVILLE OF CULROSS

If the noble Lord will do me the justice—this is a very complicated matter—of reading what I have said, he will see that I understand and accept the point that you do not want two law suits and also that the supplier can be joined by the credit card agency. I am simply saying have one action but, in the first place, put the burden on the supplier and let him be backed up by the credit card agency if he will not pay. There is no necessity to have more than one action; it is simply that you put the order of defendants in reverse of what the noble Lord has suggested. There is no difference between us in principle at any stage but I have added one extra point for consumer protection which I do not think the Bill achieves.

LORD JACQUES

What I agree with most is that there is no difference between us. As a matter of fact, I think the outcome would be the same whether we took our line or the line of the noble Viscount. Frankly, the fact that the supplier can be joined as a defendant closes the matter. But we will look at what he has said and give it further consideration.

Clause 75 agreed to.

Clause 76 [Duty to give information to debtor under fixed-sum credit agreement]:

6.7 p.m.

LORD ABERDARE moved Amendment No. 63: Page 39, line 15, leave out ("fee of 15 new pence") and insert ("prescribed fee").

The noble Lord said: I beg to move Amendment No. 63 and, if I may, to speak also to Amendments Nos. 66 and 71. These are simple Amendments. They refer to Clauses 76, 77 and 78 and they deal with the duty of the creditor to give information to the debtor or hirer in each case on payment of 15 new pence. The only question really is this. Why is there the figure of 15 new pence in the Bill?—when in many other cases in the Bill we have referred to the "prescribed fee" or the "prescribed period". I should have thought that in this case it would be more flexible if this fee were prescribed in regulations rather than put as a figure in the Bill. Certainly a person who wishes to inspect the licensing register under Clause 35 is required to pay the specified fee. Why not also put "specified fee" in this case? I know that under Clause 177 the figure of 15 new pence can be amended by order subject to the Negative Resolution procedure; whereas the specified fee is fixed, I believe, by the Director General of Fair Trading. I suggest that this might be more flexible than specifying the figure of 15 new pence.

I wonder whether the noble Lord knows how much longer we must go on talking about new pence. I should have thought the time must come shortly when, in Statutes, 15 new pence meant 15 pence in current use. If the noble Lord is able to delete the word "new" at the next stage of the Bill I think that it would be an improvement.

LORD JACQUES

On the question of new pence, I cannot speak for the Government here, but I should say that a little more time will be needed before we can dispense with the use of the term "new". There are still many of us who think that prices are rising so high that we convert them into old money and make a comparison with the old rate and I think that, for some time yet, the pence will have to be "new".

For this fee we followed the precedent of the Hire Purchase Act, which lays down 12½p. We wanted to give some idea of what the figure would be, and thought it right to put a figure in. If it needs altering—due to inflation, for instance, or for any other reason—there is power to vary the amount under Clause 177(1). To that extent, the figure is already a prescribed fee.

LORD ABERDARE

I am interested in what the noble Lord, Lord Jacques, said on that not very important point. I think he said that the Bill was not designed to be read by the consumers but by those who had to interpret it legally. I should have thought, therefore, that the word "pence" would mean what it was supposed to mean in the courts, and that it was not necessary to describe it in the Bill. To be consistent, as the noble Lord has been harping on this throughout the Bill, I suggest that as "prescribed fee" occurs in other parts of the Bill it might usefully have been kept.

VISCOUNT AMORY

Before my noble friend withdraws the Amendment, I should like to say that I personally agree with what he said about "new" pence. I was entirely in favour of metrication but it has been most inflationary. I have become wildly extravagant—for instance, with tips to taxi drivers—because I do not yet quite understand it. However, I think that we should have it forced on us that a "penny" is a new penny, and a new penny is a penny. If the noble Lord says we must go on talking about "new pence", perhaps we must also talk about the "new Government" and, if so, for how much longer must we do so before we talk about "the Government" or perhaps "the late Government"?

LORD ABERDARE

I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

6.13 p.m.

LORD JACQUES moved Amendment No. 64: Page 39, line 19, leave out ("of") and insert ("showing, according to the information to which it is practicable for him to refer").

The noble Lord said: This Amendment is made at the request of the clearing banks. They pointed out that it was possible for information to be in the pipeline as a result of a drawing at a remote branch, which a bank could not be expected to have when preparing the statement under this clause. In respect of other creditors, a cheque might be in the post of which they know nothing. This Amendment is to cover those representations. I beg to move.

LORD SEEBOHM

I thank the noble Lord, Lord Jacques, for putting forward this Amendment, which is very helpful.

On Question, Amendment agreed to.

LORD JACQUES

Rather belatedly, I will explain that Clause 76 deals with statements which can be required by the debtor in the case of fixed sum credit. This Amendment allows a creditor to give the basis of the sum and the date of ascertainment when he cannot give the amounts. This Amendment is to deal with such occasions as when the interest rate is going to change and again, is put forward as a result of representations. I beg to move Amendment No. 64A.

Amendment moved— Page 39, line 28, at end insert— (1A) If the creditor possesses insufficient information to enable him to ascertain the amounts and dates mentioned in subsection (1)(c), he shall be taken to comply with that paragraph if his statement under subsection (1) gives the basis on which under the regulated agreement, they would fall to be ascertained." —(Lord Jacques.)

On Question, Amendment agreed to.

LORD JACQUES

I beg to move Amendment No. 65, which is purely drafting.

Amendment moved— Page 39, line 36, leave out ("this section") and insert ("subsection (1)").—(Lord Jacques.)

On Question, Amendment agreed to.

Clause 76, as amended, agreed to.

Clause 77 [Duty to give information to debtor under running-account credit agreement]:

LORD JACQUES

Amendment 67 is exactly parallel to Amendment No. 64, which deals with fixed sum credit. It deals with running-account credit and makes the same concessions after representations. I beg to move.

Amendment moved— Page 40, line 7, leave out from ("creditor") to end of line 7 and insert ("showing, according to the information to which it is practicable for him to refer").—(Lord Jacques.)

On Question, Amendment agreed to.

LORD JACQUES

Amendments Nos. 68 and 69 refer to running-accounts and are exactly parallel to Amendment No. 64, which deals with fixed sum credit. Both Amendments allow the creditor to give in statements such information as is practicable. Again, this is a concession to representations. I beg to move Amendment No. 68.

Amendment moved— Page 40, line 30, after ("showing") insert ("according to the information to which it is practicable for him to refer").—(Lord Jacques.)

On Question, Amendment agreed to.

LORD JACQUES

I beg to move Amendment No. 69:

Amendment moved— Page 40, line 35, after ("showing") insert ("according to the information to which it is practicable for him to refer").—(Lord Jacques.)

On Question, Amendment agreed to.

LORD JACQUES

Amendment No. 70 is a purely drafting Amendment. I beg to move.

Amendment moved— Page 40, line 42, leave out ("this section") and insert ("subsection (1)").—(Lord Jacques.)

On Question, Amendment agreed to.

LORD SEEBOHM had given Notice of his intention to move Amendment No. 70A: Page 41, line 5, at end insert: (8) Where the creditor carries on business at more than one place the statement referred to in subsection (1) shall contain only the latest information which is recorded by the creditor at the place where the debtor's account is maintained.

The noble Lord said: I am content not to move this Amendment in view of the previous Amendments which I think are most helpful and which I think meet our requirements, although we should like further discussion on working out the details.

LORD JACQUES

I can give the noble Lord the assurance that that discussion can take place.

On Question, Whether Clause 77, as amended, shall stand part of the Bill?

LORD REDMAYNE

I should like to ask one short question. Clause 77(4)(b) provides that if there is a charge of interest and any change in the state of the account, a statement should be made to the customer. The noble Lord will know that there are now so many forms of credit that it is impossible to cover them all in any detail and the types of accounts used in the retail trade—budget accounts, revolving credit or subscription accounts—where the customer is given sanction for a sum of credit which is paid off by equal instalments over a period and those subscriptions are interest-bearing and normally, since that is a regular event, no statement would normally be issued. If purchases are made against a credit unit, a statement is sent.

I would ask the noble Lord whether, if in fact in that type of account there is no real movement other than the payment of subscription cum interest, a statement is then required under this clause. If it is so, then I think one would have to try to see at some other stage whether an Amendment should be put down to cover the point.

LORD JACQUES

I will undertake to write to the noble Lord on this point.

LORD REDMAYNE

I am most grateful.

Clause 77, as amended, agreed to.

Clause 78 [Duty to give hirer information]:

6.21 p.m.

LORD JACQUES

Amendment No. 72 is parallel to Amendment No. 64. Whereas Amendment No. 64 applied to credit trade, this applies to hiring, but it gives the same concession. I beg to move.

Amendment moved— Page 41, line 11, leave out ("of") and insert ("showing, according to the information to which it is practicable for him to refer").(Lord Jacques.)

On Question, Amendment agreed to.

LORD JACQUES

Amendment No. 73 is a purely drafting Amendment. I beg to move.

Amendment moved— Page 41, line 22, leave out ("this section") and insert ("subsection (1)").—(Lord Jacques.)

On Question, Amendment agreed to.

Clause 78, as amended, agreed to.

Clauses 79 and 80 agreed to.

Clause 81 [Variation of agreements]:

LORD JACQUES

The purpose of this Amendment is to avoid the need for documentation where the credit limit is temporarily exceeded on a running account. This would apply to credit cards and all other forms of running account. I beg to move Amendment No. 73A.

Amendment moved— Page 42, line 35, at end insert— (3A) Where, in relation to running-account credit, the creditor at any time agrees to allow the credit limit to be exceeded, but intends the excess to be merely temporary, Part V (except section 56) shall not apply to that agreement (as modified by subsection (2))."—(Lord Jacques.)

On Question, Amendment agreed to.

On Question, Whether Clause 81, as amended, shall stand part of the Bill?

LORD ABERDARE

Clause 81 provides that a variable term agreement shall not be varied without notice of variation being given to the debtor or hirer in the prescribed manner". I understand that in many agreements the rate of charge is linked to finance house base rate, which is the only objectively calculated base rate available. This rate is published daily in the Financial Times and in some other leading papers, and I would hope that publication in this way would meet the requirements of the "prescribed manner". If the noble Lord could kindly look at this point, and either say that this is so or would consider that when regulations are made a reference to this publication of the finance house base rate would meet the requirement, I should be most grateful.

LORD JACQUES

In essence the Bill is conceived as a flexible measure so that all the varied types of transactions can be dealt with appropriately. Where an agreement has been expressed with a rate of charge linked to a recognisable base rate the method of notification of variation of the base rate will depend upon the type of transaction. If it is the type of transaction where a debtor may reasonably be expected to see a newspaper or a notice displayed in a financier's office it could well be that that will be the "prescribed manner". Where the debtor is not likely to appreciate that a notice in a newspaper applies to his loan agreement, or where the creditor is in periodic contact with the debtor, it is likely that the regulations will prescribe that individual notification he given. "Horses for courses" will be the motto, and the fullest consultation will take place between the interested parties before the regulations are made formal.

LORD ABERDARE

I am extremely grateful for that very full answer, and much admire the noble Lord's grasp of the Bill.

Clause 81, as amended, agreed to.

Clause 82 [Liability for misuse of credit facilities]:

6.27 p.m.

VISCOUNT AMORY moved Amendment No. 73B: Page 42, line 41, at end insert ("unless contributory negligence can be proved").

The noble Viscount said: This clause provides that the debtor in a regulated agreement is not liable to the creditor for any loss arising through the use of the credit facilities through the action of another person who is not acting as agent to the debtor. This provision, I am advised, would mean an alteration in the existing banking law as it has been established in the courts. The object of this Amendment would be in part, at least, to restore the present position as established in the courts. The clause as drafted ignores the duty of the debtor to take reasonable care in drawing cheques. It has, I believe, been established in several cases in the courts that, where the debtor ignores obvious precautions, the bank cannot be held liable for the loss. I hope that the noble Lord will be able to give me assurances that my interpretation of the effects of this clause is wrong. I beg to move.

LORD JACQUES

The clause goes very much wider than cheques. Its purpose is to protect the consumer against careless administration of credit facilities by the creditor; for instance, in cases where goods et cetera are allowed to be taken on credit without adequate means of identification. We consider that in such cases the onus should be on the creditor to build in adequate safeguards, and that there should be no liability on the debtor. At the moment a bank credit card, both Access and Barclaycard, can be used without production of the card to obtain goods on mail order by just quoting the card number. This is so obviously open to abuse that we consider that no liability for such misuse should fall on the debtor; although under Clause 83 subsections (1) and (2) the debtor can still be liable for loss to the creditor of up to £30 if he loses the credit token, or for loss up to any amount if the token is misused by someone to whom the debtor gave it.

The Amendment would apply to cases in this broad area as well as to the narrow issue of cheques. It would also remove protection under the clause from the debtor where he had been at all careless, so that a small slip might make him liable for a very large amount. While this is the present legal position with regard to cheques, its extension across the whole range of consumer credit, where carelessness can be much less well defined, would be damaging to the consumer's interest. If the creditor issues means of obtaining credit such as credit cards or cheque books, we consider that he should himself take good care to ensure that they are issued only to responsible people who can use them responsibly.

So it is arguable that the banks' fears are excessive. This is because Clause 82(1) does not relieve a debtor of any liability for the use made of his credit facilities by another person who acts as his agent or who is to be treated as acting as his agent; that is to say, in some cases, the person misusing the cheque book could be regarded as the debtor's agent. It may be that the words underlined will cover many of the cases which worry the banks. However, if the banks were to specify the sort of cases which they fear may arise, where they feel that the debtor should be liable, we should be happy to consider to what extent this provision could reasonably be amended without the spirit of the Bill being contravened.

VISCOUNT AMORY

The noble Lord has given me a very fair reply. I must own that I have not considered the effects of my Amendment in the wider field to which the noble Lord has turned my attention. I will think over what he said. I think his offer to ask the banks to specify affairs in rather greater detail is a very fair one indeed, and in those circumstances I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 82 agreed to.

Clause 83 agreed to.

BARONESS LLEWELYN-DAVIES OF HASTOE

I beg to move that the House do now resume.

Moved accordingly and, on Question, Motion agreed to.

House resumed.