Lords Sitting of 6 May 1974

Preamble
The House met at half-past two of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.
Prayers—Read by the Lord Bishop of Lincoln.
The Earl of Cathcart—Took the Oath.
The Earl Howe—Took the Oath.
The Viscount Samuel—Affirmed.

GOVERNMENT STATEMENT
BARONESS LLEWELYN-DAVIES OF HASTOE: My Lords, with the leave of your Lordships my noble friend the Leader of the House will be making a Statement on the Counter-Inflation Act consent powers at a convenient moment after 3.30 p.m.

CONSUMER CREDIT BILL [H.L.]
2.35 p.m.
THE LORD PRIVY SEAL (LORD SHEPHERD): My Lords, I beg to move that the House do again resolve itself into Committee on the Bill. With permission, may I indicate to your Lordships that at an appropriate moment I shall propose for the convenience of the Committee that we postpone consideration of Part IX of the Bill—that is, Clauses 127 to 141 inclusive—until the end of the Committee stage to-morrow. This is a highly complex and legal Part of the Bill, and I understand that there are a number of points which it is wished should be considered. Because of this complexity, perhaps we might have discussions some time to-day. It might then meet the convenience of your Lordships to take Part IX to-morrow, after we have been able to identify quite clearly the various difficulties that may arise. I beg to move.
Moved, That the House do now again resolve itself into Committee.—(Lord Shepherd.)
VISCOUNT COLVILLE OF CULROSS: My Lords, that is a course which wholly
290
commends itself to me. I should think it would appeal to everybody else, too, because they would not then have to listen to me. If that is the course which the noble Lord would suggest, it has my blessing.
LORD HAILSHAM OF SAINT MARYLEBONE: My Lords, may I ask the noble Lord this question? As the noble Lord has said that Part IX is the legal Part of the Bill, and as I understood from what the noble and learned Lord the Lord Chancellor said last week that he has leave of absence, does that mean that in this House, in Committee, the legal Part of the Bill will have to be passed in toto without the presence of the Lord Chancellor?
LORD SHEPHERD: My Lords, the House did give permission to be absent to my noble and learned friend who sits on the Woolsack. Although certain parts of the Bill are legal, it is not the first occasion, I suspect, on which we have dealt with such Parts of a Bill without the Lord Chancellor being available. One of the reasons why I have suggested this course of action is in order that there should be discussion between the noble Viscount, Lord Colville, and the legal advisers within the Department, and then I would seek to speak on behalf of the Government on these matters to-morrow. Clearly, if the noble Viscount himself is not satisfied—or, for that matter, any other noble Lord—I will certainly see that my noble and learned friend is available when we take the Bill on Report. I do not think that we ought to hold up the progress of the Bill, but we should seek to identify the difficulties that may arise and then consider the course of action we should take.
On Question, Motion agreed to.
House in Committee accordingly.
[The EARL OF LISTOWEL in the Chair.]
Clause 84 [Duty on issue of new credit-tokens]:
LORD JACQUES: Amendment No. 74 is a drafting Amendment. It is needed to cover those cases where no executed agreement is required in the first place, and therefore no copy can be supplied. I beg to move.
Amendment moved—
Page 43, line 35, after ("agreement") insert ("(if any)").—(Lord Jacques.)
On Question, Amendment agreed to.
On Question, Whether Clause 84, as amended, shall stand part of the Bill?
LORD ABERDARE: May I raise a point on Clause 84? I apologise to the noble Lord, Lord Jacques, that I did not have much time to give him notice, but if he has had my note of about five minutes ago he may have realised that I wished to say something on this clause; but, of course, if he cannot answer me straightaway and would rather write to me on the matter I shall be quite content.
Subsection (1) of the clause reads:
"Whenever, in connection with a credit-token agreement, a credit-token (other than the first) is given by the creditor to the debtor, the creditor shall give the debtor a copy of the executed agreement and of any other document referred to in it".
This would mean that a credit card firm would have to include a further copy of the executed agreement every year when it sent out a renewal card. A firm such as Barclaycard has 2½ million cardholders, and it really would be impossible for them to prepare annually a photostat copy of each agreement to enclose with the renewal card. Naturally, in their case, and I am sure in other credit card cases, the whole process is fully automated, and to add an individual agreement on each occasion a renewal card is sent out would really be quite impossible. I am only asking what the Government's intentions are, and whether this is really what is required in the case of credit cards.
LORD JACQUES: This point has been the subject of discussions between the Department and the credit card companies. Once the Bill is law it will be the duty of credit card companies to have an agreement in writing; if not, their loans will be unenforceable against the debtor. The Department has had discussions with the credit card companies about the difficulties of documentation, and Clause 176 has in part been inserted in the Bill to allow a sufficient flexibility, so that no undue burden is put on the credit card companies. We consider that, subject to further consultations, we have gone as far as we can go.
LORD ABERDARE: I am grateful for that reply, and if indeed Clause 176 is interpreted in the right way it would be a matter of making regulations. If these regulations are to be made to assist the credit card companies, then I am content with the reply. I am very grateful.
Clause 84, as amended, agreed to.
Clause 85 [Death of debtor or hirer]:
2.44 p.m.
THE EARL OF LIMERICK THE EARL OF LIMERICK moved Amendment No. 75:
Page 44, line 2, after ("entitled") insert ("other than by operation of law")
The noble Earl said: This is a minor but not unimportant point arising from Section 75 of the Bills of Exchange Act 1882, which propounds that the duty and authority of a banker to pay a cheque drawn on him by his customer shall be determined either by countermand of payment or by notice of a customer's death. While I think I am right in saying that this point has never been taken right through the process of law to ensure certainty, nevertheless, by normal banking practice the bank/customer relationship would determine upon receipt of a notice of the customer's death, and if the account at that time is overdrawn the bank would look to the estate of the deceased for repayment in full.
The suggested Amendment to line 2 would do no more than enable the bank to continue existing practice. I am not 100 per cent. clear that the drafting is correct, but my purpose in moving this Amendment is to seek assurance by some means that the Bill is not intended to bring about any change in this practical and equitable arrangement. It is possible that this matter may be covered by subsection (5), so this Amendment is in the nature of a probing Amendment. I beg to move.
LORD JACQUES: It is necessary to distinguish between banking practice and the law; and much of what has been submitted to us has been banking practice rather than the law. We know of no law that should be excluded, but in general I would say that, provided one can be named, we shall be very pleased to consider it. I shall ensure that the point made by the noble Earl is taken into consideration and we will either

293
write to him or, alternatively, look into the possibility of putting down an Amendment at the Report stage.
THE EARL OF LIMERICK: I am grateful to the noble Lord, Lord Jacques, for what he has said. This obviously meets the point I have in mind and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
THE EARL OF LIMERICK THE EARL OF LIMERICK moved Amendment No. 76:
Page 44, line 22, leave out from ("life") to end of line 23.
The noble Earl said: This Amendment gives some concern to clearing bankers because it covers circumstances in which a borrower has taken out a policy specifically to cover a loan, but this apparently does not cover the more frequent circumstance where a customer wishes to avail himself of an existing policy to furnish security. I cannot see any reason for this distinction. Surely the same rules should apply whether a policy was in existence at the time the loan was sought or whether it was a case of the bank manager saying, "If you will take out a special policy for this purpose we shall be able to deal with your application." It is undesirable that customers should be under pressure in any way to take out new policies if they have existing ones which would serve equally well. Likewise, the bankers may find themselves prevented or in some way inhibited in accepting existing policies for the purposes of security. I think it would be in the interests both of the bank and the customer that it should be equally available to the customer to offer and to the bank to accept the security of an existing policy. I beg to move.
LORD JACQUES: The Bill, as at present before us, covers a policy to secure an agreement. The Amendment seeks to allow an existing policy to be used as a security. Personally, I have very great sympathy with the Amendment and have pleasure in saying that if it is withdrawn I will see that the proposal put forward is very fully examined.
THE EARL OF LIMERICK: I am most grateful to the noble Lord. Naturally, in the circumstances I have more than usual pleasure in seeking leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 85 agreed to.
Clause 86 agreed to.
Clause 87 [Contents and effect of default notice]:
2.50 p.m.
LORD ABERDARE LORD ABERDARE moved Amendment No. 77:
Page 45, line 24, after ("credit") insert ("or credit balance").
The noble Lord said: It may be convenient, if the noble Lord, Lord Mais, agrees, to discuss Amendments Nos. 77 and 77A together. In any event, perhaps I could put my point, which is a small one, regarding Clause 87, which deals with the consequences of issuing of default notices. In particular, where there is a breach of agreement by the debtor or hirer and a default notice has been issued, the debtor or hirer must be given an opportunity to remedy the breach before the creditor or owner enforces the agreement. This is a very sensible provision, but a point arises in relation to current accounts. It often happens that for convenience a customer has more than one current account at the same financial institution, and it is established banking law that if the need should arise the financial institution has the right to off-set the credit balances of one account against the debit balances of another.
The effect of Clause 87 is that if there is a breach of the terms of one current account there must be a pause after the issue of a default notice before the lender can take action. During that pause a borrower might withdraw the credit balances in other current accounts in order to frustrate the right of off-set. Clause 87(3) attempts to deal with this matter, and it allows the creditor to freeze other credit facilities. But it seems that there may be a loophole in the wording of this subsection, because although it plainly allows the creditor to prevent the customer drawing on other credit facilities, it is not clear that the creditor may prevent the customer withdrawing actual credit balances. That is the point of the Amendment. I beg to move.
LORD SHEPHERD: I thought my noble friend Lord Mais might respond to the invitation of the noble Lord, Lord

295
Aberdare. However, I agree with the noble Lord, Lord Aberdare, that although these two Amendments are not absolutely identical their intention is the same.
Clause 87(3) allows a creditor, immediately after the service of a default notice, to restrict the debtor's right to draw on credit, instead of waiting seven days as is necessary in the case of any other action against the debtor. This Amendment, which has been inspired by the banks, attempts to deal with a technicality which does not exist. The debtor may have several accounts, some in deficit and some in credit. In these circumstances, the banks wish to be able to prevent the debtor, whose position on one or more accounts is in deficit, and on one of which there has been a default, drawing further on accounts that are in credit. The Amendment would accordingly allow the creditor to prevent the debtor drawing on a credit balance in any of his accounts.
In our view, the Amendment is unnecessary. We are advised that the existing wording of the clause would allow a creditor to aggregate the debit and credit balances of a debtor who had more than one account and, if he was overall in deficit, to prevent him drawing any further credit. Moreover the Amendment goes too far. It would allow a creditor to prevent a debtor drawing further on his credit balances even though he was in overall credit; in effect, to freeze his assets. This would be wrong. The present wording meets the banks' point and allows them to cover themselves to the extent mentioned by the noble Lord, Lord Aberdare. If there are any further matters of drafting which the noble Lord wishes to draw to our attention, I shall be happy to consider them. It is the intention of the clause to meet the problem that the noble Lord has explained.
LORD ABERDARE: I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
LORD MAIS LORD MAIS moved Amendment No. 77A:
Page 45, line 25, at end insert ("nor does it prevent the creditor from exercising his right to amalgamate two or more accounts in the same right.")
The noble Lord said: I apologise if the noble Lord, Lord Shepherd, was waiting for me to take part earlier. I was waiting, full of hope that he might accept Amendment, No. 77, of the noble Lord, Lord Aberdare, in which case I should have been happy not to move Amendment No. 77A. The noble Lord, Lord Shepherd, overlooked one point, quite apart from the bank's position in the event of default by a debtor, or the bank's wishing to exercise its right of repayment on demand or the receipt by the bank of notice of an act of bankruptcy by the debtor. In the case of bankruptcy it is legally required that those accounts should be amalgamated. If that is so, there appears to be no logic in making an Amendment which does not place the banks in a different position from their position in the event of receiving notice of bankruptcy in connection with the customer concerned. This point must be tidied up and perhaps the noble Lord will assure us that it will be looked at in more detail. It is one law for the rich and another law for the poor at the moment. I beg to move.
LORD SHEPHERD: I shall not argue with the noble Lord, Lord Mais, about the law for the rich and the law for the poor. The point which the noble Lord has made is a new one to me. I will carefully look at it, but I still think that, at the end of the day, the consequences of the Amendment would be similar to that moved by the noble Lord, Lord Aberdare, and we would be reluctant to make any changes. In the light of what the noble Lord said, we will look at the point between now and the next stage.
LORD MAIS: I should like to thank the noble Lord very much for agreeing to look at this again. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
2.56 p.m.
LORD SHEPHERD LORD SHEPHERD moved Amendment No. 77B:
Page 45, line 28, at end insert ("but if the breach of that other provision is not duly remedied or compensation demanded under subsection (1) is not duly paid, or (where no requirement is made under subsection (1)) if the seven days mentioned in subsection (2) have elapsed, the creditor may treat the failure as a breach and section 86(1) shall not apply to it.")
The noble Lord said: I beg to move Amendment No. 77B. If I may I should also like to speak to Amendment No. 77C as these two Amendments go together. They make it clear that two default notices are not necessary in certain cases, but that one is sufficient. For example, an agreement may provide that if a debtor fails to pay an instalment then the whole amount shall become due and owing at once. It would not be right to require a creditor to have to serve one notice in respect of a failure to pay an instalment and then another notice in respect of failure to pay the whole amount due. These Amendments make it clear that one default notice is all that is needed in such a case, to warn the debtor that if he does not pay the instalment within seven days the whole amount will become due and that if this is not paid then, for example, security may be enforced against him. I beg to move.
On Question, Amendment agreed to.
LORD SHEPHERD: I beg to move Amendment No. 77C.
Amendment moved—
Page 45, line 32, leave out from ("(6)") to ("at") in line 33, and insert ("A default notice making a requirement under subsection (1) may include a provision for the taking of action such as is mentioned in section 86(1)").—(Lord Shepherd.)
On Question, Amendment agreed to.
Clause 87, as amended, agreed to.
Clauses 88 to 91 agreed to.
Clause 92 [Recovery of possession of goods or land]:
LORD SHEPHERD LORD SHEPHERD moved Amendment No. 77D:
Page 47, line 24, leave out ("agreement for the sale of") and insert ("conditional sale agreement relating to").
The noble Lord said: This Amendment is a drafting Amendment. The Bill applies to the conditional sale of land (popularly known as the hire-purchase of land) and Clause 92(2) provides that when a debtor is in breach of such an agreement the creditor cannot recover possession except on an order of the court. We consider that it is not entirely clear in this clause that "a regulated agreement for the sale of land" relates to a "conditional sale", and this Amendment clarifies the position.
On Question, Amendment agreed to.
Clause 92, as amended, agreed to.
Clauses 93 to 97 agreed to.
Clause 98 [Duty to give information]:
3.0 p.m.
LORD SEEBOHM LORD SEEBOHM moved Amendment No. 77E:
Page 49, line 8, after ("debtor") insert ("and payment of a fee of one new penny").
The noble Lord said: This is not a very important point, but it is a statutory statement that is being issued and this prescribed fee, however small, will call the attention of those issuing it to the fact that it is a statutory statement and not just a note or informal document. I beg to move.
LORD LEATHERLAND: I should like to ask briefly whether it is really necessary for the adjective "new" to be placed in front of the word "penny". The penny, under the present system of coinage, is a penny. It is neither a new penny nor an old penny. I remember that in your Lordships' House about eighteen months ago I drew attention to the fact that there was some confusion on the part of the public about the nomenclature of the penny itself, and that when people saw something marked "five pence" they thought in terms of five old pence whereas they should be thinking in terms of one shilling. I also drew attention to what I thought was the rather silly custom of using the letter "p" to denote a penny. A penny is a penny. Do we really want the word "new"?
LORD SHEPHERD: I am most grateful to my noble friend for a touch of light relief. I confirm—I apologise to the noble Lord, Lord Airedale, who presumably wishes to speak.
LORD AIREDALE: I sympathise with what the noble Lord, Lord Leatherland, said about using the odious expression "p" when one means a penny. But I do not think he was accurate in the first part of what he said. I have in my hand one new penny, and it is not inscribed "1 penny"; it is inscribed "1 new penny".
LORD HAWKE: I hope that this Amendment will not go through, because the idea of having to go to a post office and buy a one penny stamp, which is of not much use for anything else, in order

299
to send it along to the bank or someone else, ruining the gum in the process, is difficult to understand. What the bank is going to do with it when it gets it the other end, I do not know. This is pure bureaucratic nonsense.
LORD SHEPHERD: I tried to intervene on two occasions. Again I congratulate my noble friend Lord Leatherland on his light relief. I agree with him that is quite wrong to use the phrase, "one new penny". There is only one penny now in our currency. The noble Lord, Lord Seebohm, raised a question of doubt as to the position of the banks in the issuing of a statement that is binding. I wonder whether he would be agreeable to withdrawing his Amendment and considering at a later stage Government Amendment No. 101, which has been introduced in anticipation of the doubts that were expressed? The later Amendment will give an opportunity for the points again to be made. If we were to let this Amendment go by, and then deal with the issue on Amendment No. 101, I think the noble Lord would find the fears he has expressed will have been met.
LORD SEEBOHM: I am happy with that explanation and beg leave to withdraw the Amendment.
LORD ABERDARE: Before the noble Lord withdraws, may I draw attention to one small point? I know there are some quite fundamental disagreements in this Government, but does the noble Lord, Lord Shepherd, realise that the answer he has given about a new penny is exactly the opposite to an answer I was given by the noble Lord, Lord Jacques, last Thursday when I made this same suggestion, that we should no longer speak about a "new penny"? I was told, yes, it was absolutely vital that we should go on speaking about a "new penny".
LORD SHEPHERD: Whether that is so or not, I was replying on the basis of my general understanding that there was only one form of currency in this country. But, if I am wrong, I have no doubt that my noble friend Lord Jacques will take me very severely to task later this evening.
LORD DERWENT: I believe that the noble Lord the Leader of the House is wrong. I believe I am right in saying there is now no such thing as a penny; there is only a new penny. That is why it is written on the coinage.
LORD SHEPHERD: If this is the case, I am clearly in the wrong and I shall make my most abject apologies to the noble Lord on a more suitable occasion, in a more appropriate place.
Amendment, by leave, withdrawn.
LORD SHEPHERD: I beg to move Amendment No. 78. Clause 98(1) requires the creditor under a regulated consumer credit agreement to give the debtor on request a statement of his indebtedness. This Amendment limits the burden of providing these statements to what is practical. It takes account of the possibility that information may be held up in distant branches of the same firm, for example, when the creditor is preparing the statement.
Amendment moved—
Page 49, line 9, after ("indicating") insert ("according to the information to which it is practicable for him to refer").—(Lord Shepherd.)
On Question, Amendment agreed to.
Clause 98, as amended, agreed to.
Clauses 99 and 100 agreed to.
Clause 101 [Right to terminate hire agreement]:
3.6 p.m.
LORD SHEPHERD LORD SHEPHERD moved Amendment No. 79:
Page 51, leave out lines 39 to 41.
The noble Lord said: I beg to move Amendment No. 79. The Bill as originally published by the previous Administration did not include this provision. Some of the Government Back-Benchers of the day, particularly Mrs. Oppenheim, at we believe the instigation of the Finance Houses Association, argued that an 18-months termination right provided in this clause would cause large hiring transactions to be within the Bill that would not be there otherwise. Their argument is a very involved one and I can save the Committee's time by not going through it. But we have now considered this point. We think that it is not necessary, because if an agreement is outside the scope of the Bill the

301
18-months termination right will not apply to it and therefore cannot bring the agreement within the scope of the Bill. If, on the other hand, there is a term in the agreement providing for early termination under which the total payments do not exceed £5,000, it is that term in the agreement, and not the statutory 18-months termination right, which will then apply to the agreement. That brings the agreement within the scope of the Bill. I beg to move.
LORD ABERDARE: I have looked at this point and should like to study what the noble Lord has said. There were some worries about leaving out this subsection, but from what I understood him to say I think the problem is overcome and I shall not oppose the Amendment.
LORD SHEPHERD: I can certainly help the noble Lord and give him on paper some of the examples. From the examples the noble Lord will understand the difficulty and how this clause has sought to meet it.
On Question, Amendment agreed to.
Clause 101, as amended, agreed to.
Clause 102 agreed to.
Clause 103 [Termination statements]:
LORD JACQUES: I beg to move Amendment No. 80. This is a drafting Amendment to obtain uniformity throughout the clause.
Amendment moved—
Page 52, line 42, leave out ("creditor or owner") and insert ("trader").—(Lord Jacques.
On Question, Amendment agreed to.
Clause 103, as amended, agreed to.
Clause 104 agreed to.
[Clause 105 [Form and content of securities]:
LORD SEEBOHM LORD SEEBOHM moved Amendment No. 80A:
Page 53, line 15, leave out ("provided") and insert ("available to a creditor").
The noble Lord said: I beg to move Amendment No. 80A. The Amendment is to preserve the present practice of a continuing security. Where a customer borrows and pledges a security, and then repays the borrowing, if he borrows again
302
he can continue the same security and need not provide a new and fresh security or fresh charge forms. This is purely a matter of convenience to the customer.
LORD SHEPHERD: The noble Lord has moved Amendment No. 80A, but, provided he agrees, we might speak also to Nos. 81A, 81B, 81C, 90B, 90C, 90D, 90E, 90F, 90G and 91B. If we were to take these Amendments together it would save the time of the Committee. These Amendments appear to be inspired by the doubts of the clearing banks who are concerned to preserve their present informal arrangement for the deposit of securities. I am advised that the Amendments which the noble Lord has moved do not appear to make any difference to the effect of these clauses since, if a security is "available" to a creditor, it must have been "provided". The Amendment does not alter the essential provision in Clause 105(1) that a security instrument must be in writing. If anything, this is a provision which would hamper the informal provision of security. However, we have taken note of some of the concern that has been expressed and, at a later stage, we intend to move Amendments to Clause 105 to meet this point.
LORD SEEBOHM: I am very grateful and beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
3.11 p.m.
LORD ABERDARE LORD ABERDARE moved Amendment No. 81:
Page 53, line 34, leave out ("it is") and: insert ("the principal agreement has been").
The noble Lord said: I beg to move Amendment No. 81 and propose to speak also to Amendment No. 82. Clause 105 provides that any surety shall receive both a copy of the principal agreement and a copy of the security instrument. We have no objection to this at all but are only concerned about the timing. Subsections (4)(b) and (4)(c) require a copy of the security instrument and a copy of the principal agreement to be given to the surety within seven days after the instrument has been executed. However, the instrument and the agreement are not necessarily executed at the same time and these subsections may require the impossible.
Subsection (7) plainly envisages that the execution of the two documents may not be simultaneous. The Amendment suggests that it would be more practical if subsection (4)(b) required a copy of the security instrument to be sent to the surety within seven days after the principal agreement has been executed. Amendment No. 82 suggests that subsection (7), which already contains a reference to subsection (4)(c), could be improved by containing also a reference to subsection (4)(b). I beg to move.
LORD SHEPHERD: I have a fairly long brief that I could use to answer the noble Lord. It is a brief which is based upon various examples and qualifications of clauses. I think that there is a possibility of doubt here, and I would only use the word "possibility"; I do not think that it is very much more than that. We have looked at this matter with great care, and we believe that the fears that have been expressed are, in fact, unfounded. I wonder whether the noble Lord would agree, in withdrawing his Amendment, that we should ask the industry whether they would wish to write and set out quite clearly on paper their real fears. We will then see whether we can meet them. I do this for the convenience of the House. I have no doubt at all that I can persuade the noble Lord of the merits of my brief and that he should withdraw the Amendment. However, at the end of the day it is necessary to satisfy the industry. I think, if the noble Lord will agree, that we will ask the industry to write to us and we will examine their points and will seek to meet them. But, as I say, I think that their fears are unfounded.
LORD ABERDARE: I shall be very grateful if that can be done. I shall be more than thankful not to have to argue this particular Amendment. I beg leave to withdraw.
Amendment, by leave, withdrawn.
Clause 105 agreed to.
Clause 106 [Default notices]:
LORD JACQUES LORD JACQUES moved to leave out the clause. The noble Lord said: With the permission of the Committee, I speak to Clauses 106 and 107, and Amendment No. 90A. This is a matter of drafting.
304
We seek to delete Clauses 106 and 107 and to replace them with a new clause which repeats precisely the same wording. Our object is to improve the order and to reduce the number of clauses. I beg to move.
LORD ABERDARE: I should like to say something about the new clause. Should I say it at this point, or when the new clause is moved into the Bill? Perhaps I should say now what I have to say, and then the noble Lord can consider it. I should like to comment on the new clause, Amendment No. 90A. It seems to me reasonable that failure to serve a copy of a default notice on a surety should affect the security that has been given by that surety, but surely it is not reasonable that it should affect any security given by the debtor himself. It seems that that might happen. I should be grateful if the noble Lord could have a look at that point in relation to the new clause. It arises under the new clause just as under the old one.
On Question, Amendment agreed to.
Clause 107 [Failure to serve default notice]:
LORD JACQUES LORD JACQUES moved to leave out the clause.
On Question, Amendment agreed to.
Clause 108 [Duty to give information to surety under fixed-sum credit agreement]:
LORD SHEPHERD LORD SHEPHERD moved Amendment No. 82A:
page 54, line 33, leave out ("or hirer").
The noble Lord said: This Amendment corrects a drafting error. Clause 108 refers to credit agreements and the reference to a "hirer" is therefore inappropriate and unnecessary. I beg to move.
On Question, Amendment agreed to.
LORD SHEPHERD LORD SHEPHERD moved Amendment No. 83:
Page 54, line 38, leave out second ("of") and insert ("showing, according to the information to which it is practicable for him to refer").
The noble Lord said: With this Amendment No. 83 I shall speak to Amendments Nos. 85 and 88. Clauses 108, 109 and 110 impose on the creditor under a fixed-sum credit agreement, the

305
creditor under a running-account credit agreement, and the owner, under a consumer hire agreement, the duty to give information on a surety where applicable, including a statement of the state of the account in the case of credit agreements or of the sums payable in the case of hire agreements. These Amendments limit the burden of providing these statements to what is applicable, and take account of the possibility that information may be held up—such as in distant branches of the same firm—when the creditor or owner is preparing a statement. The Amendment to Clause 109 replaces the existing words used to cover this potential difficulty by the wording now being used throughout the Bill. I beg to move.
LORD JACQUES: Amendment No. 83A is consequential on Amendment No. 64A. I beg to move.
Amendment moved—
Page 55, line 5, at end insert—
"(1A) If the creditor possesses insufficient information to enable him to ascertain the amounts and dates mentioned in subsection (1)(c)(iii), he shall be taken to comply with that subparagraph if his statement under subsection (1)(c) gives the basis on which, under the regulated agreement, they would fall to be ascertained."—(Lord Jacques.)
On Question, Amendment agreed to.
LORD JACQUES LORD JACQUES moved Amendment No. 84:
Page 55, line 13, leave out ("this section") and insert ("subsection (1)").
The noble Lord said: This is purely a drafting Amendment. It is desirable because the relevant requirement for the creditor to supply the surety with information under this clause is contained in subsection (1). I beg to move.
LORD HAWKE: I cannot quite see the raison d'etre of the fee of I5p for the furnishing of very considerable documentation. I can see the argument for furnishing it for nothing and I can see the argument for furnishing it at something like cost price. But why 15p, which is neither one nor the other?
LORD SHEPHERD: That, coming from the noble Lord, Lord Hawke, with his long connection with cricket is not only a fast one but also has a slightly googly aspect. I will look into it and will be in touch with the noble Lord.
clause 108, as amended, agreed to.
Clause 109 [Duty to give information to surety under running-account credit agreement]:
3.20 p.m.
LORD JACQUES: I beg to move Amendment No. 84A. This Amendment corrects a drafting error. Clause 109 refers to credit agreements; the reference to "hirers" is therefore inappropriate and unnecessary.
Amendment moved—
Page 55, line 25, leave out ("hirer")— (Lord Jacques.)
On Question, Amendment agreed to.
LORD SHEPHERD: I beg to move Amendment No. 85 which I spoke to when moving Amendment No. 83.
Amendment moved—
Page 55, line 30, leave out from ("according") to end of line 31 and insert ("to the information to which it is practicable for him to refer")—(Lord Shepherd.)
On Question, Amendment agreed to.
LORD JACQUES: I beg to move Amendment No. 86 which is drafting. It is desirable because the relevant requirement (for the credit to supply the surety with information) under this clause is, in fact, contained in subsection (1).
Amendment moved—
Page 56, line 5, leave out ("this section") and insert ("sub-section (1)")—(Lord Jacques.)
On Question, Amendment agreed to.
LORD SEEBOHM LORD SEEBOHM had given Notice of his intention to move Amendment No. 86A:
Page 56, line 11, at end insert—
"(6) Where the creditor carries on business at mole 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: Amendment No. 85 moved by the noble Lord, Lord Shepherd, covers the subject which we had in mind for this Amendment. Therefore, I do not desire to move it.
Clause 109, as amended, agreed to.
Clause 110 [Duty to give information to surety under consumer hire agreement]:
LORD JACQUES: I beg to move Amendment No. 86B. This Amendment corrects a drafting error. Clause 110

307
refers to "hire agreements"; the reference to "debtors" is therefore inappropriate and unnecessary.
Amendment moved—
Page 56, line 16, leave out ("debtor or")—(Lord Jacques.)
On Question, Amendment agreed to.
LORD JACQUES LORD JACQUES moved Amendment No. 87:
Page 56, line 18, leave out ("(if any)").
The noble Lord said: This Amendment corrects a small drafting error. This clause requires the owner under a regulated consumer hire agreement to give the surety information on request, including a copy of the executed agreement, if any. The words, "if any" are not required in this context because under the Bill there are no exceptions to the rule that a regulated consumer hire agreement must always be in writing. Therefore, there will always be an executed agreement to copy. I beg to move.
On Question, Amendment agreed to.
LORD SHEPHERD: I spoke to this Amendment when moving Amendment No. 83. I beg to move Amendment No. 88.
Amendment moved—
Page 56, line 21, leave out second ("of") and insert ("showing, according to the information to which it is practicable for him to refer").—(Lord Shepherd.)
On Question, Amendment agreed to.
LORD JACQUES: Amendment No. 89 is a purely drafting Amendment. It is desirable because the relevant requirement (for the owner to give the surety information) under this clause is in fact contained in subsection (1). I beg to move.
Amendment moved—
Page 56, line 33, leave out ("this section") and insert ("subsection (1)").—(Lord Jacques.)
On Question, Amendment agreed to.
Clause 110, as amended, agreed to.
Clause 111 [Duty to give information to debtor or hirer]:
LORD JACQUES: This again is purely a drafting Amendment. It is desirable because the relevant requirement (for the creditor-owner to give the debtor or hirer information) under this clause is in fact contained in subsection (1). I beg to move.
Amendment moved—
Page 57, line 15, leave out ("this section") and insert ("subsection (1)").—(Lord Jacques.)
On Question, Amendment agreed to.
Clause 111, as amended, agreed to.
LORD JACQUES: Amendment No. 90A is consequential. I beg to move.
Amendment moved—
After Clause 111 insert the following new clause:
Default notices
.—(1) When a default notice is served on a debtor or hirer, a copy of the notice shall be served by the creditor or owner on any surety (if a different person from the debtor or hirer).
(2) If the creditor or owner fails to comply with subsection (1), the security is enforceable on an order of the court only.
(3) In determining whether or not to make an order under subsection (2) the court shall consider, in addition to any other relevant factors,—

(a) how far, if at all, the surety has been prejudiced by the failure to comply with subsection (1); and

(b) the degree of culpability for the default.—(Lord Jacques.)

LORD ABERDARE: This Amendment is consequential on the leaving out of the other two clauses on which I raised a point. I hope that that paint has been taken and perhaps somebody will kindly look into it and let me know the answer.
LORD SHEPHERD: Certainly.
On Question, Amendment agreed to.
Clause 112 agreed to.
Clause 113 [Act not to be evaded by use of security]:
LORD SHEPHERD LORD SHEPHERD moved Amendment No. 91:
Page 58, line 31, leave out ("age and")
The noble Lord said: I beg to move Amendment No. 91 and I should like at the same time to speak to Amendment No. 91A standing M the name of the noble Lords, Lord Seebohm and Lord Helsby. Clause 113(6) enables creditors to lend to minors and unincorporated bodies (such as sports and social clubs) on the indemnity of a third party without risking infringing the prohibition in Clause 113(1), against benefiting from the enforcement of a security to a greater extent than if the security had not been provided. Minors and unincorporated

309
bodies that are prohibited by their constitutions from borrowing would not otherwise be able to borrow. But the present words, "of full age and capacity" in line 31 are misleading because they suggest that the subsection applies only to individual men and women and not also to unincorporated bodies. The Amendment removes this suggestion. "Full age" is not in fact required because it is included in "full capacity". I beg to move.
On Question, Amendment agreed to.
Clause 113, as amended, agreed to.
Clause 114 [Pawn-receipts]:
3.28 p.m.
LORD MAIS LORD MAIS moved Amendment No. 91C:
Page 59, line 5, leave out from ("title") to end of line 6 and insert—
"(b) a pledge of goods to secure a debtor-creditor agreement conferring on the debtor the right to overdraw on a current account, or
(c) a non-commercial agreement."
The noble Lord said: Clauses 114 to 122 of the Bill deal with pledges but Clause 114(3)(a) provides that these clauses do not apply to a pledge of documents of title. In Scotland, however, it is customary for a bank to take security directly over goods rather than documents of title and it is considered that the exemption does not go far enough as no allowance is made for the situation where, for example—and I am sure I shall have sympathetic consideration here—whisky in the custody of a neutral warehouse keeper is pledged as security simply by transferring it into the name of the bank. The suggested Amendment is intended to exempt also such securities from the provision of Clauses 114 to 122.
I would draw your Lordships' attention to the definition of "goods" in Clause 184, which is that it has the meaning given to it by Section 62(1) of the Sale of Goods Act 1893; namely, that goods include, in Scotland, all corporeal movables except money. I beg to move.
LORD SHEPHERD: As the noble Lord, Lord Mais, has said, Clause 114(3) exempts pledges of documents of title (for example, a bill of lading or other documents representing goods), and noncommercial agreements from the requirements
310
under this clause and others relating to the taking of pledges as security for credit. By inserting new paragraph (b) the Amendment seeks to extend this exemption to pledges of goods securing overdrafts on current account. The argument for exempting pledges of goods to secure an overdraft appears to be that where an overdraft is exempted from the documentation provisions of the Bill (under Clause 74(3)) it is also exempted from the security documentation provisions (under Clause 105(5)), and it therefore seems anomalous to require the provisions governing pawn receipts to apply to pledges of goods to secure such an overdraft.
We have tried to meet the proper demands of the banks, but there is a limit to which we can go without destroying the basic philosophy of the Bill that there should be no exemptions on an institutional basis. Furthermore, each exemption must be considered in the light of the complications it will cause in the structure of the Bill. We do not think we can accept this Amendment. It is not a point which the banks have mentioned to the Department as causing difficulty and we can see no reason why, if a bank is to take pledges, it cannot observe the minimum rules laid down in the Bill for dealing with the pledge. Surely the banks do not mind observing what I think are relatively simple rules. The giving of a receipt for the pledge of goods and the observance of rules about its return and sale on default should not be onerous and could hardly be said to damage to any significant degree the informal nature of exempted overdraft arrangements.
The noble Lord, Lord Mais, has placed a new interpretation on the clause. I will certainly look at his Amendment but I thought I would explain to him in some detail the reason why we would find the Amendment itself unacceptable. I shall certainly look at this and will be in touch with him.
LORD MAIS: I thank the noble Lord for his answer. It is not so much a question of asking to ease the banks' position but rather to ease the traders' position because it is established custom. I am grateful to the noble Lord for his assurance, in the light of which I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 114 shall stand part of the Bill?
LORD HAWKE: I am not quite happy about the drafting of this clause, though I may be barking up the wrong tree. First of all, subsection (2) reads—
"A person who takes any article in pawn from an individual whom he knows to be, or who appears to be and is, a minor commits an offence."
I should have thought that either those words, "or who appears to be" should be deleted, or else the sentence should read "or" instead of "and". Perhaps the noble Lord will look at that.
Another point about which I am not quite clear is whether subsection (3) provides an escape for a minor pledging an article if it is a pledge of documents of title or a non-commercial agreement. I cannot quite visualise what form of agreement or document to title a minor might pledge, but I suppose that father's pawn ticket for something else might be pledge-able by little Willie at another pawn shop. Perhaps the noble Lord would look into that, too.
LORD SHEPHERD: In the light of my experience about new pennies and old pennies I will not respond to the noble Lord's first question but will look into it and communicate with him. In regard to his comment on subsection (3) I understand it has been placed there because we do not wish to inhibit the taking of pledges in transactions between friends. I think the object of that subsection is to give that degree of flexibility.
Clause 114 agreed to.
Clauses 115 to 122 agreed to.
LORD SHEPHERD: I beg to move that the House do now resume.
Moved accordingly and, on Question, Motion agreed to.
House resumed.

COUNTER-INFLATION ACT: CONSENT POWERS
3.37 p.m.
LORD SHEPHERD: My Lords, I will with permission repeat a Statement which has been made in another place by my right honourable friend the Secretary of State for Employment about the use of his consent powers. The Statement is as follows:
"We want to see a smooth transition from statutory controls to voluntary methods, using the limited powers of consent available under existing legislation to ease the most exceptional difficulties. An essential part of that transition is that those who have made settlements on the basis of the present arrangements should stick to them and others who have yet to settle in this pay round should do so at much the same level as those who have. In this we have received the full cooperation of the T.U.C. who have honoured their pledge not to press any special case beyond the miners and who have issued guidance to member unions which is fully in accord with the Government's approach. And this approach, I must emphasise covers the vast majority of people affected.
"However, it is borne in on me daily how many difficulties are created by the present controls, and I have to make clear that I have no power to issue a consent except where the circumstances are truly exceptional. Nevertheless, I am anxious to do my utmost to relieve grievances and inefficiencies wherever this can be justified in accordance with the legislation; so I have considered carefully the many representations made to my Department.
"Most cases inevitably have to be rejected, but I have, after due consultation with the Pay Board, intervened in the case of Glasgow firemen and Hull freezer trawlers where the conditions created were exceptional. I have one or two other cases of this particular nature also under consideration and, as my right honourable friend has indicated, in reply to Questions to-day, I would be prepared to intervene as necessary in the case of the Government scientists in the light of the recent Pay Board report on the determination of their pay.

313
"As my right honourable friends the Secretaries of State for Scotland, Social Services and Education are announcing to-day, the Government wish to advance their social policy in two areas; education and training for nurses and improved staffing for schools in stress. In order to carry through the new pattern of education and training for nurses in line with the Briggs Report we have decided to implement immediately certain preparatory measures which have pay implications and the Government also propose that the present arrangements for additional pay for teachers in schools in areas of social deprivation should be extended. In addition I have been convinced that there are some minor aspects of Post Office operations with pay implications which have a strong case for consideration for exceptional treatment and I am in consultation with the Post Office management and unions, although I must stress at once that this is not a proposal for meeting the main claim of postal workers for a special review. In all these cases I believe that the circumstances are of an exceptional character and, if the outcome of the negotiations related to the implementation of these policies, leads to improvements in pay and conditions out of line with the current controls, I shall be prepared to take the necessary steps, after consultation with the Pay Board, to enable them to be brought into effect.
"I am still considering the extremely strong case put to me last week by London Transport and the various unions involved. This raises urgent questions in the light of the necessity to sustain the public transport system in the Capital city. I am also conscious of the more general problem of the London situation and that many unions are anxious to open negotiations on this question. On this I can assure the House that the Pay Board are fully aware of the urgency which attaches to their awaited report on London weighting.
"Many other cases have been brought to my attention, and those who have presented them naturally feel that they too have good grounds for special treatment. But I have had to say 'no' to a number of representations from those who have asked
314
for a full-scale review—and this includes the teachers and the postmen—because I have not been able to say that these are truly exceptional circumstances and general reviews in each case would run the risk of reopening the whole pay round. Meantime, I have tried to exercise the extremely limited power as fairly as I possibly can."
My Lords, that is the end of the Statement.
3.43 p.m.
THE EARL OF GOWRIE: My Lords, on behalf of my noble friends, I should like to thank the noble Lord the Leader of the House for repeating the Statement of his right honourable friend. It is a long Statement, and we shall need to study it with the greatest care, since control of wage claims—whether voluntary or statutory, within the Parliamentary domain or established by the trade unions themselves—is surely critical to the ability of this country to contain inflation and so preserve our social institutions and relations at what I think we should all agree is their still unparalleled and high level.
My Lords, it is a little difficult for us on this side of the House to attend to the Statement without a wry smile of irony, particularly at the reference to the Pay Board and the importance of its decisions on London weighting. The Secretary of State, as recounted by the noble Lord, Lord Shepherd, has given us a long list of exceptional, or possibly exceptional, or potentially exceptional cases which may make pleas to his powers of consent. The noble Lord even made use of the rather give-away tautology "very exceptional"—or was it "truly exceptional"? It is the essence of cases in this area of life to be exceptional, and that is why I believe the Government have been fortunate in being able to try to forge their social contract against the background of a continuing and coherent counter-inflation policy. This policy is framed by law, and has a very considerable overall record of success behind it. We understand the desire of the Government to achieve a voluntary policy, and we share their feeling of the need for a smooth transition to that policy.
I would just ask the noble Lord two general questions. First, is he convinced that the great trades unions and their

315
leaders are aware of the distinctions that must exist between free collective bargaining and voluntary wage restraint? Is he certain that they are sure that a framework of law may not in fact be helpful here? Secondly, will he make representations to his right honourable friend that the views and needs of the C.B.I. are sought and taken into account during this so important transitional period, a transitional period that surely it is in the interests of the Government to continue, since they must be most sharply aware of what settlements under Stage 3 are doing for the present industrial climate in this country?
LORD SHEPHERD: My Lords, if this Statement did not come in the middle of a Committee stage, I should be very happy to debate with the noble Earl, Lord Gowrie, the merits of voluntary policy and the policy of the last Administration. The noble Earl said, "with a wry smile". Of course, this Government have to operate within the existing Statutes, and that imposes very severe limitations upon the Secretary of State and the Government as to the degree of flexibility by which we can meet the various problems which are bound to arise as we move from a compulsory, statutory pay policy to a voluntary one, which I think most Members of your Lordships' House would want to see.
My Lords, with regard to my confidence in my trades union friends, I think already they have given an indication by their actions not only of their awareness of the national need and national crisis, but of what they can do and what they intend to do again within the voluntary arrangements that exist between the various unions and the T U.C. We on this side of the House have always felt that we needed co-operation. Co-operation needs good will and good faith. I can only say to the noble Earl—and I hope he shares this view with me—that at this moment in time we need co-operation, we need consent; we need confidence. So far as Her Majesty's Government are concerned to-day, we have confidence that the trades union leaders will "deliver the goods", if I may use that phrase, in reference to the question of pay and pay negotiations.
My Lords, with regard to consultation with the C.B.I., I have no reason to
316
believe that consultation between the Government, the Trades Union Congress and the C.B.I. is any less than what it was under the previous Administration. Quite clearly, if it is a question of confidence and consent, one must have the confidence and consent of both sides of industry.
LORD ALPORT: My Lords, may I ask whether the subject of the level of student grants is among the cases which, according to the Statement, are under consideration at the present moment? If so, may we know when a decision will be made?
LORD SHEPHERD: My Lords, no doubt that question is under consideration by the Government as a whole, but to the best of my knowledge it does not come within the consent powers under the counter-inflation legislation which we are now discussing in this Statement.
LORD LEATHERLAND: My Lords, while thanking the noble Lord the Leader of the House for this welcome and, if I may say so, courageous Statement, may I ask him whether, in view of the last Government's long delay in dealing with the pay of the Armed Services, he can give us any indication as to when the pay of these long-suffering and deserving men and women will be announced?
LORD SHEPHERD: My Lords, I am grateful to my noble friend, Lord Leatherland. I did look at Hansard of last week when this matter was raised, and I thought some of the comments were most unfair. The question of pay and conditions of the Armed Services comes under the Armed Forces Review Board. That Board is at the moment actively considering recommendations to be made to the Secretary of State for Defence. I hope that a report will be in the hands of my right honourable friend very shortly. I cannot anticipate what will be in that report, but clearly the present Government must be deeply conscious of the pressures that are upon our Servicemen, in Northern Ireland in particular. But, of course, the question of consent is for the Secretary of State for Defence. If I may say so, under Stages 1 and 2 the power of consent to go beyond has al-always been available to previous Secretaries of State, but to the best of my knowledge on no occasion has the noble Lord, Lord Carrington, as Secretary of State sought to exercise that consent in

317
respect of settlements beyond what was required by Stages 1 and 2.
LORD ROBBINS: My Lords, the noble Lord, in his Statement, used the words "deliver the goods" in regard to pay policy. I wonder whether, without any malicious intent at all, I could ask him to elucidate that phrase a little further. Does he mean that the ratio of the increase of earnings is going to diminish in relation to the increase of national product, or has he some other conception in mind?
LORD SHEPHERD: My Lords, the words "deliver the goods" was perhaps an unfortunate phrase. What I had in mind was the social compact between what was then the Labour Party in Opposition and the trade unions, and the social compact between Her Majesty's Government and the T.U.C.; it is a recognition by both sides, and particularly by the trade unions, that at the end of the day, if our people are to have a rising standard of living, it means the containment of inflation and recognising the consequences of wage increases on inflation. It is only in this way that the real value of incomes rises. That is what I had in mind. Perhaps I should not have used that phrase, but should have reminded the House of a more favoured phrase, "the social compact".

CONSUMER CREDIT BILL [H.L.]
3.52 p.m.
Committee stage resumed.
Clause 123 [Restrictions on taking and negotiating instruments]:
On Question, Whether Clause 123 shall stand part of the Bill?
LORD ABERDARE: May I raise one point on Clause 123, which prohibits the use of negotiable instruments in connection with regulated agreements. It reverts really to some remarks I made way back on Clause 8, about the effects on matters where one or other party was from overseas. What I am worried about here is the possible effect on bills of exchange. The noble Lord very kindly undertook to look at these matters in Clause 8, and it may be that this point will also be covered under the same review of matters affecting overseas business. But
318
just to mention the point, it is customary and convenient for international trade to be financed by bills of exchange, and we feel that unless this clause is amended there could possibly be an adverse effect on exports. It is quite frequent, and certainly to my knowledge there have been no complaints or evidence of abuse, for overseas buyers of British equipment to obtain credit by accepting bills of exchange, either one bill or a series of bills. This clause would appear to prevent a United Kingdom finance house drawing a bill or bills where the acceptor outside the United Kingdom was not a body corporate. This is our worry. It may well be, as I say, that the matter is already being reviewed by Her Majesty's Government in connection with the points we raised on Clause 8, but I thought it worth mentioning at this point.
LORD SHEPHERD: So far as the Government are concerned, we do not wish this Bill to hinder in any way the export trade. The Department is now looking very closely at the points raised by the Finance Houses Association and also by noble Lords opposite at an earlier stage. If, after consultation, it appears that there is any difficulty in this area, an appropriate Amendment will be introduced at a later stage.
Clause 123 agreed to.
Clauses 124 and 125 agreed to.
Clause 126 [Enforcement of land mortgages]:
3.54 p.m.
LORD ABERDARE LORD ABERDARE moved Amendment No. 92:
Page 63, line 25, after ("(1)") insert ("the court may direct that")
The noble Lord said: Clause 126 provides that if an application for the enforcement of security, where that security is a mortgage on land, is dismissed by the court then the creditor shall lose his security. This, we feel is draconian. If one looks at Clause 113, which is brought into play when an application is dismissed under Clause 126, we see that Clause 113 is intended to apply in cases where there has been some impropriety in the making of the agreement, or where the agreement has been cancelled, or where the creditor has acted improperly. Certainly it is right in such cases that

319
the creditor should surrender any security. But in Clause 126 there is no suggestion of impropriety. An application might be dismissed on purely technical grounds without prejudice to a future application. In other cases covered by Clause 113 the agreement is at an end, but under Clause 126 the agreement continues to exist and the creditor is still owed money, only he has lost his security. He may well not have made the advance if he had known that he might lose his security at the very moment when he needs it. I beg to move.
LORD SHEPHERD: The Amendment seeks to give the court discretion as to what should happen when it has dismissed an application for an order to enforce a land mortgage securing a regulated agreement, for example, a second mortgage. At present Clause 126(2) provides that when such an application is dismissed the provisions of Clause 113(3) shall apply; that is, the creditor shall lose his security. I understand that the Finance Houses Association have inspired this Amendment, considering the present provision to be excessively harsh in cases where an application is dismissed on purely technical grounds without prejudice to a future application. The Amendment accordingly makes the provision permissive and not mandatory.
We are advised that the effect of the clause as drafted would not be as the Finance Houses Association fear, and that the creditor would only lose his security under this clause where the court determined that the agreement had been improperly executed or was extortionate under the provisions of Clauses 136 to 139. In these cases we consider it right that the security should be lost. However, we are considering the whole subject of judicial control with a view to making extensive amendments to Part IX of the Bill, and we would be prepared to consider any further case which may be put up concerning any unintended effect that Clause 126(2) might have.
LORD ABERDARE: I am very gratful for what the noble Lord has said, and I will draw his remarks to the attention of my noble friend Lord Colville of Culross. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 126 agreed to.
Part IX: JUDICIAL CONTROL.
LORD SHEPHERD: In accordance with my Statement earlier to-day, I beg to move that consideration of Part IX of the Bill be postponed until after Clause 188.
Moved, That consideration of Part IX be postponed until after Clause 188.—(Lord Shepherd.)
On Question, Motion agreed to.
Clause 142 [Definition of terms used in Part X]:
LORD JACQUES: Amendments Nos. 93, 94, 95 and 96 are Amendments which simply correct misprints. I beg to move.
Amendments moved—
Page 73, line 4, leave out ("143(3)") and insert ("143(4)")
Page 73, Line 12, leave out ("143(4)") and insert ("143(5)")
Page 73,Line 22, leave out ("143(4)") and insert ("143(5)")
Page 73,Line 26, leave out ("143(4)") and insert ("143(5) ")—(Lord Jacques.)
On Question, Amendments agreed to.
On Question, Whether Clause 142, as amended, shall stand part of the Bill?
LORD ELTON: There is one small point that I should like to raise at this stage on the clause. It has been represented to us that the effect of subsection (5) will be to include the activity of block discounting, and therefore to classify that activity as an ancillary credit business. The Finance Houses who conduct this activity are rather concerned to know whether this is intentional and also to be reassured, if this is the case, that it will not be necessary for them to enter into two licensing systems, one for their main activity and one for the subsidiary. I should be grateful if the noble Lord could enlighten me on this subject.
LORD JACQUES: If block discounting were not to be classified by the Bill as an ancillary credit business, it would be possible for any financier who was prepared to deal only with block discounting to escape entirely the licensing provisions of the Bill. Such a financier could have a great deal of power in the consumer credit industry by virtue of being able to extend credit to retailers,

321
but could not be disciplined in any way if he used this power against the consumer's interest. To stop this evasion the definition of debt collecting has been drawn so as to include block discounting. No decision has yet been taken as to the actual physical form licences will take, or whether a creditor's licence will enable the holder to include debt collecting. The point that is made will, however, be borne in mind when decisions are taken. It is accepted that if block discounting is only a small part of a creditor's business it might be burdensome for him to have to obtain two separate licences.
LORD ELTON: I am grateful to the noble Lord for looking at this sympathetically, and I shall study his reply further this evening.
Clause 142, as amended, agreed to.
Clauses 143 to 147 agreed to.
Clause 148 [Advertisements]:
On Question, Whether Clause 148 shall stand part of the Bill?
LORD ELTON: This is a microscopic point and I may well be mistaken, but it appears to me that in line 37 it is not possible to attribute a meaning to the word "whether". I wonder whether the word ought to be "where", or whether later in the sentence the words "or not" should appear. It is a small point, but it affects the meaning of the clause.
LORD SHEPHERD: Now that the noble Lord is following the noble Lord, Lord Aberdare, in being able to pick up these abstruse matters, I begin to tremble for any future Committee stage. I shall certainly look at what the noble Lord has said to see whether there is a drafting or printing error. If there is we shall certainly put it right on Report.
Clause 148 agreed to.
Clauses 149 to 152 agreed to.
Clause 153 [Entry into agreement]:
4.4 p.m.
LORD SHEPHERD LORD SHEPHERD moved Amendment No. 97:
Page 78, line 24, after ("65") insert ("129").
The noble Lord said: This is a drafting Amendment. Clause 153 empowers the Secretary of State to make regulations making provision in relation to
322
credit brokerage, debt-adjusting, or debt-counselling agreements, corresponding to certain provisions relating to consumer credit or hire agreements. If these provisions in relation to consumer credit or hire agreements are not met, the agreement is enforceable against the debtor or hirer only on an order of the court. The extension by Clause 153 of these provisions to ancillary credit agreements should obviously mean that such agreements should also be enforceable on an Order of the Court only when the provisions are not complied with. This is not so at present, and the Amendment rectifies this by adding to Clause 129, which sets out the powers of the Court in relation to improperly executed agreements and security instruments. I beg to move.
On Question, Amendment agreed to.
Clause 153, as amended, agreed to.
Clause 154 agreed to.
Clause 155 [Duty of agency to disclose filed information]:
On Question, Whether Clause 155 shall stand part of the Bill?
LORD ELTON: I should be most grate ful if the Government would look closely at the effects of Clause 155 as it now stands. There is no objection to the effect, which is clearly intentional, of forcing credit reference agencies to reveal all that they hold on file about private individuals when those private individuals request it. However, I have received representations about the effect, which is not so clearly intentional, for giving to private trading partnerships and unincorporated businesses the same right to force information about them to be revealed. This effect arises from the definition of the word "individual" as it is used in line 3 on page 75 and as it is defined in Clause 184. Noble Lords will remember an exchange earlier this week when the noble Lord, Lord Jacques, clarified this point with the noble Lord, Lord Airedale. Therefore, there is no doubt that the word "individual", for the purposes of this Bill, includes not only individuals as we use the term in every day speech but also individuals in the legal sense, which includes unicorporated businesses and partnerships. In this sense incorporated businesses are

323
specifically excluded and unincorporated business are specifically included.
The agencies involved do not object to revealing statements of fact, but what concerns them is the disclosure of their sources of information, and more particularly their sources of opinion. The Crowther Report also had reservations on exactly the same point, and expressed them in Paragraph 9(1)(25). The agencies fear that the existence of the machinery of compulsory disclosure will make many of their sources dry up. They expect, not unreasonably, that the result of this will cause a higher incidence of successful fraud, and that, in turn, this will result in a greater reluctance of companies to give credit to unincorporated businesses. As this, in fact, is the form in which many of our greatest and most flourishing commercial enterprises started their life, the effect of limiting credit by this means would be quite disdisproportionate to the sums involved. I should be grateful if the Government could look into some means of avoiding this difficulty, perhaps by a redefinition of the word "individual".
LORD SHEPHERD: The noble Lord has raised a point which I must admit I discussed very fully with my advisers. On the matter of disclosure, I think that it is right that there should be a statement as to who has disclosed information. Unless you know who has made a statement it is very difficult to be able to elucidate, to track, and to change. Whether there is another definition for the word "individual" I do not know. I shall certainly look at it. The word "individual" is deliberately used on a number of occasions in order to incorporate a wide-ranging group of individuals as a group, and individuals by themselves. I cannot offer the noble Lord a great deal of hope, but I will undertake to have a look at it. However, I do not think that there is a way out in meeting the point that he has made by seeking to have a new definition for what is a group or an individual.
LORD ELTON: I accept that that was an unhappy suggestion. It would be much better to substitute a different word, such as "applicant", bearing in mind that we are dealing with larger sums than when we deal with individuals as private persons, and, therefore, the
324
inquiries would be of a different nature from those that would be made by a private individual. I am grateful to the noble Lord for his undertaking to look at this matter again, and I hope that he will do so sympathetically.
Clause 155 agreed to.
Clauses 156 and 157 agreed to.
Clause 158 [Powers of entry and inspection]:
4.10 p.m.
LORD SHEPHERD LORD SHEPHERD moved Amendment No. 98:
Page 83, line 4, leave out ("an enforcement authority other than the Director") and insert ("a local weights and measures authority").
The noble Lord said: Clause 158(5) empowers the Secretary of State to make regulations providing, in effect, that in cases described by the regulations, an officer of an enforcement authority will require special authority from the Director to exercise powers of entry and inspection. This new provision was inserted in the clause to meet, inter alia, the clearing banks' misgivings about the consequences of the powers of entry and inspection in the confidentiality of the banker or customer relationship.
The purpose of the Amendment is to exclude from the requirement to obtain the Director's authority officers of the Department of Commerce for Northern Ireland, which is the enforcement authority in Northern Ireland. The Amendment is necessary because it is inappropriate that officers of the Department of Commerce should require the Director's authority, given that the head of a Northern Ireland Department has Ministerial status. The Northern Ireland authorities will ensure that in cases where regulations under Clause 158(5) limit the investigatory powers to officers of the local weights and measures authorities in Great Britain, corresponding controls will apply to their officers. I beg to move.
On Question, Amendment agreed to.
On Question, Whether Clause 158, as amended, shall be agreed to?
LORD LEATHERLAND: This clause, and the clauses associated with it, will impose extra duties and responsibilities upon the weights and measures inspectors and the weights and measures authority. I think it is generally known that there is

325
at present a shortage of properly qualified weights and measures inspectors. Is any step being taken by the Government Department concerned to try to stimulate the recruitment of additional weights and measures inspectors?
LORD SHEPHERD: Obviously the imposition of very considerable new duties as a consequence of the Bill will require the Weights and Measures Inspectorate, in terms of its size and efficiency, to be carefully considered by the authorities. However I am not in a position to say anything more about that at the moment. I think I shall have to seek to deal with it when we come to Third Reading. That, I think, will be an appropriate stage to deal with the matter.
Clause 158, as amended, agreed to.
Clauses 159 to 162 agreed to.
Clause 163 [Penalties]:
LORD JACQUES: I beg to move Amendment No. 99, which is to deal with a misprint.
Amendment moved—
Page 84, line 31, leave out ("as").—(Lord Jacques.)
On Question, Amendment agreed to.
Clause 163, as amended, agreed to.
Schedule 1 [Prosecution and punishment of offences]:
LORD JACQUES: I beg to move Amendment No. 100, which again is to deal with a misprint.
Amendment moved—
Page 106, line 8, leave out ("158(5)") and insert ("158(6)").—(Lord Jacques.)
On Question, Amendment agreed to.
Schedule 1, as amended, agreed to.
Clauses 164 and 165 agreed to.
Clause 166 [No further sanctions for breach of Act]:
Loan SHEPHERD Loan SHEPHERD moved Amendment No. 100A:
Page 85, line 26, leave out from ("requirement") to ("except") in line 27 and insert ("made (otherwise than by any court) by or under this Act shall incur no civil or criminal sanction as being such a breach,").
The noble Lord said: Amendment No. 100A has two effects. First, it adds to
326
the provision already in the clause that the breach of a requirement contained in the Bill itself shall incur no sanction except one expressly provided by or under the Bill. A further provision is that the same shall apply to a requirement made under the Bill. In other words, the same rule also applies to breaches of regulations made by the Secretary of State and to breaches of conditions made by the Director under Clause 74. But the Amendment makes it clear that this does not apply to court orders. If a court order is disobeyed the court may impose the usual sanctions for contempt of court. Secondly, the words "being such a breach" have the effect of allowing steps to be taken under the Fair Trading Act 1973 in relation to persons who break the requirements made by, or under, the Bill. If an order is made under that Act forbidding such breaches, Clause 166 would not prevent steps being taken under that Act to deal with a contravention of such an order. I beg to move.
On Question, Amendment agreed to.
Clause 166, as amended, agreed to.
Clause 167 agreed to.
Clause 168 [Statements by creditor or owner to be binding]:
4.16 p.m.
LORD SHEPHERD LORD SHEPHERD moved Amendment No. 101:
Page 86, line 31, at end insert—
"(3) Where in proceedings before any court—

(a) it is sought to rely on a statement or notice given as mentioned in subsection (1) or (2), and

(b) the statement or notice is shown to be incorrect,

the court, if satisfied that on a prosecution for failure to give a correct statement or notice the person charged could have established a defence under section 164(1), may, either wholly or to such extent as it considers just, treat the statement or notice as not binding on the person by whom it was given."
The noble Lord said: I beg to move Amendment No. 101 and perhaps draw the attention of the Committee to the next Amendment, which is to leave out the clause. This, I understand, is for the purpose of dealing with much that is in the Government Amendment. I think the noble Lord, Lord Seebohm, was willing to withdraw an earlier Amendment in anticipation of what I can now say in

327
regard to this matter. The Amendment enables creditors and owners to escape being bound by Clause 168 in respect of statements and notices given by them. If they can establish that (a) the giving of a statement or notice which they now say is incorrect was due to a mistake or to reliance on information supplied to them, or to an act or omission by another person, or to an accident or some other course beyond their control and that they took all reasonable precautions to avoid this situation: that is the defence in Clause 164(1) against offences under the Bill; and (b) it is fair to treat the statement or notice as not binding on the creditor or owner. That is not spelled out in the Amendment itself but it is achieved by reference to the defence given by Clause 164 to a person prosecuted for giving an incorrect statement or notice.
The Amendment is designed to meet the fear of the clearing banks that if they make a mistake in favour of their customer in statements under Clause 168 they will be unable to recover their money. The effect of the Amendment will be that in such circumstances a creditor might succeed in an action to recover his money if he could prove both that the money was rightfully his and that the mistake in his statement was outside his control. If these points can be proved the banks will be in the same position as they are at present. I beg to move.
THE EARL OF LIMERICK: I agree with the noble Lord, Lord Shepherd, that we should consider the following Amendment now; indeed, it would be semantically rather difficult to consider the Amendments separately. I believe that one should never look gift horses in the mouth, particularly when they come from Governments, and naturally this Amendment is welcome so far as it goes. I am not sure that it goes as far as one might wish. I shall try to express my reservations, which are a little tentative, because this is a highly technical area. I will certainly not be dogmatic about the effect of the Amendment. As the noble Lord said, it links back to what was said during our deliberations on Clause 98, and just picking up the point which was left there, the proposed fee of one new penny, or one-hundredth of a pound, was to draw attention to the fact that the matters specified under Clause 98(1) were the only
328
ones of that nature which would be binding in the case of a certificate given by a creditor for which there was no fee prescribed; and therefore the intention was merely to ensure that the mind of the institution issuing the certificate was concentrated on the fact that it had a statutory effect.
My reservation is merely this. I wonder whether the onus of proof set out in Clause 164(1)(a) and (b) is still rather heavy? First—and this probably makes no great difference in practice from what happens now—it will be necessary for proceedings to be brought before a court before a banker can defend himself against an action taken by a customer who is possibly relying on a mistake in his account to show that his position had been changed by reliance on that information.
Secondly, what would happen if a banker correctly provided a certified copy of an account which reflected an error by a third party; for example, if a credit was wrongly directed to an account of one of his customers, or perhaps repeated in a way that the banker could not discern and, indeed, had no duty to inquire into? If a banker were then to debit his customer's account to rectify this error, could he rely on the defence in Clause 164? It is not entirely clear to me whether he could. But even if the answer is, "Yes", it is hard to see why the banker should be required to defend himself in court in respect of the errors of a third party. I repeat that this Amendment is welcome and naturally, having had a peg on which to hang these questions, I shall not seek to move the following one. But I should be grateful if those points could be considered.
LORD AIREDALE: I am bound to say that I think that the proposed new subsection throws a very considerable burden on an unfortunate court of law. I say that because what it really amounts to is that the court has to say to itself, "If there had been a prosecution, would the defendant have won the case? If we think that the defendant would have won the case, we are to take certain action in consequence of that." There is only one way of knowing what will be the result of a criminal prosecution, and that is to have a criminal prosecution and see who wins the case. I should have thought that that was asking a great deal of a

329
court which was not conducting a criminal prosecution.
To my mind, the gravamen of this matter is that the words that the person charged "could have established a defence" are too strong. If the words had been that the person charged had grounds for putting forward a certain defence, I could have understood them. Perhaps it would not be asking too much of a court to say, "Would the defendant have had reasonable grounds for putting this defence forward?". But if the unfortunate court had to go beyond that and ask, "What would have been the result of the case? Would the defendant have won?", that would be imposing too great a burden. I do not suppose the noble Lord has had time to think about all these points, but could he consider before the next stage of the Bill substituting the words, "could have had grounds for putting forward a defence", for the words, "could have established a defence"?
LORD SEEBOHM: I fully understand that the noble Lord, Lord Shepherd, has gone a long way to meet our requirements, but I am still unhappy about this Amendment. It appears to me that the approach to the problem is wrong, and I suggest that the honesty of the debtor should be the criterion in any decision as to whether he should or should not benefit from a mistake on the part of the creditor. This is just another additional burden of proof on the creditor. If the approach had been the other way around, we might have got wording which would have been rather more acceptable.
LORD SHEPHERD: In reply to the noble Lord, Lord Seebohm, may I say that we have established all along that the balance should fall in the area of the consumer or the debtor. The drafting suggestions made by the noble Lord, Lord Airedale, were, as usual, helpful. But I am sure the noble Lord will appreciate that at this hour—I shall not say "late hour", but we have been in Committee to-day for some two-and-a-half hours—I shall not react by saying that what he suggested is an improvement on the drafting. What I shall do is look very carefully at what he has said and see whether an Amendment is necessary.
In regard to the point made by the noble Earl, Lord Limerick, about the position of a bank if it sent out a stat-
330
ment in good faith but was in error because of false information provided by some other person, I would say this. My understanding is that under subsection (a) to which I referred and which I explained at some length, a bank would be able to rely on the fact that the information had been supplied by some other person. Therefore, the point made by the noble Earl, Lord Limerick, is met by the drafting of the Amendment.
THE EARL OF LIMERICK: Before consenting to this Amendment passing into the Bill, may I amplify what I said? I am grateful for that assurance, which is what I hoped to receive. I should have framed my question: After this Bill becomes law, will the doctrine relating to a mistake remain as it is now, in relation to the furnishing of statements by banks to their customers?
LORD SHEPHERD: As I said at the conclusion of my earlier remarks, if a bank can prove the points which I mentioned we believe that it will be in the same position as it is in now. I think that meets the point that the noble Earl has in mind.
LORD ALPORT: I have listened with great interest to the discussion that has gone on, and to the remarks of the Minister. Am I right in saying that in the matter of the relations between a creditor and a debtor, where there is a question of doubt or a question of giving some advantage, the modern view is that that advantage should be given to the debtor rather than to the creditor? If that is the case, it certainly is a great change around from the traditional attitudes about the relationship between creditor and debtor in this country.
LORD SHEPHERD: I sought to say that if one was putting the balance it was in one way as opposed to the other. I should not have thought it was new, and I plead for the noble Earl, Lord Limerick, to come to my aid, because I believe that this was the general balance in the hire purchase legislation of 1965 and 1966. One seeks to have the right, the just balance between the two sides in a negotiated deal. But if one has to fall in one way, then one falls more on the side of the consumer in hirepurchase agreements and in the money-lending field, whereas under very old legislation

331
one fell more on the side of the debtor. As the noble Lord will see, there is no new philosophy or principle in this Bill, but perhaps there is a little more emphasis than in the past.
On Question, Amendment agreed to.
Clause 168, as amended, agreed to.
Clause 169 [Contracting-out forbidden]:
4.30 p.m.
LORD HELSBY LORD HELSBY moved Amendment No. 101A:
Page 87, leave out line 5.
The noble Lord said: Subsection (3) of this clause deals with things being done at any time with the consent of the person affected given at that time. The words "given at that time" seem hardly necessary in this context. In some cases which arise, they import the idea that it is quite impracticable. If what was to be done was the sale of property or land, that could not be carried out instantaneously, as it were, if it were to be done fairly. It would take some considerable time, and as a matter of practical necessity the consent would surely have to be given before the wheels were set in train for the arrangements to sell. I beg to move.
LORD SHEPHERD: The Bill states that certain things in the Bill, for example enforcement of an improperly executed agreement or the enforcement of a land mortgage, may only be done on the order of the court. Similarly, an agreement by an unlicensed trader may be enforced only on the order of the Director. This rule, however—and I think it is harsh—means that the debtor or the hirer may be willing to consent to the enforcement; for example, the debtor may have an unenforceable agreement on his hands but it is made unenforceable by such a small technicality that any court would enforce it. If, therefore, the debtor got into arrears, it might be in his best interest to consent to enforcement to save time and cost.
However, such a voluntary agreement is obviously also open to abuse, and to counter this the Bill provides that such consent must be given at that time; that is, at the time when enforcement is envisaged. If the debtor were allowed to
332
give his consent in advance, he could write off his protection. For example, he could be asked to sign such advance permission as a condition of getting the loan before even he knew that it was an unenforceable agreement, signing away his rights. I understand that the clearing banks have some concern in this matter and argue that for consent to be given at that time is too restrictive.
One of the important protections of the Bill is the power of the court to enforce certain agreements and this must not be whittled away. A debtor must not give his permission in advance or otherwise he might sign away his rights before he realises that one day he might need them. We cannot see that such timing is restrictive. If a creditor wishes to enforce his agreement, he could surely approach the debtor and discuss the matter first. If the debtor had moved, or was not traceable, it is right that the court should be able to look at the matter in the debtor's absence. But if there is any real problem, we should like to have full details and would look at them, but we should be most unwilling to water down this important protection. If the noble Lord would care to give us full details, these clearly would be considered.
LORD HELSBY: I am grateful to the noble Lord, and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
LORD SHEPHERD LORD SHEPHERD moved Amendment No. 102:
Page 87, line 5, at end insert ("but the refusal of such consent shall not give rise to any liability").
The noble Lord said: This Amendment makes it clear that a consumer's refusal to give his consent to goods or land being repossessed without a court order will not, of itself, make him liable for proceedings such as "conversion" (dealing with someone's goods in a way inconsistent with that person's rights) and an action for the return of goods wrongfully detained from their owner. It would be wrong if a consumer who relied on his rights under the Bill and held on to goods or land could be sued for the civil wrong of wrongfully keeping someone else's property.
Section 52 of the Hire Purchase Act 1965, which the Bill repeals, makes refusal to surrender goods not conversion

333
in certain cases. Therefore, in so far as hirepurchase goods are concerned this is not a new provision. I beg to move.
On Question, Amendment agreed to.
Clause 169, as amended, agreed to.
Clause 170 [Restrictions on disclosure of information]:
LORD JACQUES LORD JACQUES moved Amendment No. 103:
Page 87, line 19, after ("Part") insert ("II or")
The noble Lord said: Section 14 of the Fair Trading Act 1973 makes provision for references to the Advisory Committee of matters which may adversely affect the economic interests of consumers, and the Director is required to give the Committee information in his possession. The subject of such a reference could be a consumer credit trade practice, and the purpose of this Amendment is to enable the Director to pass on information in his possession to the Advisory Committee. I beg to move.
On Question, Amendment agreed to.
Clause 170, as amended, agreed to.
Clauses 171 to 176 agreed to.
Clause 177 [Power to alter monetary limits etc.]:
LORD JACQUES LORD JACQUES moved Amendment No. 103A:
Page 90, leave out line 24 and insert ("and 155(1)")
The noble Lord said: This is an Amendment to pave the way for Amendment No. 107C to Clause 183 which empowers the Secretary of State to amend Schedule 2 by adding further examples, or in any other way. With power to amend Schedule 2 in Clause 183 it will no longer be necessary for Clause 177 to contain a specific power to amend the monetary limits mentioned in Schedule 2. We therefore wish to remove that reference in Clause 177, and that is what the Amendment does. I beg to move.
LORD ABERDARE: I take it that any order made by the Secretary of State amending Schedule 2, by adding further examples, would be subject to Parliamentary procedure under the negative resolution procedure.
LORD JACQUES: That is my understanding.
On Question, Amendment agreed to.
Clause 177, as amended, agreed to.
Clause 178 agreed to.
Clause 179 [Associates]:
4.39 p.m.
LORD ABERDARE LORD ABERDARE moved Amendment No. 105:
Page 91, line 27, after ("descendant") insert ("Uncle Tom Cobbleigh and all,")
The noble Lord said: I apologise for the somewhat unparliamentary nature of this Amendment, but it highlights what is a rather extraordinary situation. If one refers back to Clause 25(2) one sees that in examining whether an applicant for a personal licence is a fit person to engage in any activities, the Director may have regard to any circumstances appearing to him to be relevant, and in particular any evidence tending to show that the applicant or any of the applicant's employees, agents or associates—and that is the point I shall be taking up in a minute—whether past or present, and so on, has committed any offence involving fraud or other dishonsty or violence, contravened any provision, and so on, or practised discrimination on grounds of sex, colour, race, and so forth.
One comes then to find out what the word "associate" means, and we see that in subsection (1) of the clause that we are now considering it says:
"A person is an associate of an individual if that person is the individual's husband or wife, or is a relative, or the husband or wife of a relative, of the individual or of the individual's husband or wife."
Then, naturally, one wants to know what a relative is, and so one turns to subsection (5) and sees:
"In this section 'relative' means brother, sister, uncle, aunt, nephew, niece, lineal ancestor or lineal descendant, and references to a husband or wife include a former husband or wife and a reputed husband or wife; and for the purposes of this subsection a relationship shall be established as if any illegitimate child, step-child or adopted child of a person had been a child born to him in wedlock."
It seems to me very extraordinary that the Director General of Fair Trading, before he grants a licence, is to be able to take into account certain misdeeds committed by a very wide range of people indeed described under the titles of

335
"associate" and "relative". I really wonder whether this is right. It seems to me that in determining whether a person is a fit person to hold a licence the Director General can take into account the behaviour of, for example, the applicant's great-great-grandfather, his niece's husband, his wife's uncle or any other combination of relationships. I wonder whether this is not only visiting the sins of the fathers upon the children unto the third and fourth generation but is going further and visiting the sins of the fathers-in-law as well. I find it rather curious and rather difficult to understand, and if the noble Lord can reassure me I shall be very grateful. I beg to move.
LORD JACQUES: In considering this Amendment when it was first put down, we were at some pains to discover what was really behind it. Who was this "Uncle Tom Cobley"? It cannot be a reference to the famous person who, in company with Tom Pearce, Bill Brewer and other gentlemen, went to Widdecombe Fair, first of all because that gentleman's name was spelt "Cobbleigh" and, secondly, because we could hardly think that noble Lords opposite would be so frivolous as to put down an Amendment referring to him. We came to the conclusion that, for some reason, one of the noble Lords in whose name the Amendment stands thought that his relative should be specially protected under the Bill, and that the name of his relative was Tom Cobley. I am sure noble Lords will appreciate that it would be very difficult if we were to mention one of their relatives. We would then have many applications from Members of both this House and another place for their relatives to be mentioned and to be specially protected under the Bill. Apart from the increased size of the Bill which would result, I hope noble Lords will agree that it would create an undesirable precedent to name in Acts of Parliament people who required special protection. But I can assure noble Lords that relatives of Peers of the Realm are not debarred from the protection provided by this Bill, and that their Uncle Tom Cobley and any other relatives will get the protection given to everybody else. With this assurance, I hope noble Lords will be able to welcome this clause as much as I know they do the rest of the Bill.
336
I am reminded that the name of one of the noble Lords who has moved this Amendment is defined in one dictionary as a "metrical frivolity". Perhaps your Lordships would therefore grant me indulgence if I quote a verse of that type, the last lines of which I hope might also be appropriate to this Bill:
"All hail to the town of Limerick,
Which provides a cognomen, generic,
For a species of verse
Which for better or worse
Is supported by layman and cleric."
I think I had better now answer the argument, having replied to the Amendment. The purpose of this wide definition is to prevent evasion of the protection given to the consumer under the Bill. One way of evading the "linked transaction" provisions would be for the creditor to get different members of a family to sign agreements for transactions "linked" to the main agreement and then claim that these were separate agreements, and not linked. For example, the father of the family might sign the credit contract for, for example, the purchase of a deep freezer on credit; the mother might be asked to sign a "linked" agreement for the purchase of the food on credit; and the son might be asked to sign a maintenance contract for the freezer. Indeed, any relative who happened to be in the household could be asked. This might sound far-fetched, but the Departments have had complaints where this has happened. The wide definition of "relative" is intended to include all likely members of the consumer's household so that he and his family are fully protected. A common definition of "relative" would reduce that protection. We do not think that this wide definition leads to any undesirable consequences, but if it is thought that there are we are willing to consider them. I believe from what the noble Lord said that he believes there are consequences which are undesirable, and I should like to give the assurance that what he said will be considered.
LORD ABERDARE: I am very grateful to the noble Lord. I did in fact correct the spelling of "Uncle Tom Cobley", if the noble Lord will look at the present Marshalled List of Amendments. I know I put down the wrong spelling to start with, but it is in fact the same gentleman who was associated with Tom Pearce and all those other characters. But I see the point that the

337
noble Lord makes for the need to have a wide definition. My only point concerned linking it with Clause 25, where the Director General can take into account the behaviour of associates and relatives before granting a licence; that was my only worry. But I should be grateful if the noble Lord would, as he says, look to see whether there are any undesirable consequences as a result of that.
LORD JACQUES: There are two points I should like to make, if I may, before we go on. First of all, I apologise for not having noticed in the Marshalled List we had to-day that the spelling had been corrected. I was working on this Bill over the weekend, and was working on an old Marshalled List. Secondly, I give a firm assurance that what has been said will be considered.
THE EARL OF LIMERICK: Before the Committee decides what to do about this Amendment, I have been busily scribbling at the same time as listening to the noble Lord's most interesting argument, and I should like to add one comment of my own:
The clause is in principle clear,
No references to "Uncle" appear,
But the class is so wide that all joking aside
We think he should think again here.
Amendment, by leave, withdrawn.
Clause 179 agreed to.
Clause 180 [Agreement with more than one debtor or hirer]:
LORD JACQUES LORD JACQUES moved Amendment No. 106:
Page 91, line 39, leave out ("one of them shall be binding on the others") and insert ("or on behalf of one of them shall have effect as if done by or on behalf of all of them")
The noble Lord said: This Amendment is a drafting Amendment to make it clear that, when there is an agreement involving two or more debtors or hirers, anything done on behalf of one debtor or hirer shall be binding on the other debtors or hirers; for example, a notice of cancellation given by one debtor is binding on the other, and so is a notice of cancellation given on behalf of one debtor. The whole purpose of this Amendment is simply to clarify. I beg to move.
On Question, Amendment agreed to.
LORD JAQUES LORD JAQUES moved Amendment No. 107:
Page 92, line 12, at end insert—
338
"(2A) Subsection (1)(b) does not apply for the purposes of section 61(1)(a) or 129(2),"
The noble Lord said: This Amendment is consequential upon Amendment No. 106. It makes clear that, to be properly executed, an agreement must be signed by every debtor or hirer who is a party to it. I beg to move.
On Question, Amendment agreed to.
4.50 p.m.
LORD HELSBY LORD HELSBY moved Amendment No. 107A:
Page 92, like 25, at end insert—
("(5) For the purposes of this section anything required by or done under this Act shall only refer to matters required by or done under the following sections

section 76(1),

section 77(1),

section 78(1),

section 98(1),

section 108(1)(c),

section 109(1)(c) or

section 110(1)(c).")

The noble Lord said: This is by way of being a probing Amendment. The clause deals with agreements with more than one debtor or hirer and the question of joint hirers and debtors. In the context of "information" as defined for the purposes of the Bill, subsection (2) deals with dispensing notices and so on. It is not quite clear to me where the clause takes us at the end of the day. I should like to ask how wide of the Act subsection (1)(a) is inteded to go. This Amendment is an endeavour to limit the clause to the formal seeking of information by enumerating previous clauses which provide for a statutory statement of information at the request of the debtor or hirer. I beg to move.
LORD JACQUES: This Amendment would limit the effect of Clause 190 to actions under clauses in the Bill dealing with the provision of information to debtors, hirers and sureties. Each of the clauses enumerated in the Amendment is simply concerned with giving information. The Amendment overlooks the key provisions in the Bill under which this clause is expected to operate. Under Clause 61(1)(a), all individual debtors must sign the agreement so that no one joint debtor can commit the rest; but under Clauses 57, 67, 99 and 101 no such stipulation is made, so that one joint debtor, when withdrawing, cancelling or terminating, will cancel the agreement for all. By excluding these two key

339
provisions from the operation of the clause, the Amendment is in effect a wrecking Amendment because the safeguards would then be disregarded and all would depend on what was laid down in the agreement. Whilst this may be of little consequence in the case of a joint stock bank account where the bank has a mandate governing the rights of joint holders, it would remove an important safeguard in the case of other types of credit agreement. For instance, a wife might commit a husband in his absence, or another person might commit a friend.
The clause, as amended by Government Amendment No. 106, would not complicate the working of a normal bank joint account. The signing of mandates is not done under the Act and so cheques could still be signed by whoever is authorised to sign, whether it be an individual, a joint debtor or the nominee of an unincorporated body such as a sports club. Trustees would still all be required to sign by the law relating to trustees, and this would not be affected. The only difficulty in relation to joint stock bank accounts concerns the provision of regular statements under Clause 77(4). In order to avoid these always having to be sent to all joint account holders, with consequent wasteful duplication in many cases, a provision has been added in Clause 180(2) allowing joint debtors to dispense with this requirement so long as at least one statement is provided. With this point covered, we do not consider that, in the case of joint stock bank accounts, any practical difficulties would be caused by the remaining provisions in this clause. The Amendment is therefore harmful, and in our view unnecessary.
LORD HELSBY: The Amendment was not designed to be a wrecking Amendment but rather a probing one. I am very grateful to the noble Lord for the information he has given, and in view of this, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 180, as amended, agreed to.
Clause 181 agreed to.
Clause 182 [Arrangements between creditor and supplier]:
LORD JACQUES LORD JACQUES moved Amendment No. 107B:
Page 92, line 42, at end insert—
"(2A) Arrangements shall be disregarded for the purposes of subsection (1) or (2) if—

(a) they are arrangements for the making, in specified circumstances, of payments to the supplier by the creditor, and

(b) the creditor holds himself out as willing to make, in such circumstances, payments of the kind to suppliers generally."

The noble Lord said: The purpose of this Amendment is to exclude from the connected lender liability imposed by Clause 75 cheque guarantee cards, as distinct from credit cards. I beg to move.
On Question, Amendment agreed to.
Clause 182, as amended, agreed to.
Clause 183 [Examples of use of new terminology]:
4.55 p.m.
LORD JACQUES LORD JACQUES moved Amendment No. 107C:
Page 93, line 13, at end insert—
"(4) The Secretary of State may by order amend Schedule 2 by adding further example or in any other way."
The noble Lord said: It was the original intention that the power to amend Schedule 2 should be only in respect of the financial limits mentioned in the examples. Further consideration has led us to the belief that it might be useful to have a wider power. For example, while some terms such as "cheque cards", "credit cards" et cetera, are recognisable concepts at the moment, they may not be so in a few years' time—in which case the examples might need to be deleted or amended. This Amendment accordingly widens the power to amend the Schedule so that the examples can be altered or added to if need be. Since the examples merely illustrate the law contained in the body of the Bill, there is no question of altering substantive legislative provisions in this way. I beg to move.
On Question, Amendment agreed to.
Clause 183, as amended, agreed to.
Schedule 2 [Examples of use of new terminology]:
LORD JACQUES LORD JACQUES moved Amendment No. 107D:
Page 107, leave out Schedule 2 and insert the following new Schedule—
("EXAMPLES OF USE OF NEW TERMINOLOGY

CONSUMER CREDIT BILL [H.L.]

  PART I LIST OF TERMS
  Term

  Defined in section

  Illustrated by example(s)

  Advertisement

  184(1)

  2

  Advertiser

  184(1)

  2

  Antecedent negotiations

  56

  1, 2, 3, 4

  Cancellable agreement

  67

  4

  Consumer credit agreement

  8

  5, 6, 7, 15, 19, 21

  Consumer hire agreement

  15

  20

  Credit

  9

  16, 19,21

  Credit-broker

  184(1)

  2

  Credit limit

  10(2)

  6, 7, 19, 22

  Creditor

  184(1)

  1, 2, 3, 4

  Credit-sale agreement

  184(1)

  5

  Credit-token

  14

  3, 14, 16

  Credit-token agreement

  14

  3, 14, 16, 22

  Debtor-creditor agreement

  12

  8, 16, 17, 18

  Debtor-creditor-supplier agreement

  13

  8, 16

  Fixed-sum credit

  10

  9, 10, 17

  Hire-purchase agreement

  184(1)

  10

  Individual

  184(1)

  19

  Linked transaction

  19

  11

  Multiple agreement

  18

  16, 18

  Negotiator

  56(1)

  1, 2, 3, 4

  Personal credit agreement

  8(1)

  19

  Pre-existing arrangements

  182

  8, 21

  Restricted-use credit

  11

  10, 12, 13, 14, 16

  Running-account credit

  10

  15, 16, 18

  Small agreement

  17

  16, 17, 22

  Supplier

  184(1)

  3, 14

  Total charge for credit

  20

  5, 10

  Total price

  184(1)

  10

  Unrestricted-use credit

  11

  8, 12,16, 17, 18.

  PART II EXAMPLES

    EXAMPLE 1
    Facts. Correspondence passes between an employee of a moneylending company (writing on behalf of the company) and an individual about the terms on which the company would grant him a loan under a regulated agreement.
    Analysis. The correspondence constitutes antecedent negotiations falling within section 56(1)(a), the moneylending company being both creditor and negotiator.

    EXAMPLE 2
    Facts. Representations are made about goods in a poster displayed by a shopkeeper near the goods, the goods being selected by a customer who has read the poster and then
    342
    sold by the shopkeeper to a finance company introduced by him (with whom he has a business relationship). The goods are disposed of by the finance company to the customer under a regulated hire-purchase agreement.
    Analysis. The representations in the poster constitute antecedent negotiations falling within section 56(1)(b), the shopkeeper being the credit-broker and negotiator and the finance company being the creditor. The poster is an advertisement and the shopkeeper is the advertiser.

    EXAMPLE 3
    Facts. Discussions take place between a shopkeeper and a customer about goods the customer wishes to buy using a credit-card issued by the D Bank under a regulated agreement.
    Analysis. The discussions constitute antecedent negotiations falling within section 56(1)(c), the shopkeeper being the supplier and negotiator and the D Bank the creditor. The credit-card is a credit-token as defined in section 14(1), and the regulated agreement under which it was issued is a credit-token agreement as defined in section 14(2).

    EXAMPLE 4
    Facts. Discussions take place and correspondence passes between a secondhand car dealer and a customer about a car, which is then sold by the dealer to the customer under a regulated conditional sale agreement. Subsequently, on a revocation of that agreement by consent, the car is resold by the dealer to a finance company introduced by him (with whom he has a business relationship), who in turn dispose of it to the same customer under a regulated hire-purchase agreement.
    Analysis. The discussions and correspondence constitute antecedent negotiations in relation both to the conditional sale agreement and the hire-purchase agreement. They fall under section 56(1)(a) in relation to the conditional sale agreement, the dealer being the creditor and the negotiator. In relation to the hire-purchase agreement they fall within section 56(1)(b), the dealer continuing to be treated as the negotiator but the finance company now being the creditor. Both agreements are cancellable if the discussions took place when the individual conducting the negotiations (whether the "negotiator" or his employee or agent) was in the presence of the debtor, unless the unexecuted agreement was signed by the debtor at trade premises (as defined in section 67(b)). If the discussions all took place by telephone however, or the unexecuted agreement was signed by the debtor on trade premises (as so defined) the agreements are not cancellable.

    EXAMPLE 5
    Facts. E agrees to sell to F (an individual) an item of furniture in return for 24 monthly instalments of £10 payable in arrear. The property in the goods passes to F immediately.
    Analysis. This is a credit-sale agreement (see definition of "credit-sale agreement" in section 184(1)). The credit provided amounts to £240 less the amount which according to regulations

    343
    made under section 20(1), constitutes the total charge for credit. (This amount is required to be deducted by section 9(3)). Accordingly the agreement falls within section 8(1A) and is a consumer credit agreement.

    EXAMPLE 6
    Facts. The G Bank grants H (an individual) an unlimited overdraft, with an increased rate of interest on so much of any debit balance as exceeds £2,000.
    Analysis. Although the overdraft purports to be unlimited, the stipulation for increased interest above £2,000 brings the agreement within section 10(3)(b)(ii) and it is a consumer credit agreement.

    EXAMPLE 7
    Facts. J is an individual who owns a small shop which usually carries a stock worth about £1,000. K makes a stocking agreement under which he undertakes to provide on short-term credit the stock needed from time to time by J without any specified limit.
    Analysis. Although the agreement appears to provide unlimited credit, it is probable, having regard to the stock usually carried by J, that his indebtedness to K will not at any time rise above £5,000. Accordingly the agreement falls within section 10(3)(b)(iii) and is a consumer credit agreement.

    EXAMPLE 8
    Facts. U, a moneylender, lends £500 to V (an individual) knowing he intends to use it to buy office equipment from W. W introduced V to U, it being his practice to introduce customers needing finance to him. Sometimes U gives W a commission for this and sometimes not. U pays the £500 direct to V.
    Analysis. Although this appears to fall under section 11(1)(b), it is excluded by section 11(2) and is therefore (by section 11(4)) an unrestricted-use credit agreement. Whether it is a debtor-creditor agreement (by section 12(c)) or a debtor-creditor-supplier agreement (by section 13(c)) depends on whether the previous dealings between U and W amount to "pre-existing arrangements", that is whether the agreement can be taken to have been entered into "in accordance with, or in furtherance of" arrangements previously made between U and W, as laid down in section 182(1).

    EXAMPLE 9
    Facts. A agrees to lend B (an individual) £4,500 in nine monthly instalments of £500.
    Analysis. This is a cash loan and is a form of credit (see section 9 and definition of "cash" in section 184(1)). Accordingly it falls within section 10(1)(b) and is fixed-sum credit amounting to £4,500.

    EXAMPLE 10
    Facts. C (in England) agrees to bail goods to D (an individual) in return for periodical
    344
    payments. The agreement provides for the property in the goods to pass to D on payment of a total of £7,500 and the exercise by D of an option to purchase. The sum of £7,500 includes a down-payment of £1,000. It also includes an amount which, according to regulations made under section 20(1), constitutes a total charge for credit of £1,500.
    Analysis. This is a hire-purchase agreement with a deposit of £1,000 and a total price of £7,500 (see definitions of "hire-purchase agreement", "deposit" and "total price" in section 184(1)). By section 9(2), it is taken to provide credit amounting to £7,500—(£1,500 + £1,000), which equals £5,000. Under section 8(1A), the agreement is therefore a consumer credit agreement, and under sections 9(2) and 11(1) it is a restricted-use credit agreement for fixed-sum credit. A similar result would follow if the agreement by C had been a hiring agreement in Scotland.

    EXAMPLE 11
    Facts. X (an individual) borrows £500 from Y (Finance). As a condition of the granting of the loan X is required—

    (a) to execute a second mortgage on his house in favour of Y Y (Finance), and

    (b) to take out a policy of insurance on his life with Y (Insurances).

    In accordance with the loan agreement, the policy is charged to Y (Finance) as collateral security for the loan. The two companies are associates within the meaning of section 179(3).
    Analysis. The second mortgage is a transaction for the provision of security and accordingly does not fall within section 19(1), but the taking out of the insurance policy is a linked transaction falling within section 19(1)(a). The charging of the policy is a separate transaction (made between different parties) for the provision of security and again is excluded from section 19(1). The only linked transaction is therefore the taking out of the insurance policy. If X had not been required by the loan agreement to take out the policy, but it had been done at the suggestion of Y (Finance) to induce them to enter into the loan agreement, it would have been a linked transaction under section 19(1)(c)(i) by virtue of section 19(2)(a).

    EXAMPLE 12
    Facts. The N Bank agrees to lend O (an individual) £2,000 to buy a car from P. To make sure the loan is used as intended, the N Bank stipulates that the money must be paid by it direct to P.
    Analysis. The agreement is a consumer credit agreement by virtue of section 8(1A). Since it falls within section 11(1)(b), it is a restricted-use credit agreement, P being the supplier. If the N Bank had not stipulated for direct payment to the supplier, section 11(2) would have operated and made the agreement into one for unrestricted-use credit.

    EXAMPLE 13
    Facts. Q, a debt-adjuster, agrees to pay off debts owed by R (an individual) to various moneylenders. For this purpose the agreement

    345
    provides for the making of a loan by Q to R in return for R's agreeing to repay the loan by instalments with interest. The loan money is not paid over to R but retained by Q and used to pay off the moneylenders.
    Analysis. This is an agreement to refinance existing indebtedness of the debtor's and if the loan by Q does not exceed £5,000 is a restricted-use credit agreement falling within section 11(1)(c).

    EXAMPLE 14
    Facts. On payment of £1, S issues to T (an individual) a trading check under which T can spend up to £20 at any shop which has agreed, or in future agrees, to accept S's trading checks.
    Analysis. The trading check is a credit-token falling within section 14(1)(b). The credit-token agreement is a restricted-use credit agreement within section 11(1)(b), any shop in which the credit-token is used being the "supplier". The fact that further shops may be added after the issue of the credit-token is irrelevant in view of section 11(3).

    EXAMPLE 15
    Facts. A retailer, L, agrees with M (an individual) to open an account in M's name and, in return for M's promise to pay a specified minimum sum into the account each month and to pay a monthly charge for credit, agrees to allow to be debited to the account, in respect of purchases made by M from L., such sums as will not increase the debit balance at any time beyond the credit limit, defined in the agreement as a given multiple of the specified minimum sum.
    Analysis. This agreement provides credit falling within the definition of running-account credit in section 10(1)(a). Provided the credit limit is not over £5,000, the agreement falls within section 8(1A) and is a consumer credit agreement for running-account credit.

    EXAMPLE 16
    Facts. Under an unsecured agreement, A (Credit), an associate of the A Bank, issues to B (an individual) a credit-card for use in obtaining cash on credit from A (Credit), to be paid by branches of the A Bank (acting as agent of A (Credit)), or goods or cash from suppliers or banks who have agreed to honour credit-cards issued by A (Credit). The credit limit is £30.
    Analysis. This is a credit-token agreement falling within section 14(1)(a) and (b). It is a regulated consumer credit agreement for running-account credit. Since the credit limit does not exceed £30, the agreement is a small agreement. So far as the agreement relates to goods it is a debtor-creditor-supplier agreement within section 13(6), since it provides restricted-use credit under section 11(1)(b). So far as it relates to cash it is a debtor-creditor agreement within section 12(c) and the credit it provides is unrestricted-use credit. This is therefore a multiple agreement. In that the whole agreement falls within several of the categories of agreement mentioned in this Act, it is, by section 18(3), to be treated as an agreement in each of those categories. So far as it is a debtor-
    346
    creditor-supplier agreement providing restricted-use credit it is, by section 18(2), to be treated as a separate agreement; and similarly so far as it is a debtor-creditor agreement providing unrestricted-use credit. (See also Example 22.)

    EXAMPLE 17
    Facts. The manager of the C Bank agrees orally with D (an individual) to open a current account in D's name. Nothing is said about overdraft facilities. After maintaining the account in credit for some weeks, D draws a cheque in favour of E for an amount exceeding D's credit balance by £20. E presents the cheque and the Bank pay it.
    Analysis. In drawing the cheque D, by implication, requests the Bank to grant him an overdraft of £20 on its usual terms as to interest and other charges. In deciding to honour the cheque, the Bank by implication accept the offer. This constitutes a regulated small consumer credit agreement for unrestricted-use, fixed-sum credit. It is a debtor-creditor agreement, and falls within section 74(1)(b) if covered by a determination under section 74(3). (Compare Example 18.)

    EXAMPLE 18
    Facts. F (an individual) has had a current account with the G Bank for many years. Although usually in credit, the account has been allowed by the Bank to become overdrawn from time to time. The maximum such overdraft has been about £1,000. No explicit agreement has ever been made about overdraft facilities. Now, with a credit balance of £500, F draws a cheque for £1,300.
    Analysis. It might well be held that the agreement with F (express or implied) under which the Bank operate his account includes an implied term giving him the right to overdraft facilities up to say £1,000. If so, the agreement is a regulated consumer credit agreement for unrestricted-use, running account credit. It is a debtor-creditor agreement, and falls within Section 74(1)(b) if covered by a direction under section 74(3). It is also a multiple agreement, part of which (i.e. the part not dealing with the overdraft), as referred to in section 18(1)(a), falls within a category of agreement not mentioned in this Act. (Compare Example 17.)

    EXAMPLE 19
    Facts. H (a finance house) agrees with J (a partnership of individuals) to open an unsecured loan account in J's name on which the debit balance is not to exceed £7,000. Interest is to be payable in advance on this sum, with provision for yearly adjustments. H is entitled to debit the account with interest, a "setting-up" charge, and other charges. Before J has an opportunity to draw on the account it is initially debited with £2,250 for advance interest and other charges.
    Analysis. This is a personal running-account credit agreement (see section 8(1) and 10(1)(a), and definition of "individual" in section 184(1)). By section 10(2) the credit limit is £7,000. By section 9(3) however the initial debit of £2,250, and any other charges later debited to the account by H, are not to be treated as credit even though time is allowed for their

    347
    payment. Effect is given to this by section 10(3). Although the credit limit of £7,000 exceeds the amount (£5,000) specified in section 8(1A) as the maximum for a consumer credit agreement, so that the agreement is not within section 10(3)(a), it is caught by section 10(3)(b)(i). At the beginning J can effectively draw (as credit) no more than £4,750, so the agreement is a consumer credit agreement.

    EXAMPLE 20
    Facts. K (in England) agrees with L (an individual) to bail goods to L for a period of three years certain at £2,000 a payable quarterly. The agreement contains no provision for the passing of the property in the goods to L.
    Analysis. This is not a hire-purchase agreement (see paragraph (b) of the definition of that term in section 184(1)), and is capable of subsisting for more than three months. Paragraphs (a) and (b) of section 15(1) are therefore satisfied, but paragraph (c) is not. The payments by L must exceed £5,000 if he conforms to the agreement. It is true that under section 101 L has a right to terminate the agreement on giving K three months' notice expiring not earlier than eighteen months after the making of the agreement, but that section applies only where the agreement is a regulated consumer hire agreement apart from the section (see subsection (1)). So the agreement is not a consumer hire agreement, though it would be if the hire charge were say £1,500 a year, or there were a "break" clause in it operable by either party before the hire charges exceed £5,000. A similar result would follow if the agreement by K had been a hiring agreement in Scotland.

    EXAMPLE 21
    Facts. The P Bank decides to issue cheque cards to its customers under agreements providing for the Bank to honour cheques of up to £30 in every case where the payee has taken the cheque in reliance on the cheque card, whether the customer has funds in his account or not. The P Bank writes to the major retailers advising them of this scheme and also publicises it by advertising. The Bank issues a cheque card to Q (an individual), who uses it to pay by cheque for goods costing £20 bought by Q from R, a major retailer. At the time, Q has £500 in his account at the P Bank.
    Analysis. The agreement under which the cheque card is issued to Q is a consumer credit agreement even though at all revelant times Q has more than £30 in his account. This is because Q is free to draw out his whole balance and then use the cheque card, in which case the Bank has bound itself to honour the cheque. In other words the cheque card agreement provides Q with credit, whether he avails himself of it or not. Since the amount of the credit is not subject to any express limit, the cheque card can be used any number of times. It may be presumed however that section 10(3)(b)(iii) will apply. The agreement is an unrestricted-use debtor-creditor agreement (by section 12(c)). Although the P Bank wrote to R informing R of the P Bank's
    348
    willingness to honour any cheque taken by R in reliance on a cheque card, this does not constitute pre-existing arrangements as mentioned in section 12(c) because section 182(2A) operates to prevent it. The agreement is not a credit-token agreement within section 14(1)(b) because payment by the P bank to R, would be a payment of the cheque and not a payment for the goods.

    EXAMPLE 22
    Facts. The facts are as in Example 16. On one occasion B uses the credit-card in a way which increases his debit balance with A (Credit) to £40. A (Credit) writes to B agreeing to allow the excess on that occation only, but stating that it must be paid off within one month.
    Analysis. The agreement to allow the excess varies the original credit-token agreement by adding a new term. Under section 10(2), the new term is to be disregarded in arriving at the credit limit, so that the credit-token agreement at no time cases to be a small agreement. By section 81(2), the later agreement is deemed to revoke the original agreement and contain provisions reproducing the combined effect of the two agreements. By section 81(3A), this later agreement is exempted from Part V (except section 56).")
    The noble Lord said: Examples of new terminology were given in the body of the first Bill. The use of examples was highly complimented, but the view was expressed that they would be better put in a Schedule at the end of the Bill. This has now been done. However, since that was done we have found that a number of important terms used in the Bill are not illustrated by examples in the Schedule. It is accordingly proposed to replace the Schedule by this Amendment. In addition, because many of the examples may be used to illustrate a number of terms, the arrangement of the Schedule has been altered. I beg to move.
    LORD HELSBY: I approve very much of the way in which the examples have now been set out. I think that they are most valuable and very well done. However, I wonder whether I might ask the noble Lord, Lord Jacques, to look at one small point in connection with example No. 19 on page 16 of the Marshalled List. The Analysis of the example there set out states, "This is a personal running-account credit agreement". It is certainly a personal credit agreement, but whether it is a running-account is rather more uncertain. In the index at the beginning of Schedule 2 this example is not listed as illustrating running-account

    349
    credit; indeed, it looks as though it is not a running-account example at all. The noble Lord, Lord Jacques, has been sternly resisting any suggestion on behalf of the clearing banks that running-account loans should be thought of as anything like overdrafts; he has said they are much more like personal loans. This idea of a running-account is off the mark. The essence of a running-account is that the customer is at liberty to pay money and to draw it out and to have his interest on the loan calculated in retrospect. This poor fellow has a heavy charge imposed on him before the loan ever starts, which does not seem to be in keeping with the notion of a running-account. I should be grateful if the noble Lord would consider the possibility of omitting these two words, "running-account". I beg to move.
    LORD JACQUES: I will look at the point raised, and I thank the noble Lord for raising it.
    On Question, Amendment agreed to.
    Schedule 2, as amended, agreed to.
    Clause 184 [Definitions]:
    LORD AIREDALE LORD AIREDALE had given Notice of his intention to move Amendment No. 108:
    Page 93, line 32, leave out ("to") and insert ("from").
    The noble Lord said: If this Amendment has alerted the Government to the need for the next Amendment on the Marshalled List, which achieves the same purpose in a different way, it will have achieved its purpose and therefore I do not need to move it.
    Loan JACQUES Loan JACQUES moved Amendment No. 109:
    Page 93, line 32, leave out ("Director") and insert ("Secretary of State").
    The noble Lord said: May I first thank the noble Lord, Lord Airedale, for having directed our attention to the mistake. As he said, we have corrected that by this Amendment. I beg to move.
    On Question, Amendment agreed to.
    LORD JACQUES LORD JACQUES moved Amendment No. 111:
    Page 96, line 21, after ("by") insert ("or on behalf of").
    The noble Lord said: This is a drafting Amendment to give consistency. A body corporate or a partnership cannot sign a document but an agreement may have to be signed on behalf of it. The Bill already provides this and it is necessary to bring the definition into line. I beg to move.
    On Question, Amendment agreed to.
    LORD JACQUES LORD JACQUES moved Amendment No. 111A:
    Page 96, line 38, leave out ("(2)").
    The noble Lord said: Amendments Nos. 111A and 114A go together. They are consequential and arise out of Amendment No. 107B in Clause 182. I beg to move Amendment No. 111A.
    On Question, Amendment agreed to.
    LORD SEEBOHM LORD SEEBOHM moved Amendment No. 111B:
    Page 97, line 28, leave out ("includes") and insert ("does not include").
    The noble Lord said: This Amendment is very much a probing one. In the Bill there is an attempt to define the small businessman as distinct from the large businessman. The two criteria' used, among others, are: one, a limit of £5,000; the people who can borrow that are assumed to be sophisticated. Another is a firm which is incorporated, a limited company. This means that a one-man company, a minute company, can be immune from the Bill; but it does not help the large firm which is not incorporated, such as firms of doctors, chartered accountants, solicitors and even stockbrokers which are not incorporated. They are caught up.
    The object of the Amendment is to help to put that right. I am not sure that we have the answer in this Amendment, and I should like to make a further suggestion. There may be one more criterion which can be put in the Bill: the relation to business turnover as well as the sum of £5,000. For instance, one might say on a business account that if the turnover had been in excess of £20,000 per annum, or some similar figure, for the previous year, perhaps this might exclude the business firm from the contents of the Act. I should like this to be considered. It is a new idea which has not been put forward before. I beg to move.
    LORD JACQUES: The effect of Amendments Nos. 111B and 111C would be to amend the definition of the word, "individual" so as to exclude partnerships and unincorporated bodies altogether from the scope of the Bill. The present Government and the previous Administration have both agreed that the Bill should apply to small businesses since in credit transactions small businessmen are often in as much need of protection as the consumer. The imbalance of bargaining power between the creditor and the small businessman in great need of a loan may be immense. The small businessman is rarely an expert in the field of credit (however expert he may be in his own field of business) and for credit transactions below £5,000 he, like the private individual, is unlikely to be able to afford to seek expert advice. There have been numerous cases of small businessmen falling prey to unscrupulous creditors who have been prepared to exploit their weakness or ignorance.
    All persons except bodies corporate have been included in the scope of the Bill in order to cover all small businesses. This follows the specific recommendation of the Crowther Committee and the precedent of the Hire-Purchase Act. To exclude all partnerships and unincorporated bodies from the scope of the Bill, as the Amendment proposes, would remove protection from too large a proportion of small businesses to be acceptable since only sole traders would then be protected.
    The division between companies on one hand, and sole traders, partnerships and unincorporated bodies on the other, is inevitably to some degree arbitrary and may create some anomalies. There may be some very small incorporated companies that are outside the scope of the Bill and some very large partnerships that are within it. But any attempt to sub-divide these categories further would create even more anomalies. For instance, if the size of a partnership were to be the criterion for exclusion from the Bill, it is by no means always true that a large partnership in terms of the number of partners is more commercially skilled in the field of credit than a small partnership of, say, a few experts in the field of finance. Similarly, the relationship of partners to one another has little if any relationship to their need for protection in credit transactions. Further categories
    352
    in partnerships and unincorporated bodies would complicate the application of the Bill unreasonably and introduce an element of uncertainty into whether or not a particular business came within the Bill.
    I thank the noble Lord for the suggestion that we might consider the question of turnover and the figure of £5,000 per annum. I would say two things. First, ally suggestion, including that, will receive consideration. But I must say that from my personal experience if you compare turnover you must compare like with like; that is, turnover in the same kind of business. Once you start comparing turnover in one kind of business with turnover in another kind of business, then you get a large number of anomalies. For example, the comparison of turnover in manufacturing with turnover in wholesaling and turnover in retailing would create many anomalies if the turnover figures were the same for each of those three categories. Therefore, I cannot offer a great deal of hope; I cannot, for example, say that I believe that turnover would be the answer to the problem. But I will give the assurance that the suggestion will be considered.
    LORD SEEBOHM: I thank the noble Lord and beg leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    5.12 p.m.
    LORD JACQUES LORD JACQUES moved Amendment No. 112:
    Page 98, line 16, at end insert ("(including that Part as applied to ancillary credit businesses by section 144)").
    The noble Lord said: This is a drafting Amendment. The present definition of "licence" means licence under Part III and might be construed to cover all licences issued by the Director in respect of persons carrying on consumer credit or consumer hire businesses. Clause 144(1) states that the provisions of Part III, licensing of credit and hire business, except Clause 40, apply to an ancillary credit business as they apply to a consumer credit business. The Amendment makes it clear that the definition also covers licences in respect of persons carrying on ancillary credit businesses, in particular credit brokerage, credit adjusting, debt counselling, debt collecting or operating a credit reference agency. I

    353
    hope that nobody says, "and Uncle Tom Cobbleigh and all".
    On Question, Amendment agreed to.
    LORD JACQUES: Amendment No. 113 is consequential on Amendment No, 3 to Clause 8. The Amendment provides that the meaning of "personal credit agreements" shall be as now defined in Clause 8(1). I beg to move.
    Amendment moved—
    Page 99, line 17, at end insert (""personal credit agreement" has the meaning given by section 8(1);").—(Lord Jacques.)
    On Question, Amendment agreed to.
    LORD JACQUES: Amendments Nos. 114 and 115 go together; they are consequential. These Amendments are consequential on the replacement in Clause 22(1)(a) and elsewhere of the term "personal licence" by the term "standard licence". I beg to move.
    Amendment moved—
    Page 99, leave out lines 18 and 19.—(Lord Jacques.)
    On Question, Amendment agreed to.
    LORD JACQUES: I have already spoken to Amendment No 114A. I beg to move.
    Amendment moved—
    Page 99, line 26, leave out ("(1)").—(Lord Jacques.)
    On Question, Amendment agreed to.
    LORD JACQUES: Amendment No. 114B goes with No. 115C. These two Amendments enable bodies corporate to seal documents instead of signing them. It has been brought to our attention that some bodies corporate make a practice of sealing rather than signing certain documents. There is no reason why this practice should not continue. I beg to move.
    Amendment moved—
    Page 100, line 37, at end insert—
    " "signed" shall be construed in accordance with subsection (2A); —(Lord Jacques.)
    On Question, Amendment agreed to.
    LORD JACQUES: I have spoken to Amendment No. 115. I beg to move.
    Amendment moved—
    Page 101, line 2, at end ifnsert (""standard licence" has the meaning given by section 22(1)(a)"). —(Lord Jacques.)
    On Question, Amendment agreed to.
    LORD JACQUES: I have spoken to Amendment No. 115C. I beg to move.
    Amendment moved—
    Page 101, line 37, at end insert—
    "(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."—(Lord Jacques.)
    On Question, Amendment agreed to.
    LORD HELSBY LORD HELSBY moved Amendment No. 115D:
    Page 101, leave out subsection (3) and insert—
    "(3) A document or agreement embodies a term or security if the term or security is set out either in the document or agreement itself or in another document or agreement referred to in it."
    The noble Lord said: This is a minor suggestion for clarification. It would seem that the words used in this subsection ought to be wide enough to cover the situation envisaged in Clause 105(1), which reads:
    "Any security provided in relation to a regulated agreement or linked transaction but not embodied in the executed agreement shall be expressed in writing."
    In other words, we are talking about security embodied in an agreement. I venture to doubt whether the terms in the clause with which we are now directly concerned are wide enough to cover that situation—at any rate, without a legitimate doubt. A term is not the same thing as a security, nor a document as an agreement; or, at any rate, if they are capable of being the same things, it is just as well for the avoidance of doubt to make quite clear what we mean. I beg to move.
    LORD JACQUES: The purpose of this Amendment would appear to be to ensure that a security can be included by mere reference in an agreement. We intend to amend Clause 105 to take account of this point and to make clear the position with regard to security under that clause. There is no need to amend Clause 184. I hope that with that explanation the noble Lord may withdraw the Amendment.
    LORD HELSBY: I am quite happy that the point should be covered in Clause 105 instead of being covered here. It achieves the objective in what I agree may be a better way. I beg leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Clause 184, as amended, agreed to.
    Clauses 185 and 186 agreed to.
    Clause 187 [Amendments, repeals and transitional provisions]:
    5.19 p.m.
    LORD ABERDARE LORD ABERDARE moved Amendment No. 116:
    Page 103, line 20, after ("instrument") insert ("after full consultation with affected persons.")
    The noble Lord said: The purpose of this Amendment is to put to the noble Lord two points which have been put to me by the Finance Houses Association. The first is that, if the Bill is to operate effectively, credit granters must have reasonable time to make their preparations. Many of the obligations which will fall on them as a result of the Bill are not spelt out in detail, but depend on regulations which have not yet been made. The task of drafting the new forms of credit agreement cannot begin on the day of enactment, but have to wait until these regulations are published.
    When the new forms have been drafted they must be printed—and not just agreements but proposal forms, guarantee forms, reminder letters, default notices, settlement statements, and so on. The regulations will also affect advertisements. Many credit granters are computer-based and this will mean that new computer programmes have to be written and tested. For all these reasons, it is essential that ample time should be allowed between the date of enactment and the publication of regulations and the date of coming into force of the various parts of the Act. So I shall be very grateful if noble Lords opposite can give me some assurance that there will be adequate consultation and time for all these preparations to take place.
    There is a second point. Under many parts of Schedule 3 the provisions of the Bill are to be retrospective. While retrospective legislation is normally undesirable, I can see that it would be unacceptable for a consumer who entered into an agreement—perhaps the day before the Act came into effect—to be denied protection. But I urge that the retrospective nature of this Bill will have effect only to the extent of continuing those measures of protection contained in the Acts to be repealed. In the first place, credit granters might not have
    356
    entered into existing agreements on certain terms, or at all, if they had known of new measures to be applied retrospectively; for example, Clause 101 which gives the consumer a new right to terminate a hiring agreement. Secondly, some of the provisions of the Bill—for example, the calculation of the rate of charge—depend on information which was not known to be essential at the time and was simply not recorded. I hope that these retrospective provisions will be the subject of consultation with the parties involved, so that they do not lead to any avoidable difficulty. I beg to move.
    LORD JACQUES: This Amendment seeks to make it mandatory on the Secretary of State to carry out full consultation with affected persons before making any Order to bring into operation various parts of the Bill as provided in Schedule 3. Mandatory provisions requiring consultation before Orders are made are not unknown in legislation, but they are usually reserved for delegated legislation of major importance. We do not consider that such a provision would be appropriate to Orders bringing parts of the Consumer Credit Bill into operation.
    The many regulations that the Bill will require before it is brought fully into operation will affect a wide variety of business interests and individuals. A legal requirement to consult all those affected would impose too wide a burden which, in individual cases, might be difficult to define and which, in consequence, might make it possible for dissatisfied individuals or organisations to slow down the bringing into operation of the much-needed reforms contained in the Bill. Nevertheless, we intend in practice to carry out the widest possible consultation before regulations are made under the Bill.
    As all those connected with its preparation will be aware, the consultations leading up to the Bill were of the most comprehensive kind. The Department consulted no less than 151 representative organisations and individuals on the Crowther Report, subsequently circulated consultation papers on various aspects of the proposed legislation, and had many other consultations on the previous Administration's White Paper. In addition, there have been constant informal consultations between the representatives of organisations mainly affected by the

    357
    Bill and Ministers and officials. We intend that this pattern of consultation should continue throughout the drafting of the regulations under the Bill. In these circumstances we do not consider that any requirement to consult is necessary or desirable.
    On the subject of the retrospection, it must be noted that the various provisions referred to apply only to events which happened after the commencement of the Act in respect of agreements entered into before its commencement. There is no question of applying any of the provisions to events which happened before the commencement of the Act. One must also bear in mind that there must be some retrospection. Otherwise, some agreements which have already been made could go on for the next ten or twenty years—some indefinitely—without being affected at all by the Bill. Therefore, to some small extent the Bill has to be retrospective in the sense that it has to refer to agreements which are already in effect.
    LORD ABERDARE: I did not expect that the noble Lord would accept this Amendment to impose a legal requirement upon the Secretary of State. But what I wanted was a commitment to a continuation of the widest possible consultation, and I am very grateful to the noble Lord for giving that to me. I hope that that will also cover the difficulties about retrospection which I mentioned. I take the point that the noble Lord made, but there are difficulties where information which may well apply to agreements made previously, is required when the Act comes into effect. This information may not have been collected at the time when the agreement was made and may not be on the computer. But these are the sort of matters which can be ironed out only by consultation between the parties involved, and I am very grateful to have had the noble Lords' assurance that this will take place. I beg leave to withdraw the Amendment.
    Amendment, by leave, withdrawn. Clause 187 agreed to.
    Schedule 3 [Transitional and commencement provisions]:
    LORD JACQUES: I have already spoken to Amendment No. 117. I beg to move.
    Amendment moved—
    Page 112, line 9, leave out ("personal") and insert ("standard").—(Lord Jacques.)
    On Question, Amendment agreed to.
    LORD JACQUES: I have already spoken to Amendment No. 118 and I beg to move.
    Amendment moved—
    Page 114, line 28, leave out ("personal") and insert ("standard").—(Lord Jacques.)
    On Question, Amendment agreed to.
    Schedule 3, as amended, agreed to.
    Schedule 4 [Minor and consequential amendments]:
    LORD JACQUES LORD JACQUES moved Amendment No. 119:
    Page 115, line 40, after ("goods") insert ("which is a consumer credit agreement within the meaning of the Consumer Credit Act 1974").
    The noble Lord said: Amendments Nos. 119, 120, 121 and 122 are Amendments to correct drafting errors. I beg to move Amendment 119.
    On Question, Amendment agreed to.
    LORD JACQUES: I beg to move Amendment No. 120.
    Amendment moved—
    Page 116, line 34, after ("goods") insert ("which is a consumer credit agreement within the meaning of the Consumer Credit Act 1974").—(Lord Jacques.)
    On Question, Amendment agreed to.
    LORD JACQUES: I beg to move Amendment No. 121.
    Amendment moved—
    Page 118, line 46, after ("goods") insert ("which is a consumer credit agreement within the meaning of the Consumer Credit Act 1974").—(Lord Jacques.)
    On Question, Amendment agreed to.
    LORD JACQUES: I beg to move Amendment No. 122.
    Amendment moved—
    Page 119, line 6, after second ("agreement") insert ("which is a consumer credit agreement within the meaning of the Consumer Credit Act 1974").—(Lord Jacques.)
    On Question, Amendment agreed to.
    Schedule 4, as amended, agreed to.
    Schedule 5 agreed to.
    Clause 188 agreed to.
    LORD SHEPHERD: At an earlier stage we agreed to postpone consideration of Part IX and therefore in these circumstances I beg to move that the House do now resume.
    Moved accordingly and, on Question, Motion agreed to.
    House resumed.

CLERICAL, MEDICAL AND GENERAL LIFE ASSURANCE BILL [H.L.]
Returned from the Commons pursuant to the Lords Message of Thursday last.
House adjourned at half-past five o'clock.