HL Deb 06 May 1974 vol 351 cc348-59

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 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 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 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 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 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 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 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 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 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 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 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 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 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 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.