HL Deb 06 December 1979 vol 403 cc919-53

5.32 p.m.

Lord SAINSBURY rose to move, That this House takes note of the 8th Report of the European Communities Committee on the approximation of the laws of Member States, relating to Consumer Credit (5147/79) (H.L. 30). The noble Lord said: My Lords, this report is on the draft Directive on Consumer Credit, and I feel that, as on previous occasions, I have to apologise for the complexity of the subject matter, which has so many legal impliactions. It requires a lawyer's mind, which I have not got, but the committee was most fortunate in having the advice and guidance of Miss Smith, formerly legal assistant in Sir Charles Sopwith's office. Our report was published, as your Lordships will be aware, in July—too late for debate before the Summer Recess, during which time most of us had other things to think about.

Before dealing briefly with the report itself, may I, by way of introduction, refer to a recent survey by the Office of Fair Trading, which states that there has been a massive increase in the number of people using credit during the 1970s. A survey in 1969 showed that only 22 per cent, of adults were using some type of credit, while by 1977, 54 per cent, were using credit facilities. The number is undoubtedly growing all the time, and therefore consumer protection from unfair conditions of credit is of real concern to an ever-increasing number of people.

Turning now to the report itself, the committee fully endorse the aim of ensuring a minimum standard of protection for consumers throughout the community. In other words, we support the underlying principles of the draft Directive. Our main criticism is confined to the way the proposal attempts to put the harmonisation of consumer credit legislation into effect.

Most of the provisions in the draft Directive have their origins in the United Kingdom Consumer Credit Act of 1974. However, if the proposal in its current form were adopted, it would introduce rules and concepts which would be unworkable in practice, and which would actually impede the implementation of the United Kingdom Act. Our view is that the proposal should be confined to general statements of principle, and less formal means should be adopted for ensuring that these are put into practice.

I should now like to mention one or two of our specific criticisms. First, there is the usual problem we have in many Directives—that of definitions: in particular the definition of the terms "consumer", (which differs from that in the United Kingdom Act), "effective annual rate of interest" and "credit agreement." We are worried that the latter term, as defined in the proposal, would include purchases made with credit cards, such as Access or Barclaycard. As the proposal stands, credit card transactions would have to be in writing, signed by both parties, and contain details of the credit given with related charges. This would clearly not be practicable in view of the large numbers of purchases made with credit cards. As we state in paragraph 13 of the report, The Committee can see no benefit to the consumer in such a result, and do not believe that it would work in practice. The consequence might be a grave disservice to the consumer if the use of credit cards were curtailed".

We were concerned that the draft Directive would not apply to agreements where the loan has to be repaid within three months. The consumers in the European Community Group gave evidence that considerable hardship could be suffered by consumers under short-term loans, often by small money-lending businesses, with repayment periods of as little as eight to 10 weeks at very high rates of interest. These would escape the provisions of the Directive, and the CECG said that they felt most strongly that to exempt such agreements was inappropriate and that a number of payments restriction would be a much fairer way.

Another matter of great concern is that no exemption is made in the Directive for certain low rate, essentially noncommercial agreements. This would create difficulties for organisations such as credit unions. These are voluntary savings and loan co-operatives which may not, by law, charge more than 1 per cent, a month in interest and are almost entirely run by volunteers. The Directive would lead to a great deal of extra paper-work which, we were told, would seriously interfere with the voluntary work of these organisations. The consumer is unlikely to be at risk under such agreements, and we therefore recommend that such low rate, non-commercial agreements should be exempted from the proposals' provisions.

The British Bankers' Association, in a written submission of evidence, expressed their concern about the requirement that consumers be informed in writing whenever there is a change in the rate of interest or the charges under an overdraft agreement. They state: Whilst it is fair and reasonable to reply to a consumer when he specifically requests information, it is an unnecessary burden to be obliged to do so upon every occasion regardless of whether the consumer requires the information". The committee considered this requirement to be unduly onerous, and felt that it could discourage banks from extending overdraft facilities.

There are many other detailed matters in the Directive that I could mention, but I do not want to speak too long and weary your Lordships. I am sure other speakers will cover the points which I have not covered. However, I should like to call your Lordships' attention to a matter which has arisen since the report was published. The chairman of the Mail Order Traders' Association has pointed out that there is no mention in the report of the problems of purchases under running accounts agreements, and the association would like the remarks in paragraph 13 of the report, which deals with credit card purchases, extended to cover running accounts purchases. Perhaps the noble Lord speaking on behalf of Her Majesty's Government would deal with this point, of which I have given him prior notice.

The Mail Order Traders' Association are also worried that the activities of mail order agents would be adversely affected by the committee's suggested rewording of Article 4 of the Directive. Article 4 in its present form allows, Member States to prohibit unsolicited visits". In the report we recommend that the article be revised to read, Member States shall either regulate or prohibit unsolicited visits to a consumer at his home…". We think that the association's anxiety is unjustified because the suggested revision, in addition to guaranteeing at least some protection to the consumer, leaves it to the Member State to decide what degree of protection is appropriate.

Before concluding, I should also like to mention the suggestion made by a witness from the Consumers in the European Community Group which the committee is recommending for consideration. This is that before a Directive is adopted each national Government should state, before final approval of that Directive, how they intend to implement it, either in an annexe to the Directive or in the Minutes of the Council of Ministers. In this way national Governments and the Commission could discuss whether or not proposed legislation appeared likely to put into effect the general principles laid down in the Directive.

My Lords, the problem is not new. It has arisen in relation to other Directives. The point at issue is how harmonisation Directives can be both detailed enough to bring about genuinely harmonised standards in Member States but not so detailed or specific that laws have to be unnecessarily amended. It is a question of balance between general statements of principle and excessively detailed requirements, as proposed in this draft Directive. My Lords, I beg to move.

Moved, That this House takes note of the 8th Report of the European Communities Committee on the approximation of the laws of Member States relating to Consumer Credit (5147/79) (H.L. 30). —(Lord Sainsbury.)

5.47 p.m.

Baroness SEEAR

My Lords, it would be unwise for anyone speaking after so great an expert on this subject as the noble Lord, Lord Sainsbury, to go in great detail into the terms of the Directive, for it is a highly technical matter and he has explained its limitations and its strengths in a way that no one else in your Lordships' House, I think, could rival. I want to concentrate on the last point that he raised. Of course, nobody can be against the idea of protecting consumers in the area of consumer credit. The objectives of the Directive must be unchallengeable. But I think I have spoken in the majority, at any rate, of the debates on EEC reports, and on nearly every occasion I think we have had to say that the detail of the Directive is absurd in relation to the objective to be achieved. We have reminded ourselves again and again that a Directive is not a regulation; that, if it is supposed to contain a great deal of detail, this should be laid down in a regulation; and that the whole purpose of a Directive, in the wording of the Commission itself, is that it should declare the intention and leave to the different countries the detail as to how that objective is to be achieved.

We have said this again and again; and what I want to say to your Lordships this evening is that surely we could not have a better case than this for saying that we want to challenge the way in which Directives are coming forward. This is not a highly political matter; it is not a highly sensitive matter which is going to arouse a great deal of political animosity. That is the last thing we want to do in relation to the EEC at the moment. This is a perfect case for testing this matter, because we already have our own legislation. I understand from the noble Lord, Lord Sainsbury, that in fact our own legislation was drawn on in order to formulate the Directive. What could be more transparently ridiculous than, they having done that, we should then have to go to a great deal of expense and trouble to adjust back our legislation (which, so to speak, taught them their business, if I may be permitted to sound a little chauvinistic, although I am not in the least) in order to satisfy this Directive?

I implore your Lordships and the Government that we should not go on doing this. Let us take this case. How can we, not just go on talking about it in your Lordships' House but bring pressure to bear in Brussels so as to stop this happening? I do not know; it may be that the appropriate member of Government could talk to Mr. Roy Jenkins and say that this is ridiculous, that it is contrary to what the Commission is supposed to do in terms of the nature of Directives and that we want to find a better way. This kind of thing—and I speak as an absolutely committed European—is doing more harm to the standing of the European Community in this country than many other issues of far greater importance. If the anti-marketeers had set out to find a way of discrediting the Community they could not do better than produce some of the draft Directives that we have had before the House.

Can we not really this time, instead of just deploring it, do something? One possibility is that the Government should take it up with the Commission. I do not know the procedure, I do not know whether it is right to go to Mr. Roy Jenkins, but I should have thought it quite likely to be right; but if not to him alone, why not to him as well? I regret that the noble Lord, Lord Bethell, is not present. I was hoping that he would be here when we had this debate. We now have MEPs and in this House we have MEPs overlapping with membership of this House. Is this an appropriate matter to take up and push through the European Parliament? All that I am saying is this. Do not let us go on again wringing our hands and doing nothing.

Here in this report we seem to have, as the noble Lord, Lord Sainsbury, pointed out, in paragraph 29 two suggestions as to how we can overcome this nonsense. Can the noble Lord, Lord Lyell, give an undertaking that on this something will be done? The suggestion in the report is: … before a directive is adopted Member-States should state how they intend to implement that particular directive". That is what Directives are supposed to be about, the report goes on: It would then be possible for the Council to determine whether particular proposed implementing legislation would in fact fulfil the purpose of the directive …". Surely there is a line of action that can be pursued as a possible solution to the problem. It would be a valuable debate tonight, if, as the result of it, we resolved this time that we are going to take it up at the right level and do something about it.

5.52 p.m.


My Lords, I support fully the words of the noble Baroness who has just spoken on this matter; but we have the report so I am going to go into some detail and shall run the risk of competing with the noble Lord, Lord Sainsbury. We are grateful to the noble Lord, Lord Sainsbury, not only for the work he has done in preparing this report on such a technical matter but also for raising it in your Lordships' House tonight. I should like to speak briefly to certain points raised by the draft Directive. I believe it is fundamental to any consideration of a Directive that, in the first place, everyone understands what is meant by the key terms. Definitions that are precise and will be interpreted in the same way by all Member States are essential to the sensible working of this Directive. This also forms the basis of harmonisation; but it soon became clear in evidence to the committee that the definitions in this Directive were open to different interpretations and, therefore, unless there are a number of changes to the document, it will not achieve the purpose for which it is designed.

For a start, the definition of "consumer" is complicated by the word "predominantly". This is misleading and I agree with the evidence that a change to the definition used in our 1974 Consumer Credit Act would be beneficial. The definition of "credit agreement" (Article 1.2(c)) is clearly capable of two meanings, as was pointed out in evidence which your Lordships will find on page 14 of our report. This is a point that must be clarified before the Directive is implemented. Next comes the difference in meaning between "effective annual rate of interest" and "annual rate of interest." This was a point that the noble Lord, Lord Sainsbury, raised. I am sure that your Lordships will be aware of the problem when you read Article 6. Paragraph 2(a)(iii) refers to the "effective annual rate of interest"; but paragraph (b) (iii), which relates to credit cards, refers to the "annual rate of interest"; and paragraph (c) refers to the "annual rate of interest and any other charges" as well as "the effective annual rate of interest". Evidently, there is a need for redrafting on these points in order to clarify exactly what is meant.

My Lords, it is probably unusual to wish to add to Directives from Brussels but there is a need to do so when it comes to defining supplier and retailer. Perhaps I can illustrate it in this way. If I go into a shop to purchase a television but cannot afford to pay for it, there are two ways of surmounting the problem. Icould arrange a personal loan from, say, a finance house. The money is lent to me; I purchase the television and, in this instance, the supplier is the same as the retailer. However, the retailer could say to me that he has a better agreement with the same finance house and it would be beneficial to me to use his hire purchase agreement. What, in effect, happens here is that the retailer sells the television to the finance house and I buy it from them. The finance house, therefore, becomes the supplier and is a different entity from the retailer.

Now, my Lords, what happens when the television goes wrong? Where is my redress in the second example? Is it with the finance house as the supplier or is it with the retailer? The Directive does not make this clear but it is basic drafting to differentiate between the two as this has a direct effect on the interpretation of Articles 1.3 and 13.Perhaps my noble friend Lord Lyell would care to comment on this on behalf of the Government in due course.

My Lords, I now move on to another point mentioned by the noble Lord, Lord Sainsbury: Article 1(3)(b) relating to credit cards. At the moment, the Directive equates transactions under a bank credit card with the credit agreement itself. I understand that the credit card is basically an Anglo-American invention and is not widely used in Europe. Therefore, there is some difficulty in understanding the way it works and its benefits. Under the Directive every retail establishment—and there are in this country over 140,000 which use credit cards—would need to display detailed information concerning the various credit cards accepted and provide quotations on request. Every transaction would be subject to a long and complicated written agreement signed by both parties and containing a considerable amount of detail about the credit itself. In effect, the credit card system which we know would become virtually inoperable and this would have enormous repercussions throughout the country. I understand that there are negotiations in progress on the redrafting of this clause, not so as to make the credit cards above the law or exempt them from certain provisions of the Directive but just so as to allow us to continue to use them on the same basis as at present. Can the Government confirm that they are in agreement on this point and that they are supporting the negotiations taking place in Brussels at the moment?

There are a number of other points of importance that the committee raise. I should like to draw your Lordships' attention to two of them. First, in Article 4, the words "may prohibit unsolicited visits" should be changed to "may prohibit or regulate unsolicited visits", for obvious reasons. Secondly, it is envisaged that Member-States shall implement the necessary measures to comply with this Directive within 18 months. I appreciate that not all Member-States will wish to introduce legislation running to a basic 193 sections and five schedules as in our 1974 Act. But this matter is so technical that at least three years should be allowed for implementation.

I believe that the Directive strikes the right balance between broad principles and detail and that, with certain amendments, it could prove beneficial, particularly if credit on an intra-Community scale increases. However, before that happens, it is fundamental to obtain unanimity on the definition and interpretation of the key words and phrases.

6 p.m.


My Lords, I think we all have to thank our Select Committee for this report on consumer credit. I do not know how we could keep up with or even understand the EEC Commission reports but for our Select Committee. Because the Select Committee reports are so good and because we have a reasonable time to debate them —although, sometimes, we could perhaps do it a little earlier in the evening—I think that we have a considerable advantage over the other place. We make an important contribution to the discussions of this Commission's draft resolutions.

I should like to thank the noble Lord, Lord Sainsbury, for his very clear exposition of the report to the committee, of which he was the chairman. So thorough was his report that I only want to make a few general points. I do not want to cover the whole general ground again. The draft Directive is under Article 100 of the EEC treaty. This article is extremely wide and it should be used by the Commission with very great care and caution. All sorts of slight divergencies in the legislation of the various Member States could, to quote the terms of Article 100, … influence the free movement of goods and services". The wide terms of Article 10 might mean or lead to the Commission sorting out matters to harmonise which could often achieve very little and cause a lot of concern and trouble. This has happened on a number of occasions.

This particular draft Directive is on the right side of the line but not by a very large margin. I do not think that it is as important as all that. The noble Earl, Lord Caithness, referred to definitions. I agree very much with what he said. It is a grave defect of a number of Directives—including this one—that they have either vague definitions or sometimes no definitions at all. I agree with the noble Earl that there is no proper definition of the key word of this draft Directive, which is the word "consumer". It depends, as he said, on the very vague and undefined term, "predominantly". It takes the courts months to discuss what "predominantly" means. He said that there is no definition of another very important term, "the annual rate of interest".

I should like to turn briefly to two fundamental criticisms of the draft Directive which were made in evidence given to our Select Committee. First, the evidence by the Finance Houses Association (which appeared on page 20) which said: …this type of legislation may be striving towards an impossible goal, given differences in language and interpretation … and differences in trading concepts within member-States". This seems to go so far that as it stands it would make almost all harmonisation impossible; but none the less there is some force in this argument. Member States do have different deep-rooted customs, traditions and histories. The supporters of supranationalism in the Community go much too far in favour of the concentration of power against Member States. In my view, there is no future in such notions as federation or confederation, though I have never understood the difference between the two. Such ideas seem to me impossible of achievement; it would involve an exercise of power over Member States which could never be tolerated by great and traditional nation-States.

Nowhere else in the world is there a close community of this kind consisting of independent and ancient nations. This does not mean that no progress towards greater union can be made; but it means that we must find a new type of evolution towards closer union than has been discussed in the main in the past, something which perhaps could be called parallel development. I do not think that the Community should attempt the impossible task of imposing rule over Member States. Its aim should be to achieve power about equal to those of the major States in the Community. The power of the Community and the power of Member States should then be exercised in parallel, not one over the other.

This brings me to the second fundamental criticism in the evidence given before the Select Committee, this time by the Consumer Credit Association of the United Kingdom. At page 38 the Association quotes from the Directive as follows: … the provisions of the Directive can only be minimum provisions … member-States must be allowed to adopt more stringent provisions". Then the Association goes on to comment on this: —which statement removes any likelihood of effective harmonisation and in our view, renders the whole exercise pointless". That is a very strongly expressed view. In my opinion, on the other hand, the Commission's proposals for minimum provisions are the right way to proceed. It is an example of what I have called "parallel development". The Commission has a proper role in attempting to raise the general standards of consumer protection in the Community while leaving Member States like ourselves to achieve higher than these minimum standards. Therefore, while agreeing that the points in the Directive criticised in the report of the Select Committee should be amended or in proper cases eliminated, I support the recommendation of my noble friend Lord Sainsbury and the Select Committee that we should accept the general framework, the underlying principles and the approach of the Commission's draft Directive.

6.6 p.m.


My Lords, I should like to thank very much my noble friend—if I may so describe him in these circumstances of the EEC scrutiny committee— Lord Sainsbury for introducing this Motion, and also for the skill and wisdom with which he chaired the subcommittee which examined this problem on behalf of the Select Committee. It seemed to me that in the first instance this particular Directive must have been introduced because there was a need for it on the Continent of Europe. Sometimes—particularly in relation to consumer affairs—in this country we tend to forget that we have a common border in Ireland with other Community Members and we tend perhaps not to see quite as clearly as those which have their countries adjacent to one another the fact that they are sharing all sorts of services like shops, credit arrangements, advertisements and newspapers on the borders between these countries. So it seems to me that perhaps this was the reason for having this Directive.

If it was not that, it seems such a puzzling Directive because it seems to learn from our Consumer Credit Act, but then to proceed to turn it upside down. Here I strongly agree with the noble Baroness, Lady Seear, that the Directive, as it turns out, is calculated to add fuel to the fire of the people who are against the Community because it seems such nonsense when translated into our terms. Therefore, it does much more harm to the Community than it should do, because people just cannot understand it.

With that background, it seems to me that it must be something to do with the Continent of Europe that was the cause of this. It was with that in mind that on page 5 of the report, in Question 19—and I shall read parts of it for the benefit of those who do not have the report—I asked the Department of Trade representative: Is this, when it comes into effect, going to make it easier for credit to be given across frontiers, as it were, to consumers, or is that more or less ruled out by the various caveats which are written into the context, and if not, why not? Not a very good question, my Lords, but it seemed to work at the time. It will be noticed that the reply was: I think that the Directive should make it a little easier to give credit across frontiers. I think though another reason for having it would be that up to now the consumer credit legislation of the member-States has grown up in its own way". I will not go on with that answer.

I then asked another question: Is it more a good basis than a final solution, so to speak?"— to which the Department of Trade representative said: "Yes". It seems to me that there is not very much point in this directive applied in its present form. It is not going to help our Community partners in Europe—not very much anyhow, if one is to believe the Department of Trade. It is certainly not going to help us. Here I would strongly support the first sentence of paragraph 28 of the report: The Committee consider that the present proposal would, if adopted in the form in which it is currently drafted, introduce rules and concepts which not only would impede the current progress which is being made in the implementation of the Consumer Credit Act in this country but would be unworkable in practice". That is very firm and, I think, very right, on the basis of all that there is in this booklet. It seems that in this area of pursuing the interests of consumers, the Commission is perhaps starting to lose its way and I think there is a bit of evidence in this direction. It is not covered by the harmonisation part of the Treaty of Rome but by this very broad Article 100, which can mean anything to anybody. So one then wonders: what is the solution? It is here that I very strongly support the noble Lord, Lord Sainsbury, and the noble Baroness, Lady Seear. It is in our paragraph 29 with the recommendations by the consumers.

Before I move to that perhaps I might also direct your Lordships' attention to the views of the principal consumer organisation, that is the Consumers in the European Community Group, UK. On page 24, about a third of the way down, above the statement "DETAILED COMMENTS" they say: Adoption of the directive would mean little specific improvement for UK consumers who have the protection of the Consumer Credit Act 1974. but CECG believes it important that standards of consumer protection throughout the European Community should be brought up to the highest level". That is absolutely clear. There is no doubt about it, and it would seem to me that one would entirely support it: indeed the Sub-Committee and the Select Committee have done so. But these very excellent consumers with a balanced opinion, which we in this country are privileged to have—I do not think the same degree of responsibility exists in other parts of Europe—have made a positive and forward-moving suggestion, which the noble Baroness, Lady Seear, at once latched on to as being a probable best solution. This is that where you are in an area in which you are using somebody else's legislation to bring everybody else up to the same standard and you are dealing with a subject which is not harmonisation, there is immense merit in producing a draft and inviting companies to say how they are going to match the needs of the draft.

I would suggest that that was the way the Commission tackles it in the first place; not only would it do itself a lot of credit but it would also probably write the Directive in a rather different form which would lend itself to the right sort of answer. It would not try to go into detail—a detail which, as my noble friend Lord Caithness has pointed out to us, is not very precise and therefore not as helpful as it should be. It would try to do that; it would produce a Directive which established broad principles—and in this report we have agreed that the principles are entirely to be supported—and would invite people to say how their present legislation matches up to it and, if it does not, what they are going to do about it. This is a wholly admirable method of approach; we might even stretch that to the harmonisation Directive, though there are obvious problems there. But certainly, in this whole field of consumerism and related subjects, it could have been applied, for instance, to the problem of misleading advertising, in which we had a very similar situation, where the Commission has tried to help us. I do not want to divert to that but it is a parallel, and the sort of solution which the consumers have suggested for this Directive would have suited that very well too.

I hope that somehow my noble friend on the Front Bench can trumpet this across the Channel to Brussels so that the message may get through strongly from, so far, three Benches. The noble Baroness, Lady Seear, the noble Lord, Lord Sainsbury, and I are all agreed on this point, and no doubt there may be other noble Lords of the same opinion. The Commission has a chance to recover some of its lost credibility in this country, and no doubt in others.

6.16 p.m.


My Lords, in rising to make four points in this debate, I run the risk of consuming every bit of credit that your Lordships in your kindness would give me by way of patience, so let my say at once that at this hour I propose to make every one of those points as shortly as possible.

The first is to join with others who have expressed their gratitude to my noble friend Lord Sainsbury and the members of his committee for producing this report and to the noble Lord for the way in which he introduced it to us tonight. A lot of technical evidence was taken, as appears from the report. It was a very arduous task, and the noble Lord and the members of his committee are to be congratulated on the succinct way in which the report has been presented, on its clarity of language and on the recommendations made.

I move speedily to my second point, which is on the Consumer Credit Act 1974. It has been eulogised in the course of this debate, and rightly so. It consists of a very big structure of rules that have been made in that Act for the protection of the consumer. The one point I would make in regard to it is this: the Act was passed in 1974 and, admirable though it is, it has not yet been implemented. If I may, I would ask the noble Lord, Lord Lyell, when he comes to reply to give us some indication of when the implementation can be expected, because it becomes a little difficult for us to praise our Act and to say how fundamental it was to the consideration of the Community when, as I say, the Act has not yet been implemented.

My third point is respectfully to venture a difference with one of the recommendations made in the report. Your Lordships will have noticed that there is no upper or lower limit in the Directive by way of amount of a contract which is going to be governed by the Directive. Under, I think, Article 2(e), there is power for any Member State to provide for such maximum and minimum limits, but the consultation in regard to that has to take place with the Commission, and the Commission has to agree.

If you are to have minimum standards, I would have thought it very necessary that there should be consultation with the Commission. I can well understand the reason why different States would differ in regard to the upper and lower limits. Matters of inflation, economic conditions, and so on, in each State would vary, but it would be a very easy way for a Member State to defeat the minimum standards if you allowed complete discretion to the Member States to say what amount of contract on the lower or upper level should be governed by this consumer credit legislation. If your Lordships will refer for one brief moment—those who are fortunate enough to have this red-covered document—to page viii, you will see that, in regard to that, paragraph 16 refers to exemption (v), which deals with the amounts greater or lesser than particular sums to be fixed by the Commission for a Member State, after consultation with that Member State. On exemption (v) above", the report states, it was the view of several witnesses that the fixing of upper and lower limits should remain the prerogative of Member States, which would set rates appropriate to the prevailing financial and economic conditions". This would give no right that the Commission should be consulted or could disagree, and in my respectful view it would defeat the very object of the exercise, which is to set minimum standards.

I come quickly to the last point that I want to raise. May I express my profound and respectful agreement with all that was said by the noble Lord, Lord Sains-bury, the noble Baroness, Lady Seear, and other speakers relating to the form of both this and similar Directives. The point has already been made— therefore it is quite unnecessary for me to repeat it at length—that this is not even a harmonisation Directive. As the noble Lord, Lord Mottistone, emphasised, it is a Directive which seeks to set minimum standards. Therefore one would expect, as the report implies, there to be an expression of principles and not the detail that we have in this Directive.

If the noble Baroness will permit me, I want to add force to her argument. She started this desire for battle to be waged. Therefore I want, if I may, to supply a little ammunition. It is not only a question of it being unnecessary detail. It is not only that Member States have different traditions and different laws. It leads to delay as a result of draft Directives coming in and various Member States sending in their amendments. And finally it leads to nonsenses. I want to add to the ammunition by venturing to suggest that there are nonsenses in this Directive. That is what happens if you get into detail.

I shall mention just four examples. The first is Article 1(3), which deals with an agreement for the supply of goods or the provision of services on credit. It provides that such an agreement should be regarded as a credit agreement even where the credit agreement with the consumer is contained not in the agreement for the supply itself but in a legally separate document. In my respectful view, this article is basically unsound since it seeks to treat a supply contract, financed by a credit agreement, as itself a credit agreement where there is co-operation between the creditor and the supplier. Not only is it erroneous and pointless to designate the supply contract as a credit agreement, when often it will be only for a supply of cash, but it also has the disadvantage that all the requirements for the formalities of credit agreements and their contents will have to be duplicated in relation to the supply contract.

The second example is one which the noble Lord, Lord Sainsbury, has dealt with, and several other noble Lords have also referred to it. It is Article 6(2)(b), which relates to credit cards. I make an additional point which has not yet been raised—and I believe that I make it correctly—with regard to Article 6(2)(b)(iii), where there is a requirement that there should be a statement of the annual rate of interest and charges. And this relates to credit cards. I should have thought that an obligation to state "the amount of any charges" for a credit card is impossible to comply with, since the amount of the charges will not be known in advance of the use of the credit card.

I turn next to my third example. Article 9(1) provides in general terms that a credit agreement shall be void—and I emphasise the word "void"—from the time the creditor repossesses goods supplied under a credit agreement. As drawn, the article appears to apply even if repossession is pursuant to a court order. But that is not my major point. It provides, as I said, that the agreement shall be void. In English law, if an agreement is void it denotes invalidity from the beginning of the contract, with the consequence as I see it, that under our law sums already paid by the consumer would presumably have to be repaid.

May I give your Lordships my last example. Before I do so, however, and in order to show the uselessness and the nonsense of it—I say that with some amount of deference to those who have drawn up what is an amended Directive— I should like to point out that there is an Article 9(2) which should have been absolutely sufficient to cover this point. In simple language it states a principle. This is what the noble Baroness, Lady Seear, and the noble Lord, Lord Motti-stone, indicated. This is the principle. Article 9(2) says that Member States shall lay down rules to ensure that repossession of goods does not lead to unjustified disadvantages for any of the parties involved. What more could one want than that bit of guidance?

I turn, I promise, to my very last point and example and then I further promise to sit down. Article 14(1)(d) mystifies me. It says, in effect, that a banking company cannot extend credit unless it obtains and retains authorisation to carry on a banking business. It passes my understanding why the right to extend credit should be dependent, in the case of a banking company, upon its obtaining and retaining final authorisation to carry on a banking business. As I understand it, banking controls are designed to protect the public in relation to deposit-taking institutions. If an institution ceases, for any number of reasons, to be entitled to take deposits, that does not, as I see it, seem to be any good reason for preventing it from extending consumer credit when organisations which have not been involved in taking deposits are quite free to extend consumer credit.

I hope that I have supplied some of the ammunition which the noble Baroness and other contributors to this debate want for a battle which I believe is a worthy one; namely, to teach, with the utmost respect and courtesy, our brethren in Europe not to fire Directives of this nature at us.

6.29 p.m.


My Lords, I should like to reiterate the thanks which have been voiced this evening by so many speakers to the noble Lord, Lord Sainsbury, for having so adequately dealt with the report of the Select Committee. The Select Committee on the European Communities invariably examines with very considerable thoroughness those regulations, or proposed regulations, or Directives which come before it. As I have said on many occasions in this House, the Select Committee reports from this House as a consequence are held in very high esteem in Europe itself, and, of course, in the European Parliament.

There has been an astonishing degree of unanimity among all those who have spoken in this debate this evening and one is bound to ask the question—and I put it to the noble Lord, Lord Lyell, who is to reply—as to whether this proposed Directive is really necessary at all; as to whether the Government might consider causing instructions to be given at COREPER level and, if necessary, at Council of Ministers level to ask that this proposed Directive be withdrawn.

Quite clearly, it has sought to do two things at the same time—or rather it has sought to justify the proposed Directive for two different reasons. It first justifies it under Article 100 of the Treaty of Rome, which makes it desirable that Member States should, wherever possible, harmonise their laws. We have had a number of those in the EEC. There are regulations, which my noble friend Lord Gordon-Walker will recall, dealing with suggestions for the harmonisation or standardisation of mayonnaise throughout Europe and other matters of that kind. There has indeed been a tendency which has grown over the years for the Commission Directorates to put out proposed Directives almost for the sake of putting them out, regardless as to whether or not they are important.

Indeed, the Commission itself must be conscious of the fact that the main reason that it gave for bringing forward the proposed Directive was Article 100, because in its observations on the Directive it invokes the necessity for ensuring harmonisation in order to ensure that free competition is preserved under the provisions of the Treaty. It says: The fact that there are differences between the various laws therefore influences the volume and type of credit taken up by consumers and thus hinders harmonious development within the Community. Those differences also affect free competition between creditors. A competition which is protected from distortion is one of the fundamental principles of the Common Market". So there is a suggestion all the way through that, unless a proposed Directive of this kind is enforced in the Member States, there will be a danger of distortion of competition.

As my noble friend Lord Gordon-Walker has pointed out, it is in fact self-contradictory in this particular respect, because under Article 14 of the proposed Directive Member-States must be allowed to adopt more stringent provisions if they consider them necessary for the protection of the consumer. On that basis, if one Member State adopts more stringent provisions than the other that will invalidate the very claim that is made as the purpose for introducing the proposed Directive; that there should somehow be an ironing out of differences for the purposes of avoiding distortion.

I would not wish in any way to add to the very pungent observations that have been made by the noble Baroness, Lady Seear, by the noble Lord, Lord Mottistone, by my noble friend Lord Gordon-Walker and indeed by the noble Lord, Lord Mischon. I agree with everything that they have said. I would leave this thought when considering whether or not we ought even to take this proposed Directive further. In great federations like the United States of America, which has the advantage of a common language, there is no such endeavour to impose within States a complete uniformity of standard in regard to matters of this kind. States within the Union are quite free to make their own particular provisions on matters of this kind, and in fact they do so. Therefore, I put it to the noble Lord, Lord Lyell, that it is for consideration as to whether this proposed Directive ought to be pursued at all; or, if it is to be pursued, as to whether it should be in such form as has been suggested by the noble Baroness, Lady Seear, as being purely a statement of principles to which Member States can conform, or as suggested by the noble Lord, Lord Mottistone, the question as to whether the Member States can be issued with a series of principles and then invited to say how they see the matter.

My feeling is—and I take note of the words of my noble friend Lord Mischon— that the Consumer Protection Act 1974 has yet to become operative. But I would trust that we would look at our own legislation. So far as I see, it is extremely comprehensive and affords much fuller protection than would be granted by conformity with the Directive. For the United Kingdom the Consumer Protection Act 1974 is quite sufficient for us, although we would welcome other Member States complying if they so desire.

6.38 p.m.


My Lords, the first thing I should like to do this evening is to thank the noble Lord, Lord Sainsbury, and his Committee for all that they have done in respect of this particular Directive and indeed in respect of all the other Directives that flood in from Brussels. In my past career on the other side of the House I had the honour to serve on one of the Scrutiny Committees and from everything that I heard all over Europe I would fully endorse the comments made by the noble Lord, Lord Bruce of Donington, on the high regard in which the reports from the scrutiny sub-committees are held all around Europe and indeed in your Lordships' House and in the other place.

I hope the House will bear with me if I go fairly carefully through the Government's views on the committee's report and indeed on the Directive. I will attempt to answer as many questions as I can. I feel rather like the boy, not quite on the burning deck, I hope, but in a fairly hot seat, and some of the questions which came in my direction I felt were rather technical. I shall attempt to answer them but if there are some omissions I would ask noble Lords who have taken part in this debate to bear with me and I will certainly guarantee that everything that has been said tonight will be carefully read and considered and I shall be in touch with noble Lords later.

The House would agree that consumer credit has long been the most important element in this country's consumer protection legislation. Even if we were to regard the usury laws as ancient history— and I believe they are—we have had legislation governing the activities of such bodies as the pawnbrokers—and I am not spelling that with three r's!—since 1872, and there is legislation governing the activities of moneylenders since the early part of the present century. There has been hire purchase legislation in the United Kingdom since 1938. The publication in 1971 of the report of the Crowther Committee provided the main basis to show that there was a need for comprehensive legislation to cover the main element of the Directive on which the noble Lord's Committee has reported, covering consumer credit in all its forms and the consumer credit industry in all its aspects. The outcome was that we have on the Statute Book the Consumer Credit Act 1974. The acceptance of a need for, and the enactment of, more comprehensive enabling legislation were a response to the growth in the volume and diversity of consumer credit transactions since the Second World War.

It would be true to say that a very similar development has unfolded in what are now the EEC countries. There, as in this country, consumer credit began to get under way effectively with such things as instalment sales, and as early as 1936 a chapter was inserted in the Netherlands Civil Code to regulate such transactions as these. Various other Acts and measures were passed in France and more recently in Denmark and Germany, as well as in Belgium. Therefore, it is not surprising that consumer credit found a place in the Community's first consumer protection programme, and that is what we are discussing tonight.

In seeking to devise a Directive on consumer credit, the Commission drew very heavily on our legislation and in particular on the Consumer Credit Act 1974. Because of this need to draw on our legislation perhaps the Commission may be a little upset at the volume of criticism that their proposal has received in the report of the noble Lords' Committee as well as the criticisms whichhave been flying around your Lordships' Chamber this evening. They may feel that the criticism is well based; perhaps they may feel it is unfair. The fact is that it is a very complex area, and experience with our Consumer Credit Act has shown that it is not at all easy to cater for different types of institutions and transactions. I think the speech of the noble Lord, Lord Mishcon, showed up this point more clearly than anything else.

Some of us might argue that consumer credit is a matter which could and would be better left to the Member States. I would not necessarily go that far, at least until the possibility of framing a Directive which would be acceptable to all the Member States has been fully explored. It was for that reason that I was very glad of the comments of the noble Lord, Lord Bruce, and indeed of the noble Baroness, Lady Seear, and I took very careful note of what she had to say. We do not have any statistics of intra-Community commerce in consumer credit but we believe that the potential of this commerce is considerable and the perpetuation of widely differing arrangements could be detrimental in the long term both to consumers' and to traders' interests. We also belive that it is noteworthy that many of the main credit grantors now have overseas connections and have European consultative organisations. In addition, now that exchange control restrictions have been removed, credit grantors in various Member States may wish to take advantage of the freedom of services provided by the Treaty of Rome to provide credit on a service basis to consumers resident in other Member States. Harmonisation in this particular field could prove to be a matter of importance where we have much to contribute in laying the foundations of such future community legislation as may be passed.

I hope the House will allow me to turn now to the Directive itself. It is a matter of paramount importance to bear in mind that the aim is to provide a minimum of Community-wide protection whileallow-ing Member States to have these more stringent provisions if they wish. I do take all the points that have been made about harmonisation, but I think that if we bear in mind that the main priority in these Directives, especially this one we are discussing, is the laying down of minimum standards of Community-wide protection, things will be a little clearer in our minds. If we put it fairly simply, as a general rule we should be able to retain a provision in the Consumer Credit Act 1974 if it gives the consumer in this country equivalent or greater protection than that in the Directive.

It may be argued that this really is not harmonisation. That is a valid point, but if Member States were not to be allowed to have more stringent provisions then harmonisation would be at the very considerable cost of reducing our protection to the level of the Member State which is prepared to do least to protect its consumers. We believe that harmonisation at such a cost would be wrong in principle and that the Commission were in this instance right to propose a minimum Directive allowing Member States to have more stringent provisions than required by the Directive.

The proposed Directive is in many respects not in terms which we can accept, and many criticisms, some major and some minor, have been made about it, both in the committee's report and particularly in the debate this evening. The Government certainly want to see the Directive amended in various respects, not just to achieve greater compatibility with the Consumer Credit Act but also to ensure that the Directive would be workable. I think that is the most important point that I would want to bring out tonight. We believe that some of the provisions in the Directive are far too rigid to provide any framework which is going to be realistic or workable. Certainly it is in the interests of our partners in the Community, as it is in our own interest, to have provisions which, while protecting the consumer, do not impose unnecessary or completely unreasonable requirements on traders.

Some of the deficiencies in these areas may stem from failure on the Commission's part to translate its concepts into suitable provisions. I do not mean translate so far as language is concerned; it is much more a concert of mind and a concert of will. We cannot be sure about these points until a meeting is held to discuss a proposal. We hope that this meeting is likely to be part of a working group set up by the Council after the European Parliament and the Economic and Social Committee have delivered their opinions on this Directive. It will be most interesting to see whether their opinions tally with those expressed here tonight.

We would then, after the opinions have been delivered, be able to obtain the reactions of our fellow Member States. We have criticisms of this Directive and so will they, particularly in view of the different legal systems in existence. It is the existence in Member States of different systems and different concepts which I believe will make it extremely difficult, though we hope not impossible, to get some of the provisions of the Directive expanded to extend the benefits of our own Act to European consumers. At the moment the essential thing is to get the basics of the Directive onto a solid and workable foundation on which we can build. The Government believe that it is vitally important in any legislation, national or supra-national, to get the definitions right. So much depends on them. I would question aspects of each of the definitions in Article 1 of the Directive, but I hope your Lordships will forgive me if I confine my remarks to three of them.

First, the definition of "credit agreement" has the effect of excluding from the scope of the Directive agreements where the principal and the interest are repaid in a lump sum. It appears that short-term loans are often repaid in that way. Pawnbrokers' loans provide a classic example of lump sum repayment agreements which our legislation regulates. It is true that because Article 16 of the Directive we are discussing makes this a minimum provision, we could retain the Consumer Credit Act provisions in relation to these special agreements. None the less, this seems to be a case where the definition is inadvertently far too limited.

The second example that I should like to give is the definition of the "effective annual rate of interest". We believe it to be much better to say "charge"—at least not necessarily to say that in a boisterous way, but possibly to explain it in a more definite way—rather than using the term "interest" as we do in the Consumer Credit Regulations of 1977 which define the total "charge" for credit. More important, the provision appears to require interest and all—I repeat, all— other charges to be taken into account in calculating the effective annual rate.

In theory the Directive is correct, but in practice this provision would be completely unworkable. Where the debtor has to pay a charge, let us say for insurance, to obtain the credit that he is seeking, he may be given the choice of source which is intrinsically desirable both by the terms of this Directive and in terms of our own legislation. But, if that happens, the creditor will not know when the agreement is prepared how much the debtor will have to pay, because probably the interset charges or the insurance might vary from debtor to debtor or perhaps the prospective customer, if he shops around, might get more interesting or competitive charges elsewhere. That is a relevant point, but we should not pursue it too far this evening.

Such charges as might be included in the definition will be unascertainable and our regulations exclude them from the total charge for credit. Of course, there are other charges which have to be excluded if the calculations are not to be over-complex and the resulting rate completely uninformative to the consumer and the customer. The Government think that some exclusions are essential and that, given the differences in law and practice between the Member States, those Member States should be allowed to make their own rules as to the items to enter into or to be excluded from the calculation in this particular definition.

The noble Lord, Lord Sainsbury, mentioned that the Mail Order Traders' Association had pointed out that the problem described in paragraph 13 of the committee's report applies to fascinating items called "running-account credit purchases" in general—I always think there is some element of the Wild West about that with Indians running about, but it does make sense if one reads the legislation—and not merely to credit purchases. We believe that that is a very valid point.

Paragraph 3 of Article 1 says that an agreement for the supply of goods or for the provision of services which is financed by a credit agreement shall be deemed to be a credit agreement. The consequence appears to be that what the Consumer Credit Act calls "secondary documents", such as the sales vouchers used in connection with a credit card, trading cheque, or mail order transactions, would have to comply with the requirements as to the content of agreements set out in Article 6. No one would deny that the appropriate requirements should apply to credit agreements proper, but to apply the requirements to secondary documents really would be a nonsense, and a major nonsense at that. We think it very likely that the provision does not accurately reflect the Commission's intention. But it is a matter which will be pursued vigorously when a Council Working Group is set up.

Article 2 is extremely important in that it defines the areas in which the Directive will not apply. I hope that this might relieve some of the anxieties of noble Lords so far as nonsenses have been expressed this evening. If the lines are drawn in the wrong places, the Directive will apply to transactions to which its provisions are quite inappropriate. I should like to mention three particular items as regards those exclusions.

The exclusion at paragraph 1(c) is in respect of credit granted for a period not exceeding three months, and it is aimed at relieving ordinary trade credit from the restrictions of the Directive. However, we do not think this is the best method of dealing with trade credit and we do not agree with the Commission's explanatory note that the danger of a disadvantage to the consumer is minor. In our view there is considerable scope for abuse in the area of short-term credit, particularly in extremely high interest rates. I think that that was brought out in the report by the CECG. Clearly ordinary trade credit should be excluded, but we would prefer this to be done on the lines of the exemptions made under the Consumer Credit (Exempt Agreements) Order 1977, so that we would wish to see either an alternative or additional provision added to the Directive allowing an exemption in respect of agreements for the supply of goods or services where repayments are made in not more than a specified number of instalments. The simplest solution might be to permit Member States to specify the number, because different numbers may be appropriate in different circumstances and in different Member States.

In our Exempt Agreements Order we allow four instalments for most agreements for the supply of goods or services on credit. Often, however, goods or services are supplied under a running-account. Let us take as one example the milk bill. Another example is the electricity account. I should think that another example is that eternal chestnut the telephone bill. However, certainly in those cases our exemption is dependent on the requirement to repay the whole amount of the credit in one payment each period—it might be by the week; by the month; or by the quarter.

We are also very concerned that no provision has been made for an exemption for agreements for cash loans where the effective annual rate does not exceed a specified level. We believe that such an exemption is essential. Otherwise, as we have heard this evening, organisations such as credit unions and friendly societies, who make loans at very low interest rates, will be subject to all the provisions of the Directive and, indeed, to the resultant additional costs in observing them. In some instances that would result in the consumer having to pay more for his credit, and in other cases the facility might cease to be available altogether.

We are naturally glad that the Directive makes provision for upper and lower value limits of the agreements to which it will apply. That is in line—and we are pleased about this—with the £5,000 and £30 limits in the Consumer Credit Act. However, we are less happy with the proposal that Member States will not be able to fix their own upper and lower limits of value, but must rely on consulting with the Commission to set reasonable limits. I hope that that answers one or two of the points that have come my way on this particular question.

The provision in Article 5 which permits creditors to give, as they call them, "offers" or, as our Consumer Credit Act calls them, "quotations", is important because the diversity of the credit facilities available might well make it impracticable for creditors in this country to comply with the alternative requirements proposed in the article, of displaying their rates on their premises. However, the Government are very concerned that the Directive refers to "an offer which shall be binding" on the creditor if he were to grant the credit. At a time when in this particular Member State at least, interest rates vary frequently, it would be unreasonable to expect the creditor to give a binding offer, particularly without a time limit. We think that that is unreasonable and unworkable. Indeed, we would consider it better to rely on the supervisory provisions in Article 14 to ensure that creditors behave reasonably in giving offers or quotations.

We have heard that Article 6 sets out the requirements as to the content of credit agreements. The requirements appear no more onerous than those likely to be imposed by the regulations which are still being made, as the noble Lord, Lord Mischon, and others have pointed out, under the Consumer Credit Act. But, as regards that special direction, concern has been expressed—indeed, it has been expressed this evening and in the report by the noble Lord, Lord Sainsbury— that running-account credit for the sale of goods or services falls within paragraph 2(a) of Article 6. If that were so, it would mean that a separate contract would have to be entered into for every particular sale. That would place a very heavy, if not a completely intolerable, burden on mail order traders and other traders of that type. We do not think that that is the intention, but rather that running-account credit is covered by paragraph 2(c)—the general catch-all exemption—which, according to the Commission's explanatory note, applies to all types of credit agreement not expressly listed. But clarification will be sought in the Council working group when it is set up. In the past the Commission has assured the department that it is well aware of the usage of running-account credit and its importance to mail order traders.

The noble Lord, Lord Sainsbury, mentioned the submission of the British Bankers' Association and the committee's view on the requirement in Article 8 as to informing consumers when overdraft interest rates change. We agree with the committee that the requirements governing the giving to consumers of information about overdraft agreements should permit changes in the rates to be notified by advertisement in the Press.

The principle in Article 13, which makes a creditor jointly and severally liable with a supplier with whom he co-operates where goods or services are not supplied or the goods or services supplied do not conform to the agreement, is consistent with the "connected lender liability" principle which was enunciated by the Crowther Committee on Consumer Credit. It is also consistent with the Crowther view that the creditor and the seller are engaging in a joint venture which they hope will profit both of them. We welcome the inclusion of the provision in the Directive, but with reservations. We agree very much and very strongly with the committee that if one gives the consumer Community-wide protection as great as that laid down in Section 75 of the Act the limitation on the creditor's liability to repayment of the loan should be removed. The question of the extent of the liability is, however, a controversial one and we note that the committee suggests an upper limit of liability to protect a creditor from disproportionately heavy liabilities. This might make the idea more acceptable to our Community partners but, if it were carried into our legislation, it would diminish the protection to which Section 75 of the Consumer Credit Act entitles the consumer.

I think that a much less controversial matter would be to include in the Directive, if the right did not exist without an express provision, a right of the creditor to be indemnified by the supplier for loss suffered in satisfying his liability. Unlike earlier drafts, the proposal contains no provisions relating to the cancellation of credit agreements negotiated away from business premises. At present such provisions are left for the Directive that goes under the attractive name of "Doorstep Selling". We note that the committee suggests that the provisions should be removed from the latter Directive and incorporated in this Directive in so far as they apply to credit agreements. Whether or not this is the best solution is a matter requiring further consideration in the light of future developments on the doorstep-selling Directive—the need for which has often been questioned and nowhere more strongly than in your Lordships' House— but we completely agree that it is essential that there is no conflict between the Directives and that a situation in which the requirements of the one Directive are later superseded by those of the other is avoided.

I hope that the comments which I have made on individual articles have shown that there are real problems which the Government intend to solve if there is to be a workable Directive. We have no wish to over-emphasise these problems, but certainly we see no point in minimising them. Solutions may not be at hand, and I read with great interest the suggestions which the committee make in paragraph 29 of their report—to which my attention has been drawn by a number of speakers —to assist progress in harmonisation. We do not yet know how well the suggestions would fit in with Community procedures, but it is very clear that the suggestions in paragraph 29 have a much wider relevance than this particular Directive.

I should like to go through and answer some of the questions that have been raised. The noble Baroness, Lady Seear, if I understood her correctly, asked me to bring pressure to bear in Brussels to put a stop to Directives that are already covered. I shall certainly convey her wishes to the correct quarters.

Baroness SEEAR

My Lords, I am afraid that the noble Lord has misunderstood me. I should hate him to bring pressure to bear for the reason that he gave. The point of paragraph 29 is to ensure that, in fact, the purpose of a Directive is made clear; Member States then submit their proposals in line with what they are doing or intend to do, and it is then agreed that those proposals adequately meet the objectives. That is slightly different from what the Minister said.


My Lords, I hope that I may return that comment with the reply that I believe the noble Baroness has misunderstood me. I was not associating her point with Paragraph 29; I had finished with Paragraph 29. The point she raised very early on was that in general these Directives—and this Directive in particular—were somewhat unwanted, and she asked whether the Government could bring pressure to bear—I think that that was the gist of her comment—to stop these unwanted, unnecessary and otiose Directives coming. I shall certainly ensure that her views are passed on. It may be that it is not a matter for my department; indeed, it is far more likely to be within the province of my noble friend Lord Trefgarne and the Foreign Office at a diplomatic level. I take the point of the noble Baroness, but stress that it is not connected with Paragraph 29 of the report.


My Lords, I still think that the noble Lord has misunderstood the point. The point that has been raised is that there should be a Directive —not that there should not be one—but that it should lay down principles and not go into too much detail.


My Lords, I see that I have been on my feet for a number of minutes and I hope that I have set out and stressed the Government's view that Directives should lay down minimum standards. I think that the noble Baroness, Lady Seear, quite fairly raised the point with me that some of the Directives, in spite of wishing to raise minimum standards, were muddled and woolly. I do not think that there is anything between the noble Lord, Lord Jacques, and myself and I hope that there is nothing between the noble Baroness and myself.

I hope that my noble friend Lord Caithness will let me write to him on the various definitions of "consumer" and possibly "retailer". However, my noble friend rightly raised one point. He asked about his television set. He said that he went to the retailer and found that the retailer was acting as both financier and retailer. If my noble friend consults Section 75, paragraph 1, of the Consumer Credit Act 1974, he will find that should anything go wrong with his television set or he is caused loss or damage, he may sue both the financier and the retailer, wholesaler, supplier, or whoever it may be, jointly and severally. I think that means that my noble friend would be able to find his losses satisfied either by one or both—there might be more than one— of the people concerned. However, it is a matter between the other parties to settle my noble friend's loss.

I am very grateful that the noble Lord, Lord Gordon-Walker, emphasised the harmonisation aspect. Again, I stress to him that these Directives lay down minimum standards. Perhaps I might call them a strategic plan. The implementation is the problem of the Member States. Certainly as regards the Directive which we are discussing tonight, we believe that the Consumer Credit Act 1974 is indeed a model for any type of consumer legislation throughout the Community. My noble friend Lord Mottistone raised the point of unworkable provisions in the Directive. Indeed, the Government take the view that the proper forum for discovering whether or not provisions can be made to work is the Council Working Group in Brussels. The Government will press very vigorously to ensure that the provisions in the Directive are not just useless, hot air, empty and woolly thinking.

The noble Lord, Lord Mishcon, was very kind and said he was going to raise a very few points. I do not think that I can answer all those points tonight, so I hope he will bear with me. I shall read carefully what he said. So far as paragraph 16 of the committee's report is concerned, the Government have taken note of his point. The consultation will take place, and the working party safeguards on our legislation will be certainly as strong as the legislation which is contained in the Consumer Credit Act 1974.

I hope I heard the noble Lord, Lord Mishcon, aright. He mentioned something about the implementation of the 1974 Act. So far as I understand, it is part of the statutes and the laws of this country. But would I be right in thinking that the noble Lord is alluding to various orders and updatings, secondary legislation, that is smoothing out several of these provisions? I notice that my particular copy of the Act has been amended by various other pieces of primary legislation, such as the Banking Act.


My Lords, if the noble Lord is not completely out of breath, may I ask him this: I was talking about the implementation of the Act by the making of all the necessary regulations and orders under it. I wondered whether he could indicate when that final implementation is likely to take place.


My Lords, I am afraid that I do not think I can. Certainly not tonight. I think it is highly unlikely that it would be finally implemented. I hope that the Consumer Credit Act 1974 is in no way what I have been describing as woolly thinking, and is not subject to the criticisms that we have made of some of the more loosely worded Directives tonight. The principle is the same, that problems have arisen since 1974, and that we shall attempt to see that the Consumer Credit Act 1974 is continually revised and updated. I could not—certainly not tonight—give the noble Lord, Lord Mishcon, any guarantee as to when we would see the Consumer Credit Act as being in its final, perfect form. Nevertheless, I shall write to him later about that.

The noble Lord, Lord Bruce of Doning-ton, pointed out how the reports from the Select Committee were so highly thought of. I agreed with him very much indeed. I think that the noble Lord was very fair in asking me to push hard at Foreign Office and diplomatic level that we should see that these Directives were more relevant, and that we should have realistic and workable provisions coming across from Brussels. Indeed, this is one of the purposes of the working group.

I would not agree with the noble Lord, Lord Bruce, when he asked me about Article 100. I do not think that it necessarily compels us to dilute our legislation, or reduce our standards. I was interested with the noble Lord, Lord Bruce, in wondering how we pursued the Directive. I hope he might be satisfied with out view that it is really a statement— as indeed are all Directives—of principle, and that we hope there is unlikely to be any compulsion on us to dilute any of our consumer legislation, which we regard as a model in this particular area.

I have been on my feet a long time. I hope that the House will forgive me. Your Lordships will agree, and indeed the noble Lord, Lord Sainsbury, and his Committee will agree, that it is an intensely complicated and complex subject. Our participation in the work in Brussels will be with a view to achieving a workable Directive within a reasonable time. I hope that that is not woolly speaking from this Dispatch Box, but that is the Government's firm intention. I hope that we are able to carry it out. We hope that if the problems of devising a Directive acceptable to, and workable in, all the Member States were to prove serious, the Commission would be willing to consider alternatives such as just a recommendation to Member States. With that, I would conclude.

7.14 p.m.


My Lords, at this late hour I will not detain you for more than a minute. First, may I thank the noble Baroness Lady Seear, and the various Members of your Lordships' House who have taken part in what I think has been a useful debate. May I thank you for unmerited but very kind references to my own role. I think that our debate tonight will have been really worth while if both the United Kingdom Government and the Council Working Party take note not only of our report but of the speeches that have been delivered in your Lordships' House.