HL Deb 27 March 1998 vol 587 cc1491-3

1.17 p.m.

Lord Haskel rose to move, That the draft order laid before the House on 13th January be approved [19th Report from the Joint Committee].

The noble Lord said: My Lords, the purpose of this order is to increase the monetary limits that determine which consumer credit and consumer hire agreements are regulated by the Consumer Credit Act 1974, as well as the limit at which certain credit advertisements are exempt from the provisions of the Act. These limits are currently £15,000. From 1st May 1998 the limits will be £25,000 and so will bring more loans within the scope of the Act. As a result more consumers should benefit from the advantages of the Act. This is because most consumers who take out unsecured consumer loans will have the protections the Act gives to regulated agreements such as cancellation rights and cooling-off periods.

Many consumers who take out loans for house purchase and other loans secured on property from lenders other than banks and building societies will also gain protection. Your Lordships will note that the limits covered by the order are some of the most important monetary limits in the Act. But the Act also contains various other monetary limits and amounts which the Government propose to increase by separate legislation which is not subject to the affirmative resolution procedure. I beg to move.

Moved, That the draft order laid before the House on 13th January be approved [19th Report from the Joint Committee]—(Lord Haskel.)

Lord Borrie

My Lords, I welcome the order. It restores to individuals the benefits of the protection of the Consumer Credit Act which has been eroded by inflation over the past 15 years. As the Minister indicated, a regulated consumer credit agreement provides a considerable amount of protection to the individual. I refer not just to the cooling-off rights but other rights concerning requirements for the agreement and pre-agreement material including an indication of the rate of interest so that it can be compared in a fair way with other rates of interest. As regards repossession of goods, I refer to the right of a firm stake, as it is sometimes called, in the goods obtained on hire purchase by having paid one third of the total due. It is undoubtedly beneficial to the individual to have the limit raised from £15,000 to £25,000.

However, the draft order raises certain questions in my mind. Why wait 15 years? One may not want such orders coming before the House every time inflation is 3 per cent. or 4 per cent. One does not want such an order coming before the House every year. However, bearing in mind that inflation has eroded protection gradually over a long period, instead of fixing the limits for 12 or 15 years ahead, perhaps by order the limits could be adjusted by the RPI. Alternatively, the Government could come forward with a draft order with a higher limit which one might reach as inflation of 2 per cent., 3 per cent., or 4 per cent. per annum was envisaged, no government apparently envisaging nil inflation. So why not a limit of £35.000 instead of £25,000?

The final point on which I should be grateful for the Minister's comments is this. Why have a limit? The regulation applies only to individuals. I realise that it includes not only the private consumer but those in partnerships. But it excludes those in corporate businesses. It might be said that they do not need this protection; they can look after themselves. I am not sure why any individual should not enjoy the protection of the Consumer Credit Act which exists for regulated agreements. One might argue that the more money at stake—let us say, on a Jaguar or a Mercedes instead of a more modest saloon car—the more one needs the protection that the Consumer Credit Act provides for regulated agreements.

I welcome the increase in the limit that the draft order provides. However, I doubt whether it is satisfactory to deal with the problem once every decade or so.

Baroness Blatch

My Lords, the Minister will be relieved that I rise not to oppose the order but to support it, and to make a different point about the prolonged period over which there has been no increase. I put that down to a sustained period of low inflation, which has been welcome, and I hope the prospects of that continuing are good.

The noble Lord, Lord Borrie, raises some interesting points about whether there is to be a commitment to an annual review, or a target to be reached over time. It is important that at some time the Government set out their views. In the meantime I support the order.

Lord Haskel

My Lords, I thank the noble Lord and the noble Baroness for their comments, and for their support. My noble friend asks: why wait 15 years? The matter is reviewed as and when consultations lead one to think it necessary. There may be a good reason for having a regular review. I am sure that the Government will look into the matter.

As regards the limits being adjusted by the RPI, there are other matters so adjusted. I am sure that it is a matter the Government will consider. I thank my noble friend for that suggestion.

My noble friend suggests moving towards a limit which envisages what inflation will be. I am not sure that my right honourable friend the Chancellor would wish us to take a view as to what inflation will be and to move towards that total. I do not know how far that proposal will get.

My noble friend referred to the business aspect. That is a separate issue and not related to the order. However, since my noble friend raised the point, let me say that the Government agree with the judgment of the Commons committee which, before the election, examined the previous government's proposals to deregulate business lending. The committee rejected that on the ground that the Consumer Credit Act provides valuable protection to sole traders and unincorporated businesses. The Government have no plans to remove business lending from its scope. I thank noble Lords for their proposals. I commend the order.

On Question, Motion agreed to.