§ Order for Second Reading read.
§ 3.38 p.m.
§ The Minister for Trade and Consumer Affairs (Sir Geoffrey Howe)
I beg to move, That the Bill be now read a Second time.
The Bill provides for radical reform of the whole law on consumer credit. It will establish a new framework for the conduct of consumer credit business and afford substantially increased protection for the consumer. It is the outcome of careful study by the Government of the report of the Committee on Consumer Credit, of which the late Lord Crowther was Chairman, and of detailed consultations with the many interests which will be affected by it.
I am sure that the House would wish me to take this opportunity of expressing its appreciation of the achievement of the late Lord Crowther and his colleagues in producing such a valuable report. The best tribute a Government can pay to a committee is to implement its recommendations. We all wish that Lord Crowther had lived to see this Bill and to take part in the consideration of it.
The House will be aware from the White Paper which we published recently that the Bill gives practical effect to the committee's recommendations in the consumer credit field proper. The places where we have departed from what was recommended by the committee—in the consumer credit field—are few, and there will, of course, be opportunity to discuss these in later stages of our consideration of the Bill. It may be helpful if I stress now that there are no significant omissions or differences between the outline of proposals summarised in the White Paper and the detailed provisions contained in this Bill.
The concept underlying the Bill is the provision of a basic framework of regulation to cover all types of credit transaction, with, in addition, specific provisions relating to particular forms of transaction when these are clearly needed.
For the consumer the same basic protection is needed to redress the differences 510 in bargaining strength and background knowledge between the credit grantor and his customer, whatever the form of the contract. The Bill provides that basic protection. No longer shall we have the situation where there is a cooling-off period if the doorstep salesman offers an HP contract but none if he offers a personal loan secured by a second mortgage. No longer will the courts be able to re-open an extortionate agreement only if it is made with a registered moneylender and be quite unable to look at an identical agreement made by an institution that has exemption from the Moneylenders Acts.
At the same time, new protection will be provided for the consumer. In particular, there will be protection against concealment of the cost of credit. Truth in lending, with full disclosure of the cost of credit, is one of the keynotes of this Bill.
For the credit industry it means creating a situation in which fair and open competition can thrive. At present one set of rules applies to pawnbrokers, another to moneylenders. Banks, including those recognised under Section 123 of the Companies Act 1967, enjoy effective exemption from all regulation. In future, all credit grantors will be subject to the same licensing system and the same basic regulation. Within this framework they will be able to compete on equal terms for business.
The Bill also recognises that hiring arrangements and here I mean hiring as distinct from hire purchase—are today often an alternative to buying on credit. Accordingly, the Bill provides for parallel regulation of the hiring industry. Likewise it will cover, so far as appropriate, brokers of credit, debt counsellors, debt collectors, debt adjustors and credit reference agencies.
In short, the Bill sweeps away outmoded legislation and replaces it by a framework which is simpler in its fundamentals, gives the consumer reasonable protection across the board and makes possible fair competition between different providers of credit. The Bill makes a worthwhile contribution to the rationalisation of the statute book. It repeals seven United Kingdom Acts in their entirety and parts of many others. In total, 232 sections and 22 schedules are 511 swept away. As will be evident from the Bill, they are replaced by something which is substantially less in scale, length and complexity.
One of the difficulties of legislation in this field in the past has been that it failed to allow for the development of new types of business. We must expect over the next 20 years to witness at least as great changes in the credit industry as we have seen in the last 20 years. We do not want to find ourselves once again in the position where our law has failed to keep pace with commercial developments because of its rigidity. For this reason, the definitions in the Bill are drawn as widely as they can reasonably be and provision is made for regulations to be made under the statute covering many important aspects of the business.
I should like to mention in passing the widely held and quite false view that delegated legislation is a twentieth century heresy and departure from the proper standards as maintained in the nineteenth. To quote from the invaluable textbook "Practical Legislation" published in 1878 and written by Lord Thring, who was founder of the office of the Parliamentary Counsel and the grandfather of them all, so to speak,Procedure and matters of detail … should … be left to be prescribed by a court or department of the Government.… The adoption of a system of confining the attention of Parliament to material provisions only, and leaving details to be settled departmentally, is probably the only mode in which Parliamentary Government can, as respects its legislative functions, be satisfactorily carried out.It is in perfect accord with that sentiment that we have drawn this Bill. The framework, structure, pattern and purpose of control are set out in it and will no doubt be subject to the discussion which they should properly receive in the House. But there is no intention that lack of legislative time should any longer be a constraint on making proper provision for regulating new types of business. Neither—this is equally important—will it lead to loss of protection for the consumer as a result of new developments.
With that general introduction, I turn to the specific provisions of the Bill and set them out part by part.
512 Part I of the Bill provides for the appointment of a Consumer Credit Commissioner by my right hon. Friend the Secretary of State. He will, as the Crowther Committee recommended, have an independent status and be directly responsible for carrying out the duties imposed on him by the Bill. He will have his own staff.
I would like to emphasise particularly three of his duties. First, under Clause 2, he will be responsible for administering the proposed licensing system and for adjudicating cases arising under it. Second, by the same clause, he will be required to keep under review developments in the credit field and in the operation of the statute so as to advise the Government of any changes which may become necessary in the orders and regulations made under it or, perhaps later, in the statute itself. Third, by Clause 5, he will be able to make information and advice available to the public on credit matters generally.
Part II sets out the scope of the Bill and closely defines particular types of transaction for the purposes of the Bill. I will not discuss these definitions here, but no doubt they will be scrutinised carefully when the Bill is being examined in Committee.
Broadly speaking, the Bill covers credit transactions with individuals—that is, with persons and non-corporate bodies. It covers transactions where the amount borrowed on any one occasion does not, or need not, exceed £5,000. It covers hire agreements where the total rent payable may be £5,000 or less.
There are certain exemptions to these general provisions provided in Clause 15. All house purchase agreements entered into by local authorities, building societies and some other institutions will be exempt. That clause also gives power to exempt certain kinds of agreement, such as those made at a very low percentage rate of charge. It is our intention to use that power to exempt credit connected with the sale of goods and services which is repayable in fewer than three instalments. We have in mind under that heading trade conducted on a monthly account or broadly similar basis which we do not want to complicate.
Part III is concerned with the licensing of credit grantors and those who provide 513 goods on hire. The licensing of credit brokers and other categories is dealt with in Part X of the Bill, to which I shall refer later. The basic requirement is that all those carrying on the business covered by the Bill will need a licence. The only exception to this, provided by Clause 20, is that licences will not be required by local authorities or bodies corporate empowered by a public general Act of Parliament to carry on business.
In Clause 21 provision is made for two different types of licence—personal licences issued on application to named persons, and group licences. The latter will cover broad categories of business. A group licence might, for example, cover all practising solicitors or all retailers who obtain no commission for introducing customers to credit grantors. The commissioner will be able to issue group licences where he concludes that this is in the public interest.
But the basic criterion provided in Clause 24 for the issue of a licence is that the applicant should be able to satisfy the commissioner that he is a fit person to engage in the business to be covered by the licence. The commissioner will have to take account of any history of fraud, any contravention of a provision of this or other consumer protection legislation, and any discrimination on the grounds of sex, colour, race or origin.
If after preliminary consideration the commissioner thinks that he ought to turn an application down, he will have to tell this to the applicant, giving his reasons. The applicant will then have the right to make written and, if he wishes, oral representations at a hearing to be held by the commissioner or someone appointed by him. The commissioner will then give his decision. If the applicant believes that the commissioner has reached a conclusion not supported by the evidence, he may appeal on any point of law to the High Court. That is the effect of Clause 4, which brings the adjudicating functions of the commissioner under the supervision of the Council on Tribunals. A similar procedure giving the licensee the same rights applies where the commissioner considers it necessary to refuse to renew or to suspend or revoke a licence.
I realise that some hon. Members may wonder about the introduction of a new licensing system. To them I would say 514 two things. First, licensing in this area is not new. For many years we have had licensing of moneylenders and pawnbrokers. Secondly, this is an area in which new ways of business and new abuses can develop very quickly.
Indeed there are many hon. Members who have drawn the attention of my hon. Friends and myself recently to particular abuses affecting their own constituents. Licensing will curb those abuses; it is the corollary of competitive freedom for the credit industry, and all those in the industry who wish to give their customers a fair deal will, I believe, welcome these provisions.
Part IV will regulate advertising and canvassing. I should like to emphasise that some types of business which are excluded from the generality of the provisions of the Bill will be subject to the requirements of this part. It will, for example, cover loans of more than £5,000 secured on the borrower's home. Clause 42 provides for the main advertising rules to be laid down in regulations, and the first appendix to our recent White Paper sets out in detail what we have in mind here.
Putting it briefly, the advertiser will either have to confine himself to a general statement of the business he offers or else give reasonably full information about what he has on offer. He will not be able to blazon forth one favourable element in the offer and leave unmentioned others which are less favourable. If he gives any specific information about offers he will, for example, have to disclose the cost of the credit in both cash and percentage per annum terms.
The disclosure requirements and the prohibition in Clause 44 of false or misleading advertisements are the first element in the "truth in lending" provisions.
Clause 46 prohibits telephone canvassing. The House will remember that the White Paper invited comment on this proposal in a paragraph that was an island of green in a paper that was otherwise white. So far, comment has been very limited, but on balance, clearly in favour of this prohibition, which now finds itself in the clause. This again is a matter which will no doubt be considered further at a later stage.
515 Clause 46 also makes it an offence to canvass in person straight money loans as distinct from loans connected to the purchase of goods and services. In practice this will cover mainly door-to-door canvassing. There is a similar restriction in the Moneylenders Acts which are to be repealed, and we think it right to extend it to all those offering straight cash loans. Hon. Members will note that Clause 47 prohibits the sending of circulars offering credit or hire facilities to minors, and Clause 48 prohibits the mass mailing of credit cards, which was a matter of some concern to a number of hon. Members recently.
Part V gives various protections to the consumer at the time when he negotiates an agreement.
Clause 54 provides him with a cooling-off period in every case where he is offered a loan secured on land, except where the loan is to be used to purchase that land. In common language, that is a cooling-off period wherever a second mortgage deal is offered. Clause 63 and those which follow it similarly provide a cooling-off period for other types of credit transaction, but only if signed away from trade premises after the visit of a salesman. That means that the cooling-off provision will not apply, for example, to mail order business or to the usual credit transactions conducted in retail establishments. Similarly, there will be no cooling-off period for any unsecured credit purchase of goods involving a loan of less than £30.
Clauses 57 and 58 provide for regulations to be made concerning the form and content of agreements and secondary documents. That is the other leg of our "truth in lending" proposals. We have set out in the second appendix of the White Paper the details of what we have in mind. Broadly, our proposals will follow the present requirements of regulations made under the Hire-Purchase Act 1965.
Under Clause 70 the commissioner will be able to exempt, subject to such conditions as he thinks fit, from the requirements of this part of the Bill the normal overdraft facilities offered by banks as part of their service to customers having current accounts. This provision is necessary in order that the requirements of the 516 Bill should not make impossible the present facilities offered by banks to their customers.
Part VI deals with a number of matters which can arise during the currency of an agreement.
Clause 71 provides that where goods or services are supplied on credit under arrangements made between the supplier and the credit grantor, the latter should be jointly liable with the supplier for any misrepresentations or breach of the contract by the supplier. Many hon. Members will be aware of cases where a supplier has arranged with a financier that the financier should provide credit and the supplier has traded on the financier's good name, has supplied defective goods or no goods at all, and then has disappeared leaving the consumer with a fully enforceable debt to the financier. This provision will encourage financiers to consider the bona fides of those with whom they deal, those whom they finance. They will know that if the consumer is let down or swindled their profit on the deal, and perhaps more than that, will be at risk. This is an important recognition of the association between the financier and the trader whom he helps to finance.
§ Mr. Peter Rost (Derbyshire, South-East)
Does that apply where a financier finances a broker who subsequently absconds with the money instead of passing it on to the borrower?
§ Sir G. Howe
That is not the provision to which I am referring. This is on a slightly different ground. There are provisions to which I shall come later dealing with the position of brokers in certain circumstances. I am dealing with what is known in the jargon as the connected lender liability—the connection between financier and trader. The House will recollect that creditor's liability of this type already exists in the hire-purchase field in certain circumstances. The Bill will extend it to almost all other types of transaction where creditor and supplier are effectively engaged in a joint business transaction. There will be only two exceptions to it. The first will be when the cash price of the goods concerned is less than £30. The second is where the cash price of the goods is more than £10,000; that is, more than twice the limit of agreements regulated under the Bill.
517 Part VII of the Bill deals with problems arising on default of the debtor or when the agreement is to be terminated.
Clauses 83 to 85 regulate the repossession of goods under hire-purchase agreements, effectively repeating and simplifying the provisions of the Hire-Purchase Act 1965. Once one-third of the total price has been paid, the goods cannot be repossessed without a court order. If they are repossessed in contravention of this provision, the agreement lapses and the debtor will be entitled to recover all sums already paid under the agreement.
Clauses 87 to 91 provide the debtor with a right to complete payments ahead of time and, if he does so, to be allowed a clearly specified rebate on the charges for which he is liable under the agreement. The calculation of the rebate must, as a minimum, be made according to a formula to be set out in regulations. We have set out our detailed proposals for this formula in the third appendix to our White Paper. Many reputable finance houses already give their customers rebates of about the level which we now contemplate. But, on the other hand, we are aware of instances of consumers being asked to pay charges in full even when seeking to repay debts early. This may be particularly onerous when a long-term debt secured by a mortgage has to be rapidly repaid because the individual needs to move house.
Clauses 92 and 93 continue the right under the Hire-Purchase Acts for the debtor to terminate his agreement and return the goods without further charge if he has already paid half or more of the cost of the goods.
I should draw particular attention to Clause 94. This provides the consumer with a right to terminate hire agreements. Unfortunately, something has gone awry with the wording of the clause in the Bill at present. I am glad to see so many alert heads on the Opposition side of the House nodding assent to that proposition. I admire the tenacity with which they have ploughed through to the line where the meaning runs off the end of the page. We shall propose an amendment in Committee to bring it into line with the White Paper, which provides that this right should be effective 518 only after the agreement has run for 18 months.
I believe that, even with this correction, the clause may cause difficulty for some renters for business use. We shall be ready to consider possible further amendment to it. Nevertheless, there is need here for protection, not only of the consumer renting consumer goods for his personal use but of the small businessman.
Part VIII of the Bill deals with the giving and taking of security for loans regulated by the Bill. A third person providing the security will receive the same type of protection as the debtor and will not have more onerous terms imposed on him following default of the debtor than are applicable to the debtor under the main agreement.
Clauses 103 to 111 make provisions for pawnbroking business to replace provisions of the Pawnbrokers Acts, which are being repealed in their entirety. A number of detailed requirements of those Acts which no longer appear appropriate or which have been effectively superseded by more recent legislation are omitted. No longer, for example, will it be an offence for a pawnbroker to carry on his business on a day appointed for public fast, humiliation or thanksgiving, or to fail to post appropriate notices on church doors.
Of more substance, there are three main changes. First, there will be no statutory control over pawnbrokers' charges, in line with the general philosophy of the Bill. Secondly, the Bill provides that all pledges will be redeemable for at least six months. Thirdly, it provides that a pledge given for any loan of up to £15 will become the property of the pawnee if not redeemed. The dividing line of £2 for this purpose in the old legislation is clearly not realistic today in the light of the decades that have passed since it originally appeared.
Clause 115 is very short, but it provides a most important protection. Where a consumer has entered in a second mortgage agreement it will not be possible to turn him out of his house following default except on court order. In this respect I would also draw attention to the powers of the court set out in Clause 123. Under that clause, where the court considers it just to do so it may make an 519 instalment order in terms which it considers just rather than enforce the security immediately.
Part IX is concerned with judicial control generally, and I would draw the attention of the House at this stage, to two main points. The court is given a wide degree of discretion in many issues, and a general power to reopen extortionate agreements. At present the court's powers in respect of extortionate agreements are limited, perhaps more than many people appreciate. The court can reopen only extortionate agreements made by registered moneylenders, and even in those cases where the rate of interest in the agreement is less than 48 per cent. per annum the onus is on the debtor to prove that that rate of interest is extortionate. This is a heavy burden on the debtor. In future the court will be able to reopen any agreement made with an individual or non-corporate body. I stress the word "any".
This power will apply to agreements which otherwise are not regulated by the Bill—such as agreements for more than £5,000 or those where the creditor's business is not regulated by the Bill, such as building societies or agreements made by private individuals not in the business of making loans. Moreover, wherever in a court action it is alleged that the rate of charge—not just the rate of interest—is extortionate, the onus of proving that it is not so will always rest upon the creditor. Thus the old 48 per cent. dividing line goes, but it goes in order that the consumer may get, as he will get, better protection. Clause 120 provides the court with considerations to take into account in determining whether any agreement is extortionate.
Part X of the Bill is relatively short, but very important. It brings within the appropriate sections of the Bill ancillary credit businesses; that is, credit broking business, including that of retailers arranging credit for their customers, debt-adjusting, debt-counselling, debt collecting and the operation of credit reference agencies.
Special provision is made by Clauses 133 to 136 for protecting the individual against inaccurate information held about him by a credit reference agency, as recommended by the Younger Committee. He will be able to demand a 520 copy of all information held about him. If he thinks it wrong he can require its removal from the record, its amendment or its supplementation by a notice of correction. If he cannot reach agreement with the agency the matter can be referred to the Consumer Credit Commissioner for adjudication, and he may order the agency to amend its records. That is an important and significant addition to the recommendations of the Crowther Committee, but one that we think it right to include in the Bill at this stage.
Part XI of the Bill makes the Consumer Credit Commissioner and local weights and measures authorities responsible jointly for enforcing the Bill. The provisions are closely modelled on those contained in the Fair Trading Act passed by Parliament earlier this year. It is the intention that the weights and measures authorities should bear the principal burden of enforcing the Bill, and that the commissioner should deal with cases where it appears more appropriate that investigation should be undertaken centrally or where he has some particular reason for intervening.
In conclusion, I remind the House that in today's society credit has grown to play a much bigger part than it has done in the past. It is the means whereby the opportunity of purchasing particular goods and services has become available to a large section of our society. It is, therefore, right that the provision of consumer credit should receive close attention from this House, as it will during the consideration of the Bill.
The Bill will provide a just and equitable framework within which the consumer can manage his affairs and within which those who provide credit facilities can develop their business in competition with each other and to the benefit of the consumer. This is, in other words, a Bill which deals sensibly and equitably both with the provider of a service and with the consumer of that service. Upon that basis, I commend the Bill to the House.
§ 4.9 p.m.
§ Mr. Alan Williams (Swansea, West)
The Bill, like the Supply of Goods (Implied Terms) Act which we discussed earlier this year, is a bipartisan Bill. It is not a Bill which will provide the basis for great political dispute. Were it not for yesterday's debate on pornography, I 521 think we could describe the Bill as a jointly conceived Bill. The committee was set up in 1968 by the Labour Government. It reported in 1971, and the present Government are correct in saying that, to a large extent, they are implementing the proposals arising from the consumer protection element of the report.
I join the right hon. and learned Gentleman in congratulating the members of the committee, and the late Lord Crowther, on the exhaustive work that they undertook in preparing the report. It is an excellent report and, in view of the time taken on it, a report on which it would be difficult to improve.
In the Fair Trading Bill I commented adversely on its complex draftsmanship. It was recognised universally as a monster of a Bill to follow; anyone who did not believe so would have been welcome to join us in our somewhat protracted Committee stages to discover just how many confusions could arise, legitimately, on both sides of the Committee. In contrast the Bill before us is readable, and I congratulate the parliamentary draftsmen on a move which I am sure most hon. Members will welcome. The lawyers in the House tend to have a certain monopolistic advantage in debate in that they understand the complexities of these wretched Bills, while the rest of us do not. This Bill, however, goes some way towards putting back-bench Members on an equal footing. We welcome the improvement in drafting.
The Opposition want to see Crowther implemented. We have made that clear at Question Time and in debate. I regret, that, while that report took understandably, two and a half years to prepare, it should have taken the Government a further two and a half years to introduce the Bill, and, as it contains 169 clauses, it is reasonable to predict that it will be at least a full three years, with all good will of both sides in getting through the Committee stage, between the production of the report and Royal Assent for the Bill itself.
What is more, that may not be the end of the delay. How long after the Bill is enacted will it be before we have the regulations based upon it and, more important, how long will it be before those regulations are implemented?
522 How soon can industry make the changes which are required? I have a document here from the Finance Houses Association, which welcomes the Bill and, I am sure, will co-operate in its implementation. The document says:The Association believes that the Consumer Credit Act will impose upon consumer finance organisations a once-for-all work-load of preparation of an order not previously suffered by any United Kingdom commerce-oriented industry because of the inter-reaction of two factors: 1. the extreme complexity of the legislative provisions themselves and, 2. the size and complexity of the computer-based administrative machinery upon which the industry has become almost totally dependent in recent years.The association makes a valid point. We should not underestimate the administrative difficulties that will face the industry.
It is no good looking to the 1964 Act and the time that that took to implement. That is no guide, because the industry today is twice as large as it was then. There is a wider range of credit terms in existence. In 1964 to 1965 most of the transactions involved hire purchase. Today in the major houses we have between 20 and 100 different forms of agreement available. In terms of the range of credit we are dealing with a different industry from that of 1964. Furthermore, the Bill is far more extensive in scope—I welcome that—than was the 1964 Act.
In 1965 there was virtually no computerisation in the industry. Today it is virtually completely computerised. One of the problems of computerisation is that, while it eases the day-to-day work of an industry, the changeover from one system to another may be more difficult than it was in the days before computerisation.
After meeting representatives of the Finance Houses Association, I asked them to estimate for me the period which they thought would be needed for them to implement the regulations. They sent me a document in response to my questions, and I take it that the points made therein have been put to the Department also. If not, I shall gladly make the document available to the Department.
The finance houses argue that there will have to be the redesigning of computer systems and then a large programming change for the computers, the reason being that the computer system at present in 523 use is not designed to identify various classes of transaction which will be covered by the Bill. For example, the present programme will not identify hire-purchase cases up to £5,000, and it will not identify loan cases, hiring cases or restricted use cases. Nor are debtor-creditor-supplier agreements identifiable, and even the total charge for credit is not available under the present programme.
We must not underestimate the magnitude of the problem which will face the suppliers of credit with whom we are here concerned. They have on their books at present 3½ million separate agreements, and they are adding to these at the rate of 7,000 a day. These 7,000 a day, moreover, as I have said, may take any one of as many as 100 different forms of credit transaction.
What, then, does the industry ask for? In its submission it says:Because of the interdependence of so many of the detailed provisions of the new Act and its supplementary regulations, it will be greatly to the benefit of financial institutions if the regulations can be published as soon as possible after the Bill is enacted.As an aside, I assume that that is what the Government intend to do. The submission goes on:But, at least, one full year should then be allowed for preparation before the main provisions of the Act come into force.I admit that it came as a surprise to me to have it suggested that the time lag may have to be as long as 12 months between the issuing of regulations and their full implementation. It will mean that implementation will come four years after Crowther reported—four years' delay largely because the Government delayed in order to hold this Bill back as a piece of election year window-dressing. We shall want to hear about that when the Minister winds up.
In passing, may I say that I regret that the Under-Secretary of State, the hon. Member for Honiton (Mr. Emery), is confined to a sedentary and silent rôle today, though I notice that he kept himself awake earlier by interspersing the quiet "Hear, hear" at intervals of about four minutes 20 seconds during his right hon. and learned Friend's speech. I am sorry that he has not extended the same courtesy to me, but I am sure that we shall hear rather more from the hon. Gentleman in Committee.
524 Appropriately enough, the Minister for Aerospace and Shipping is to wind up today's debate, and we expect to hear from him when the regulations will be introduced and when it is envisaged that full implementation will take place. Moreover, if there is to be a year's delay between the enactment of the Bill and its implementation, we want to know what will happen to the 7,000 new agreements a day which will be entered into during these 12 months. Will they have protection under the law, or will they operate on an out-of-date legal basis? Also, what about the 3½ million existing contracts? We assume that the Government intend to do something for the people here concerned—or do they say that nothing will be done to help them? Have they even discussed this question with the industry to establish whether any practical assistance can be given?
We want Crowther in force at the earliest practicable date. The Opposition pledge that they will do everything reasonable to ease the passage of this 169-clause Bill through Committee. But we want to know when the new law will start to bite.
The need for the Bill is clear. I should be surprised to hear anyone suggest today that it is not necessary. There are, as I have said, so many different forms of credit and, as is implicit in the Bill itself, so many concealed charges that one virtually needs to be a chartered accountant to make a meaningful choice between the various forms offered.
Even on credit cards, for example, I was surprised to see the details worked out by the Consumers Association showing that if one had a credit card offering 1½ per cent. interest per month on the outstanding balance, then, depending on the way that 1½ per cent. was applied, one could pay as much as five times more under one credit card system than under the other, although nominally they appear to be charging the same. I am sure that many of those who are now undertaking their Christmas purchases through Access will be disturbed to hear that they are probably paying more than they would pay if they were making their purchases through Barclaycard, although both nominally charge the same interest rate.
While abuses are to be found in all levels of the industry, the important consideration here is that those who pay most 525 and those who are exploited most harshly are those who are least able to protect themselves and most need our protection. The Daily Mirror and the Consumers Association undertook an investigation of moneylenders, and the results were published on 19th June this year. On the basis of computations worked out according to the prescriptions of the Moneylenders Act 1927, the investigation showed a range of interest between 48 per cent. and 325 per cent. I am sure that the House will regard those figures as unacceptable. However, using the more up-to-date formula which would apply under the Bill and assessing the true rate of interest on that basis, one finds that the range is not between 48 per cent. and 325 per cent.—all of which rates were illegal under the Moneylenders Act anyhow—but between 57 per cent. and an incredible 1,706 per cent.
One recognises that these figures have to be treated with a certain reserve because of loan charges and so forth on very short-term loans. I am not trying melodramatically to put matters out of proportion. What I am trying to demonstrate, however, is the degree of exploitation which may take place, and, unfortunately, as we know, that exploitation is often to be found in the activities of those in the money industry who cater for people with the lowest incomes and the least ability to defend themselves.
Similarly, the Consumers Association, which has been commendably active in these matters, undertook a survey with BBC local radio stations in Derby, Nottingham and Stoke. This survey found that some finance houses were charging a true rate of interest of 111 per cent., and that over half the moneylenders were charging more than 48 per cent.; that is, more than the permitted limit under the Moneylenders Act.
All too often, the terms are made to sound attractive, and the more attractive they sound the more expensive they may in fact be. For example, 1p in the £ per month may not sound much, but it works out at interest at 22.3 per cent. Moreover, the Consumers Association and the BBC local radio stations found clearly that in all cases it was the poor who paid most.
The need for action, therefore, is not in dispute. The industry is playing an increasingly important part in the lives 526 of individuals, and no one denies its importance within the national economy. I was surprised yesterday to hear the broadcast of an interview with the Chancellor of the Exchequer—repeated several times on radio and television—in which the right hon. Gentleman argued, explaining the day's events, that there was too much credit, that too much credit is inflationary, and that most people accept that.
I assume that the Government have found a new scapegoat for inflation. In 1970–71 it was the Labour Party. In 1971–72 it was the trade unions. In 1973 it is world prices. For 1973–74, apparently, it is to be the credit industry. It never seems to be the Government's fault.
We all know that too much credit is inflationary, but it was the Chancellor of the Exchequer, after all, who aimed to buy a boom on tick. He even printed money—if the House will forgive the marital parallel today—like confetti. He aimed to get consumer growth while he held down incomes, and to make it happen on credit. To ensure that it happened with credit he even gave income tax relief on the interest paid on credit to encourage people to indulge more frivolously and extensively in credit. It is a little ungracious of the Government to attack the industry which gave them what they wanted—their bubble boom.
The Government's activities and policies during the last two years have made it more difficult for the industry to be fair to the consumer, because constantly varying rates of interest, soaring to a 13 per cent. lending rate, have made it more difficult for the industry to determine what is a fair and reasonable long-term lending rate. The rate which today may be reasonable in the light of prevailing rates of interest might in two years' time, when there is a Labour Government, appear to the consumer to be unduly harsh. The finance houses are finding it difficult to know where the rate of interest should be pitched.
We want to help the Bill through the Committee stage. I am sure that hon. Members from both sides who are appointed to the Committee will want to improve the Bill, if possible. I noticed that the Minister, in his succinct and clear 527 introduction, expressed an unusual ministerial enthusiam that there should be detailed scrutiny of the Bill in Committee. I deduce that the right hon. and learned Gentleman has no intention of being there himself. However, while we have his attention and services it may be helpful if certain points could be clarified today. Able as he no doubt is, the Minister for Aerospace and Shipping does not have quite the same experience of immersion in consumer affairs as does the right hon. and learned Gentleman.
We made clear in Committee on the Fair Trading Bill that we felt that the Consumer Credit Commissioner need not necessarily be separated in office from the Director-General of Fair Trading. I do not see why the two should be treated as separate, for consumer credit is as much a matter of fair trading as are monopolies or restrictive practices. There is bound to be overlapping and inter-relationship. These points can be discussed in more detail in Committee. The Minister has not indicated why he feels that this separation is necessary, but I hope that the Minister who winds up the debate will be able to explain.
We welcome the decision to use the weights and measures inspectors, the trading standards officers, to implement the Bill. There must be local contact, local information and local initiative. It is a correct decision, but there is a point on which I am not yet satisfied. The Minister will appreciate the difficulties if he bears in mind the imposition of the extra work load at the time of the introduction of VAT, when the weights and measures inspectorate had to neglect other work in the months of special scrutiny of VAT.
I am not satisfied that the weights and measures inspectorate has enough staff to carry the large extra work load which the Bill will create. I would like an assurance that extra specialised training will be given to weights and measures inspectors. I am sure that as a group of officials they will do all in their power to implement the Bill, but they must be given the necessary numbers and the necessary training. How do the Government intend to provide the numbers and training?
I also wish to have clarification of what is now considered to be "an extortionate 528 rate of interest." In Clause 120 "extortionate" is defined asgrossly exorbitant".Now we need a definition of "grossly exorbitant".
The guidelines in Clause 120 (2) offer little help, certainly to the individual. The individual is reluctant to go to court, even when he thinks he has a case, and when there are no clear guidelines he will be more reluctant to take to court a case of exorbitant or extortionate interest.
Nor are the guidelines of much help to the court or the industry. Most of the people operating in the industry will want to operate fairly and within the law. Yet we are told in the Bill that in deciding what is extortionate the court will take account of a person's age, experience, business capacity and the state of health and the financial pressure he was under, not necessarily from those giving the loan at the time.
How are the hire-purchase companies and finance houses to know what conforms to those guidelines? Will there be a greater loss of privacy for the individual? Will there have to be more prying into private affairs, even for quite small loans, because the companies will want to be sure that they are within those vague guidelines? As there is no ceiling, since the Act removes the existing ceiling of 48 per cent.—I am not saying that that is a reasonable rate of interest—is it conceivable that there could be rates of interest above the Moneylenders Act ceiling of 48 per cent.?
I do not underestimate the difficulties of presentation, even for a Government, in setting a specific rate of interest. I am sure that many Conservative Members regret the enthusiasm with which they berated 8½ per cent. as an extortionate rate of mortgage interest under a Labour Government. The Prime Minister now offers that same 8½ per cent. as the concessionary rate for young marrieds. That is his "gift". It is not quite a gift, because he does not spend a penny towards it. All that happens is that any interest that the couple do not pay in the early years they pay in the later years, in addition to the then due interest.
Therefore, I understand the Government's being rather sensitive about rates of interest and what constitutes a fair or unfair rate. But I have deep misgivings 529 about their decision to depart from the Crowther recommendation that there should be a ceiling. I appreciate that it can be difficult to set a ceiling that is fair for both secure and unsecured loans, for example. What is fair for an unsecured loan might be extortionate for a loan with security. But I have grave doubts about the advisability of disposing of the previous ceiling.
The Government also introduce a £30 lower limit for protection under the Bill. That is too high. The Consumers Association and the finance houses agree that it is wrong. The finance houses take the view that all credit should be treated on the same basis, and the Consumers Association says:It is precisely in relation to the smaller transactions that the greatest need for protection arises. People with smaller incomes embarking on credit transactions for smaller sums need protection even more than those entering larger transactions. The only case for exemption is in relation to small oral transactions, in CA's view.It suggests that £10 should be the limit. Why was the £30 figure chosen? Why was it not £20 or £10? There has been no attempt to explain the matter in detail. People borrowing sums below £30 lose the important protection of the cooling-off period, pre-entry disclosure and the regulations on form and content of agreement.
Crowther made a major point of wanting hire purchase abolished. I am told that every speaker on both sides of the House in the Second Reading debate on the 1964 Act also wanted hire purchase abolished. The finance houses would like to see that form of lending abolished, as would the Consumers Association, I understand.
In paragraph 8 of the White Paper the Government state that there are social disadvantages which offset any benefits from abolishing hire purchase. Will they spell them out? They are not immediately apparent. There may well be a good case, but, in view of the importance that the Crowther Committee and various other bodies have placed on the recommendation, the Government should explain in great detail why they reached their decision.
The right hon. and learned Gentleman rightly said that there were worries about the effect on hire agreements of Clause 94 530 which provides for an 18-month cut-off period, when individuals, but not bodies corporate, can terminate agreements. I welcome the intent, which is good, legitimate and commendable. Nobody criticises the intention, but there is a side effect that I am sure was not intended. I gather from the right hon. and learned Gentleman's introduction that he is willing to try to deal with it.
Sole traders and partnerships are treated as individuals under the Bill. Such businesses rely considerably upon leasing agreements for cash registers and office equipment. Even Ansafone or mini-computers are often covered by leasing agreements. Such agreements involve a predictability in the write-off time of the equipment. A normal period is seven years. The rental will be based on the assumption that the renter will keep the equipment for at least that time. If the Bill were implemented in its present form, sole traders and partnerships would be able to cancel the agreement at the end of 18 months, and therefore, the rental would cease to be viable. Alternatively, the rent would have to be so exorbitant that it would be unacceptable to the small firm or would put it at a competitive disadvantage vis-à-vis its larger incorporated neighbours.
The business use definition in the Supply of Goods (Implied Terms) Act may provide a way out of this predicament, which has occurred inadvertently. I am sure there is good will to resolve it. I hope that the Minister can assure us that the provision will be modified after discussion in Committee.
The Consumers Association is worried about the rebate for early settlement. It believes that under the formula envisaged in the document, by the time the rule of 78, which can be postponed for three months, is added to the three months' notice the lender requires, the equivalent of six months' interest will be payable upon the termination of an agreement. It believes that three months' interest would be adequate. Why was the six-month period decided upon? At first sight it seems to be an arbitrary figure. There may be good reason, and clarification would ease the Committee stage.
I agree that the true cost of borrowing should be seen by the consumer. I shall be interested to see how the Government 531 apply the fair rate of borrowing to the spurious scheme for mortgages which the Prime Minister produced just two days, fortuitously, before his party's annual conference. It is a scheme whereby, after repaying for five years, the young family will owe more than the debt they originally contracted for.
We understand the Government's sense of desperation in relation to mortgages. After all, it was only last weekend that they had to announce that they were setting up a committee of Ministers and building societies not to provide an extra pound in mortgage money but solely to ration existing mortgage money. It would seem that the Government are now committed to mortgage rationing as a policy rather than the readier availability of mortgages, which is the real solution to the problem.
We shall want to consider many further points in Committee—for example, unfair billing practices, which are becoming widespread in the United States, and billing systems. These are Committee points and they can be appropriately dealt with at that stage.
I regret the lower limit of £30. We shall try to change it in Committee. I am worried about the definition of "extortionate" and the fact that there is no ceiling in the Bill.
I regret that only half the Crowther Report is being implemented, because the suggested lending and security Act recommended by Crowther is not part of the Bill. However, I recognise that probably it would have had to be a separate Bill, because it would be more complex than this Bill.
What astonishes me is that in paragraph 14 of the White Paper the Government state that they intend to institute consultations about the lending and security Act after the passage of a Consumer Credit Bill. In other words, three years after receiving the Crowther Report the Government are to start the consultations which may eventually lead to an Act. That suggests that on present form we are talking of at least six years between the report and the lending and security Act reaching the statute book.
Similarly, I deplore the fact that it may be four years from the receipt of 532 the Crowther Report to the Bill becoming fully effective.
The Bill is being used as window dressing for an election, and the consumers' interests have had to take a back seat to the Government's political advantage.
I should like an assurance—though I suspect that I shall not get it—that the Minister himself, as this is the leading consumer protection measure of this Session of Parliament, will deal with the Committee stage. I mean no disrespect to the Minister for Aerospace and Shipping. However, there is a close relationship between this Bill and the Fair Trading Act. The right hon. and learned Gentleman sat through and guided the Standing Committee on the Fair Trading Bill. It would be appropriate that he should deal with this Bill in Committee. I regard it as an affront to hon. Members on both sides who have been devoting the time to the detailed study of the Bill which the Minister apparently wants prior to the Committee stage that he is now considering that the Minister for Aerospace and Shipping should deal with the Bill.
We are dealing with a Bill that requires full disclosure and which aims to reduce the ugliness of the ugly face of capitalism, to protect the consumer from business. I am struck by the duality of moral standards that we find here. While business is to be made to disclose more, the Government are in the process of concealing more. For reasons of political embarrassment, only last week the Government announced that they are to conceal price increases authorised by the Price Commission. It seems that disclosure is all right but not if it is in danger of revealing the ugly face of Conservatism. The Bill makes for more open business, but it is small compensation for last week's announcement when the Government finally buried open government at a stroke.
§ 4.45 p.m.
§ Mr. Fergus Montgomery (Brierley Hill)
The hon. Member for Swansea, West (Mr. Alan Williams) said at the beginning of his speech that this was a measure on which there would be a good deal of agreement between both sides and, therefore, it would be fairly non-partisan. He then became rather partisan and tried to make political points throughout his speech.
533 At the outset I declare an interest. I am a director of a consumer credit company.
I welcome the Bill. I believe that it will be welcomed by all responsible members of the credit industry. I agree with the hon. Member for Swansea, West that this is the outcome of the report of the Crowther Committee, a committee which was set up in September 1968 and reported in March 1971. It seems to have taken a long time for the committee to report and even longer for the Bill to come before the House. The hon. Gentleman was right to point out the dangers that exist, because it is essential that this legislation is got through as quickly as possible.
The Bill largely implements the findings of the Crowther Committee and is another step forward by this Government in ensuring a more comprehensive set of safeguards than ever before for the consumer. It is a sign of the Government's recognition of the importance of consumer affairs that we have the appointment to the Cabinet of my right hon. and learned Friend the Minister for Trade and Consumer Affairs.
There are certain aspects of the Bill that I particularly welcome. First, I welcome the appointment of a Consumer Credit Commissioner who will have wide powers to supervise the operation of consumer credit and will work closely with the Director-General of Fair Trading. I am anxious to know whether these two appointees would have the power to act in a difficult constituency case which I am dealing with at present. I have had a good deal of correspondence on this case, and my right hon. and learned Friend has been very helpful when I have written to him.
I should like to acquaint the House of details which are set out in a letter I received from my constituent. He tells me that he bought a freezer on 24th August 1972. He bought the freezer through a representative from Inter-City Shoppers Frozen Food Suppliers, Manchester, who called at his home. The representative tempted my constituent to have a freezer on a 14-day trial. My constituent signed the forms, and then, to his amazement, discovered later that he had signed an agreement with KHR Financing Limited, London, but at that time the representative from Inter-City 534 Shoppers Frozen Food Suppliers did not explain this clearly to my constituent.
Two days after receiving the freezer my constituent decided that he did not like it and that he was not satisfied with it. He therefore contacted Inter-City Shoppers and asked that firm to collect the freezer. This the firm did after some trouble. The mistake my constituent made was that he did not ask for a receipt for collection of the freezer. Some time afterwards he received a payment book from KHR Financing to pay instalments on the freezer. Immediately my constituent sent back the payment book and explained that he had had the freezer only on trial and that, in fact, it had gone back to the firm.
A few weeks later my constituent received a letter from KHR Financing warning him that he was behind on his payments. My constituent replied several times but received no reply from KHR Financing. KHR Financing has now taken my constituent to court.
My constituent contacted Inter-City Shoppers, which is now saying that it did not collect the freezer, which is untrue. Inter-City Shoppers has now gone into liquidation. My constituent has been in contact with a solicitor who told him that he should offer to pay £1 per week. My constituent felt that this was all wrong, because by doing this he would be admitting liability.
I feel strongly about this, because this man has now been asked to pay for something that he does not even possess because he was unfortunate enough to buy something from a firm that has gone into liquidation.
My right hon. and learned Friend has been helpful with this case. He wrote to me on 19th October stating that he thought that my constituentshould be put in touch with Jacobs Kroll and Co. Ltd., the company which originally financed the transaction. This company undertook to discuss the matter with their former customers, who now hold the promissory note covering this transaction.The latter Company KHR Financings Ltd., have now written to us about the transaction. They point out that your constituent signed a note on 18th August stating that he had received the deep freezer and that on his instructions they paid the supplier. They heard nothing from your constituent until 18th October 1973 and were not aware until then that the freezer had been returned. Nevertheless, the firm have indicated that in the 535 circumstances, purely on an ex gratia basis, they would be prepared to discuss the matter with your constituent.That was on 19th October. My constituent has informed me this week that he has written to both firms—Jacobs Kroll and KHR Financings—but neither has written in reply. I hope that as a result of this piece of legislation unfortunate cases such as that will not recur.
Secondly, I welcome the provision in the Bill which will require consumer credit agreements to show the true rate of interest. I am sure that there will be no objection to this provision from any of the reputable consumer credit firms in this country. The only people who have anything at all to fear are the "sharks" in this business, who bleed dry unsuspecting and naïve members of the general public. Thirdly, I welcome the acceptance of the recommendation of the Younger Committee on privacy. By this, individuals will have a legally enforceable right of access to information held about them by credit rating agencies, and the Consumer Credit Commissioner will have power to see that incorrect entries are rectified.
Having said that, there are a number of matters in relation to the detailed operation of the Bill which may require further attention during the Committee stage. I think specifically of the question of borrowers' rights on cancellation. I agree that the interests of the borrower must be protected, but we must also bear in mind that the costs of abortive transactions will ultimately be passed on to the customer who carries out his bargain. The cancellation of a contract can be expensive to the grantor of credit.
I have admitted that there are unscrupulous providers of finance but we also have to accept the other side of the coin, that there are unscrupulous debtors, so that during the Committee stage we must ensure that this piece of legislation is fair to all parties. Any provisions which encourage an irresponsible approach to credit by a sector of the public will result in an increase in the cost of credit. The people who are particularly vulnerable in these new conditions are the connected lenders, who could quite conceivably be the innocent victims of disputes between a customer and a retailer on questions of merchandise I 536 hope that some thought will be given to this point during the Committee stage.
I trust that the points I have made, which are all Committee points, will be considered at the appropriate time.
I should again like to welcome the Bill, which I believe is also generally welcomed both by the Consumers Association and by the Finance Houses Association. It sweeps away many of the artificial distinctions between different types of credit granting, thereby making it easier for the general public to distinguish between them, and when it has been enacted this Bill will be of great value to the consumers of this country.
§ 4.53 p.m.
§ Mr. George Darling (Sheffield, Hillsborough)
As I had some slight responsibility for the appointment of the Crowther Committee, I should like to join the right hon. and learned Gentleman the Minister for Trade and Consumer Affairs and my hon. Friend the Member for Swansea, West (Mr. Alan Williams) in paying tribute to the work of that committee and particularly to the guiding hand of the late Lord Crowther. His death was a tremendous loss to the public life of this country. But the committee has carried on its work and has produced a report which, in scope, in the quality of its survey of the law and of the practices governing credit trading in this country, and particularly in its recommendations, is a model for committees and commissions of this type.
I join in the general welcome to the Bill. The great expansion of hire-purchase and credit trading in this country in the post-war years has been remarkable not only for the vast amount of money and the millions of transactions involved, but for the fact that all of this trade has been conducted within a completely inadequate legal framework. The case which the hon. Member for Brierley Hill (Mr. Montgomery) spoke about will be familiar to many hon. Members. I do not say that it can be copied in every constituency, but I am sure that many hon. Members have received complaints about similar cases which point to the inadequacy of the legal system under which the transactions take place and which allows unscrupulous traders to come into business. They could, and 537 should, have been prevented from coming into business from the start.
This inadequacy in the law of contract was recognised by the Molony Committee more than 10 years ago. My hon. Friend the Member for Swansea, West complained about the delay during the last three or four years. The Molony Committee's recommendations were not thoroughly carried out by the previous Government when in 1963 they introduced what is now the Hire-Purchase Act 1964. I welcome this Bill because it at last very largely, though not completely, provides a modern and comprehensive body of law to govern fairly all the transactions to which reference has been made. But I also welcome it for a slightly personal reason. The Bill contains provisions which some of my hon. Friends and I put forward as amendments to the 1964 Act when it was going through its Committee stage, which were rejected by the previous Government. I refer to such provisions as the obligatory rebate on payment ahead of time in hire-purchase transactions—
§ Mr. Alan Williams
For the record, may I be clear that my right hon. Friend is referring to a previous Conservative Government and not to a Labour Government?
§ Mr. Darling
Yes, I meant the previous Conservative Government. Therefore, I am pleased to welcome those amendments into this new legislation.
But in defence of the previous Conservative Government and of the present one, I must say that we recognised that it was difficult, and in some cases undesirable, to go on amending laws which were basically inadequate and often unworkable. The dangers in continuing to tinker with this legislation were brought home to me when I had some responsibility for trying to amend the law when the Labour Government were in office. We were unable to do so, because the view that then prevailed—which, on reflection, was right—was that we should not try to tinker any more with the legislation, but should try to get a new comprehensive law which would be far better than a patchwork of legislation that needed to be either amended or repealed. It was in order to achieve this that we set up the Crowther Committee.
538 I must confess that three years ago I was apprehensive when it was said in the first Queen's Speech of the present Government that a consumer credit Bill would be introduced. I felt that more amendments to out-of-date legislation would be coming forward and that the Crowther Report would be ditched because there had not been sufficient time properly to digest it. But after consideration of the report, the Government have now taken the right line. First, the Government have produced the main recommendations in one Bill, rather than in two Bills as the Crowther Committee proposed. Secondly, they have added further measures for consumer protection which were not recommended in the Crowther Report.
In my view, the Government are right to postpone the introduction of a proper legal concept of chattel mortgage. Like my hon. Friend the Member for Swansea, West, I should like to see the development of personal loans secured by and connected with the goods being purchased. I should like to see the hire-purchase arrangement of credit trading, which has developed practically only in this country, abolished, with a system of chattel mortgage taking its place. It is a very difficult legal provision to work out, but I hope that the proposal will not be abandoned despite the statement on this matter in the White Paper.
There are some parts of the Bill which will require detailed consideration and amendment. But it would be inappropriate to go into detail at this stage. To do so would involve a far too lengthy speech. Apart from that, as the hon. Member for Brierley Hill said, most of the comments that one would wish to make are Committee points with which those among us who may be called to serve on the Standing Committee will be able to deal. But I do not want it thought that my rather restricted observations cover all the suggested amendments that I could now put forward.
I support the remarks of my hon. Friend the Member for Swansea, West about the delay in making the legislation operative and in introducing the regulations which will flow from it when it is on the statute book. Clause 169, dealing with this point, gives the Secretary of State powers to make different 539 sections of the legislation operative on different dates. We want to know how long we shall have to wait. I hope that we shall be given some idea of the dates that the Government have in mind, assuming that this legislation is on the statute book early next year, as we all hope. Obviously some time will be needed for the finance houses and other credit operators to reorganise their administrative arrangements. However, some of the consumer protection provisions which do not involve any further administrative work ought to be introduced immediately. I have in mind such matters as truth in advertising, and so on. I hope that we shall be given assurances about this.
I was surprised that the Minister skated over a provision at the very beginning of the Bill which gives the Secretary of State authority to appoint a spare-time commissioner. If all this work is to be governed and administered properly, it will not be done by a spare-time commissioner. I hope that we shall be assured that if this is how it is to be administered we shall have a commissioner who is not only full time but someone who is fully qualified to do the job and determined to do it. This is definitely not a spare-time job.
I welcome the proposals for licensing everyone who provides credit to consumers. This is tremendously important. I remember the trouble that we had when we had to deal with the case of the United Dominions Trust v. Kirkwood. It was a peculiar legal case where the UDT was at risk merely because legally it could not call itself a bank or a moneylender. As a result, anyone owing it money did not have to repay it. We spatchcocked a curious little piece of legislation into the Companies Act to give some finance houses the legal benefits of being banks. But they are still not registered. For all of them, from the richest finance house to the smallest trader, it is very important that they should be licensed to carry on their work so that their licences may be revoked in the event of their misbehaving themselves. I am not altogether happy about the appeals procedure where the commissioner revokes a licence. I hope that this provision will be looked at again. 540 It is a Committee point more than anything else, of course.
I am glad to see, as hon. Members would expect, that the weights and measures authorities will be responsible for enforcement. However, in my view, it is time to change their title and to put into legislation the title which they themselves prefer. They would wish to be called trading standards officers.
There is an important point in this connection in that the officers are responsible already for licensing moneylenders and pawnbrokers. In view of that, they have the machinery to extend the licensing system to consumer credit. But they will need to extend their activities, and this was a point about which the Crowther Committee was rather doubtful. Of course, the committee could not be aware of the provisions of Local Government Acts which were passed subsequently. Those provisions have reduced the number of relevant authorities from about 250 to 75 or 80. Each of them will be large enough and have sufficient resources to carry on the multifarious activities which now come under the umbrella of consumer protection. They will be in a far better position to extend their activities, and they will have the necessary resources. In practice, to cover licensing, this will probably mean the addition of three or four officers in a county authority.
If this legislation is to come into operation at about the time that the Local Government Act comes into force, with the change in the scope of duties of county authorities, and assuming that the licensing provisions are to be introduced quickly, there is very little time left to recruit officers and give them the training that they require. I do not think that the training part of it will be difficult, provided that its organisation is started now. The legal departments of several universities are active in this connection, and they are perfectly capable of providing not only the courses and curricula but the lecturers, the examinations and everything else required to ensure that the officers are properly trained. I hope that the Government will take this matter seriously.
My next point concerns computer errors, of which the Consumers Association made a great deal in its 541 memorandum. The local trading standards authorities have a part to play here. We all know of cases of harassed customers threatened with court action because it is alleged that they have not paid bills when all the time computer errors have been made and the bills have been paid. In such cases, I do not believe that customers should be left on their own. They need help. If this can be provided for in the Bill, it is the local trading standards officer who is the person to whom he should appeal. That officer should have the right to begin, as it were, counter-proceedings against the firm operating the computer which has misled the customer. I hope that these matters will be specifically included in the work of trading standards offices.
The Government are wise to leave some of these decisions to regulations, not only because we cannot work them out clearly in the Bill but because circumstances keep on changing and we do not want a new Act of Parliament every time some new kind of credit trading comes along to bring it within the scope of the law. It is better to have regulations rather than embody everything into what will be the basic law for many years to come. For example, the £5,000 upper limit if inflation continues at its present rate would need to be considered again and changed by regulation. I agree also that we should re-examine the £30 lower limit for small credit arrangements.
My next point relates to the true cost of credit, which I believe should be laid down by order. This provision should be introduced immediately after the Bill reaches the statute book. As the Consumers Association says, standard charges for credit charge transactions should also be included. In other words, instead of having a range of charges as at present, the standard charge should be laid down by law by bringing it forward in regulations.
The Government should look again at the provision for rebates on payments ahead of time. It is wrong to allow an extra three months' interest to be taken by the creditor where settlement is made ahead of time.
I note with pleasure that an obligation will be placed on the Consumer Credit Commissioner to publish information and advice. This is greatly needed, and I am pleased to see it included in 542 the Bill's provisions. Incidentally, I want to pay a tribute to the draftsmanship of the Bill, which is almost as good as that of the Trade Descriptions Act. I am pleased with the innovation in the Bill by which examples are given of different forms of credit. I hope that this innovation will be extended to other complicated legislation.
I believe that the obligation on the commissioner to explain all these things in simple language to the customer should be mandatory and not permissive. The commissioner should be compelled to do this by the terms of the Bill. When a customer goes into a shop intending to undertake any kind of credit trading or hire-purchase transaction the customer's liability and the whole system of credit payments involved should be clearly stated on a piece of paper. That document should be part of the transaction and written in language that everybody can understand. This suggestion is not new, for there is a precedent in the hire-purchase forms, in a box which must be printed in different coloured ink from the rest of the document. This addition to the document asks the customer whether he realises that the goods are not his until he pays the final amount. This was one of the improving amendments we tabled to the 1963 Bill which was accepted. It is a pity that not all our amendments were accepted.
Finally on the subject of licensing, I believe that we should look at the power given to the commissioner to allow for group licensing. What we have in mind are the mutuality club collectors of co-operative societies. We ask whether it is reasonable to expect each of the collectors to be individually licensed. We hope that this will be provided for in the group arrangements in the Bill.
I welcome the provisions which mean that the Consumer Credit Commissioner and the Director-General of Fair Trading will have to work together in this extended field of consumer protection. I am sure that in practice it will be impossible to separate the legal financial rules of hire-purchase and credit trading from the other legislation that covers the description and fitness for the purpose of the goods people are buying.
Truth in lending and truth in advertising seem to me to be the twin defences against misleading practices, and they 543 cannot be separated. It is essential that they should be jointly administered wherever necessary. It is also essential that both areas of legislation, truth in lending and truth in advertising, should be commonly enforced by a single local administration.
Just to illustrate how carefully we have all examined the Bill, I wish to draw the Minister's attention to a missprint in Clause 152 on page 71. Subsection (2) should be numbered subsection (3), and that, of course, affects the following subsections.
We welcome the Bill. It is a comprehensive measure bringing in new law to supersede the old patchwork of out-of-date legislation which we have had with us for so long, and this reform has been greatly needed for a long time. Indeed, many hon. Members on both sides of the House have to some degree contributed to this reform. I know that the Minister will understand my concern when I say that he would have been in serious trouble if after the publication of the Crowther Report he had introduced anything less than this very satisfactory Bill.
§ 5.18 p.m.
§ Mrs. Sally Oppenheim (Gloucester)
Following the passage of this legislation, the need to heed Polonius's admonition "Neither a borrower nor a lender be" should be greatly diminished.
As my right hon. and learned Friend the Minister for Trade and Consumer Affairs said, the use of credit has become increasingly important in our society, and the rules governing its use must be reasonable and fair. This is why I believe the whole House will support the Bill. I am sorry that my hon. Friend the Member for Brierley Hill (Mr. Montgomery) was not so familiar as are some of us on the Conservative Benches with the curious interpretation of a "nonpartisan" speech often adopted by the hon. Member for Swansea, West (Mr. Alan Williams).
The Bill is all the more welcome because it has been so long awaited. It is a considerable time since the Crowther Committee reported, and in many ways the problems and practices in the realms of consumer credit have multiplied, intensified and become more diverse. Therefore, one would not expect the Bill 544 to be an exact transcription of those recommendations. Indeed, in some respects it goes a good deal further in the protection which it offers to credit users. It maintains a faithful interpretation of the Crowther recommendations and at the same time strikes a felicitous balance between users and lenders of credit which is fair to both as well as dealing with the whole problem comprehensively. One of the more welcome aspects of the Bill is that it should provide an ideal complement to the Fair Trading Act.
Whereas there is a great deal in the Bill that is worthy of special note and acclaim, time will not permit me to deal with every aspect that I particularly welcome. I will try not to weary the House with too many illustrations of points by examples from personal experience, although inevitably there will be some because, like all hon. Members, I have had considerable experience of the need for this legislation through constituency cases.
The House may recall that, following an Adjournment debate that I had last February, my hon. Friend the Under-Secretary of State announced a voluntary credit code as an interim measure which had value in its own right and in alerting the credit world to what would be expected of it following the passage of this legislation. It is interesting that the subject of that debate was not harsh rates of interest but unfair billing practices. Therefore, I was particularly pleased to see attention drawn to this matter in the memorandum sent out by the Consumers Association. I, too, share the view that Clauses 134 and 135 will provide valuable protection to consumers in this instance.
I particularly commend the provisions in Clauses 88 and 91, which should put an end to the imposition of onerous conditions in respect of the early repayment of loans. In July 1971 one of my constituents borrowed £733 from our friendly neighbourhood finance house, Julian Hodge and Co. During the year he wanted to sell his home, on which the second mortgage was secured. It finally cost him over £204 to borrow £733 for a little under 10 months. I am satisfied that Clause 91 gives fair protection against that kind of extortion.
Although it is not strictly relevant, I am disappointed that the same kind of protection in reverse is not given in cases 545 of early redemption of life insurance policies where the consumers are, as it were, the lenders, and have to pay a very high price to redeem what turns out to be only a very small proportion of their savings.
I hope that the regulations which will stem from Clause 88 will not have the effect, to which the Consumers Association and several hon. Members have drawn attention, of imposing a notice period of six months. This is unreasonable. It could result in consumers in certain circumstances being no better off in respect of earlier repayment than they are at present.
I accord a qualified welcome to Clause 5. I am an optimist. I gathered from the White Paper that a statutory duty would be imposed on the Consumer Credit Commissioner to educate consumers in the use of credit, whereas he is merely to be permitted to do so. I hope that he will educate. I shall be interested to see by what means he proposes to do that and whether he will deem it desirable to start in secondary education. If so, and if this is successful, perhaps the Director-General of Fair Trading will emulate his example in general consumer education.
I welcome the imaginative inclusion of Clause 71, which, for the first time, as my right hon. and learned Friend said, will make the lender jointly liable where the quality of goods is in dispute if he has a direct link with the seller. This directly answers the point raised by my hon. Friend the Member for Brierley Hill and closes the final gap in the protection offered under the Supply of Goods Act concerning goods.
Naturally, I welcome the provisions dealing with the mass mailing of unsolicited credit cards and the banning of doorstep canvassing of credit, except by reputable firms, which, for the first time, will have to be licensed.
Having referred to a number of matters that I welcome, I must deal with others on which I think some clarification is necessary, also perhaps a little more emphasis, and possibly some improvement.
It is important to recognise that the effectiveness of the Bill will to a great extent depend on the regulation which will ensue from the appropriate clauses. Therefore, we are to some extent whistling in the dark in discussing the 546 Bill. My right hon. and learned Friend said that there is great value in this method of legislation in that new practices, when they arise, can be dealt with quickly. I agree, but I think that in Committee we shall need to deal thoroughly with every aspect of the aims behind these regulations so that when the time comes to make them those aims will be clearly understood.
I think, too, that the House will accept that the fundamental principle underlying Crowther and the Bill is truth in lending. I believe that the most significant manifestation of this will come in initial credit advertising. This is where I part company from the Consumers Association, which takes the view that this will take place during the negotiation period. It is crucial that the information which will have to be supplied under the disclosure requirements, for which regulations will be made, is as effective as possible in informing consumers about the cost of credit and the terms and conditions to be imposed in advertisements. There are far too many misleading credit advertisements at present. One that immediately springs to mind which appeared in the Radio Times, and which subsequently a national newspaper, to its great credit, refused to print, in banner headlines proclaimed:A thousand pounds for only £2.30 a week.Then in very tiny print below it went on to say that the repayments would rise to £17.37 a month after two years. The House will note the confusion between monthly and weekly repayments. It then said that repayments would be continued over a further 156 months. It is also common in credit advertising to make it appear advantageous to repay debts over a longer period than is beneficial to consumers. Therefore, again, I hope that the content of the statutory declaration of information will have the effect of making this and other points clear.
The Bill is faithful to the high priority that Crowther gave to the creation of standard consistent formulae for use in advertising, in agreements and in negotiations for early repayment. The formulae put forward in the White Paper appear, in theory, to go some way to meeting these needs. But I fear that, in practice, they may prove a little too complicated for the average consumer 547 and, indeed, for me, and may undermine the usefulness of the Bill.
I suspect that, however much information we try to give to consumers, it will be the cost in cash terms of instalments and of the total repayment that will be of the greatest importance to them, because this will be more readily understood. This is what they want, and need, to know. Therefore, I hope that some prominence can be given to this aspect of the information which will have to be provided in advertisements and other documents.
After all, when Mr. and Mrs. Jones go to buy a television set on what is often genteelly, and sometimes misleadingly, described as "deferred terms", they want to know, in a way that they can readily assimilate so that they can compare credit values, how much more it will cost to buy the set on deferred terms than to pay cash for it over the counter. They will want to know the cash amount of each instalment, the number of instalments, the period over which the instalments must be made and the total capital cost of the repayments. This is equally true in many second mortgage and other credit transactions. Whereas I do not in any way underrate the importance of the other information which will have to be provided, I maintain that the cash cost will mean more to consumers than percentage rates of interest.
Still on the subject of advertisements, I was pleased to see in Clause 42 that what appeared to be a tremendous loophole in the White Paper had been closed. In the White Paper there appeared to be no requirement for a consistent standard applying to all aspects of the presentation of the information that will have to be provided in advertisements and notices other than that it should be in a prominent position. In other words, it would not be required to be prominent in relation to the rest of the advertisement.
Whereas appendix 2 of the White Paper was specific about the form and content of agreements, appendix 1 was extremely vague and in theory left the way open for the disclosures to be made in minute print in pale grey on white in the centre of the advertisement in a prominent position. One would not want 548 to make regulations as to the size and colour and print proportions, but the size of the disclosure is relation to the rest of the advertisements is absolutely for ensuring that information is presented with adequate clarity in a manner calculated to attract the immediate attention of consumers. I was delighted to see Clause 42—a model of drafting—specifying a very clear intention to this effect so I do not think that, even with the worst will in the world, regulations could be drawn other than to deal with these points I have particularly raised. It is an admirably drafted clause.
The other points I raise are ones which I also think possibly need some clarification If the Bill is to be as beneficial to the consumers as most of us want, the means of enforcement of the statutory conditions in it and of redress will be very important. Whereas I accept and uphold the view in the White Paper that the two strands of criminal and civil redress should be kept separate, I think that there is possibly likely to be some confusion, and I hope that my hon. Friend the Under-Secretary of State will be able to clear it up.
For example, the Bill creates a number of new criminal offences, such as noncompliance with advertising disclosure, misleading advertisements, the operation of a credit business unlicensed, and new civil offences such as harsh and unreasonable rates of interest and harsh and unreasonable agreements.
My point is that in the case of a successful criminal prosecution the consumers will get automatic compensation in most cases, but this will not always be the case in a successful civil prosecution. Equally, the point was raised in paragraph 137 of the White Paper that in some cases it would be desirable for consumers to pursue their own cases at local level in the county court or the criminal court, and that other cases should be pursued by trading standards officers. I hope, if this is the intention, that it will not prove either too costly or too complicated for consumers. Would it not be initially better for all such cases at local level to be pursued by trading standards officers?
Also, although in principle I approve of the idea that the Consumer Credit Commissioner and the Director General 549 of Fair Trading should observe the run of local cases so that they may be immediately aware of any new pattern of malpractice which may arise, the idea that the director should prosecute in the Restrictive Practices Court on the advice of the commissioner if, for example—I give the exact example from the White Paper—a misleading advertisement appears in a national newspaper would appear in some ways a little anomalous, because misleading advertisements are one of the new criminal offences created in the Bill. If it were pursued in the Restrictive Practices Court, I believe I am right in saying that it would not bring about the same compensation for the consumers. It would be very incongruous if the consumers were to be denied compensation because they were misled by an advertisement in a national paper but allowed compensation because they had been misled by advertisements in local newspapers. While accepting the need for flexibility in the means and methods of enforcement, I believe it will be necessary to lay down some very clear guidelines so that consumers do not end up with two classes of justice.
It would be churlish to make any further criticisms of this excellent piece of legislation. It has been widely and warmly welcomed by the consumer organisations, by the Press and by the House, and I think that, indeed, it is a very valuable measure for consumers. It should do a great deal towards banishing the image of the usurious moneylender which has all too often justifiably applied to some purveyors of credit, and, like all good consumer legislation, it should have the effect of raising standards on both sides of credit transactions.
I take this opportunity—I am sorry that he is not present—of paying tribute to my right hon. and learned Friend at the end of his first year as Britain's first Minister for Consumer Affairs. He has brought his own expertise and stature to consumer affairs. He has won the respect and admiration of the consumer organisations throughout the country, and, perhaps most important of all, he has proved the point I made in debate on the Fair Trading Act—that a diligent, constructive and patient approach can very often achieve a great deal more than any strident campaign.
§ 5.35 p.m.
§ Mr. W. T. Williams (Warrington)
The hon. Member for Gloucester (Mrs. Sally Oppenheim) and the hon. Member for Brierley Hill (Mr. Montgomery) appear to be a little hurt that my hon. Friend the Member for Swansea, West (Mr. Alan Williams) made a number of party political points on what they assert to be a wholly non-partisan Bill.
§ Mr. Williams
I hope that the Under-Secretary of State will not share that hurt, because he will be hurt a good deal in the debate if he thinks that this is an unfair thing to do.
I welcome the Bill as far as it goes. There are many splendid things in it, and the Government are to be congratulated on making some attempt to clear out the Augean stable which has been the province of those who have been engaged in our credit and money markets during the past century or so.
But it would be asking too much of human nature to deny the right to remind the Government and the country that there is something not a little ironical in the presentation of the Bill at this of all times. After all, the Government were elected on a programme of criticism of the Labour Government—a criticism of a time in Britain which, by comparison with now, appears almost like paradise lost.
There is a lot to be said for the Bill itself, and it would be churlish to deny that life will be a good deal easier and less complicated and the whole system of consumer credit more justly and more fairly conducted as a result of it. So far as it is the primary duty of the Government to ensure the welfare of the people, the Bill deserves the good cheer and congratulations I unreservedly give it.
But the fact remains that the value of the Bill has been made smaller by the activities of the Government themselves. Their debasement of our coinage and of their own integrity have resulted in a situation when the protections afforded by the Bill have been eroded by the Government's own profligacy. We are a land divided. We are a land rent with industrial discord. Prices and interest and mortgage rates stand at a level never before seen in this country—not in time of peace, and not even in time of war.
551 So, although the Bill deserves praise—and I am glad that the Opposition will assist its passage through the House—it has to be considered against the background of the situation of the country when it is introduced. In that context, it is fair to point out that the Government might well have had regard to many other matters in dealing with the needs and welfare of our people at this time, as it inevitably will be rubbed into the Government that many of the burdens which now affect our people are the result of the Government's own actions.
It is the general philosophy underlying the Bill that creates the dissatisfaction I feel about it. There are significant aspects of the Bill which reduce its value in my eyes even at first glance. My first criticism arises from the philosophy that chooses to preclude those whose borrowings are small from the protection afforded to other sections of the community. There is no section of the community that more needs protection than those who have to borrow small sums of money, often of less than £30. There is something unpleasantly patronising about the suggestion that appears first in the White Paper and then as part of the Bill, that small borrowings of that nature, even if the interest rates are excessive, are not worth bothering about.
The people who borrow small sums of money—£10, £20, £30—are often those who stand at the lowest levels of our society. They are the poorest among us, and they borrow small amounts because they need the money as a lifeline when they are in parlous need to which people who are financially better off are not subjected. They, more than anyone else, need protection against excessive interest charges. I invite the Government to reconsider this reduction of the protection that is allowed to borrowers when the amounts borrowed are small. I speak from some experience in my constituency and elsewhere when I say that people who borrow a small sum of money—and who will continue to be unprotected by the Bill—may find themselves when they have repaid the capital owing as much money as they originally borrowed, and sometimes even more. That is a most oppressive situation for people who are already poor.
552 Another major matter that requires attention is the delay in the implementation of parts of the Bill until ministerial orders are laid. I understand the problems involved in licensing and the creation of a new system of credit, but I nevertheless ask the Government in that interim period—which I hope will be short—to introduce transitional measures to prevent the present abuses of the credit system. During this period—especially if it is a long one—those in the credit business who have shown themselves to be so unscrupulous in their greed that the Bill has become necessary will suck the greatest advantage to themselves and create the greatest disadvantage to those who are unfortunate enough to borrow from them unless the Government introduce transitional measures to anticipate what is contained in the Bill.
§ Mr. Ted Leadbitter (The Hartlepools)
My hon. and learned Friend has referred to the limited protection afforded by the Bill to people who borrow £30 or less. He might add a few words about the trading-checks system, whereby thousands of poor people are paying extortionate interest rates so that they are in a permanent state of indebtedness, which sometimes leads to families being broken up.
§ Mr. Williams
I agree with what my hon. Friend says.
In the wider context there is another matter about which I am greatly concerned. It is basic to the Bill, and it is not a Committee point, although it will perhaps have to be dealt with in Committee. The Government have persistently and rigidly refused to state what they regard as the level at which interest rates become oppressive. I can understand their sensitiveness about that, bearing in mind that by their own acts interest rates have now been established at a level which 20 years ago many county court judges would have refused to implement on the grounds that they were oppressive and extortionate. Mortgage and overdraft interest rates are so high that they make a mockery of the hopes of many people to own their own house.
Nevertheless, the Government should take this bull by the horns and declare what they regard as an extortionate rate of interest. It should not be left to the courts to determine in the light of the 553 many factors set out in the Bill and the White Paper, some of which are private, personal and intimate.
The Government should not leave it to the courts to make that kind of inquiry for two reasons. First, in any event it is an improper approach. It is wrong that people who are faced with what they regard as an extortionate interest rate and which they cannot pay should be obliged to go through this public undressing of their affairs.
Secondly, there is a large section of the community—the under-privileged, the ill-educated and those who are illiterate—about whom the Government should be more concerned. These people will continue to pay interest rates which would be regarded by the courts as extortionate partly because they do not understand and partly because they are afraid of the cost and the inquiries that would be made. Because no level has been laid down, they are afraid that if, after this public exhibition of their affairs, it was held that they had to pay the interest rates, they would also have to bear the increased burden of the court costs and possibly the costs of the lender.
§ The Under-Secretary of State for Trade and Industry (Mr. Peter Emery)
I always listen with interest to the hon. and learned Gentleman's arguments, but will he consider the situation in which a person wishes to borrow £20 or £25 for a week? If someone wishes to borrow £25 for a week, it would not normally be thought terrifying if he had to pay perhaps 25p for the loan. However, at an annual rate of interest it works out at a minimum of 52 per cent. If the sum borrowed were £20, the interest would work out at over 60 per cent. The moment we take the type of action which the hon. and learned Gentleman suggests we may well cut away people's ability to borrow small sums for short periods.
§ Mr. Williams
This is the classic argument of the widow and orphan. Credit clubs, clothing clubs, and so on, often issue vouchers on the repayment of interest which run for considerable periods, sometimes 24 or 48 months, and the borrower who perhaps pays £10 for a pair of trousers or a couple of bed sheets will pay for them over and over again. We cannot compare the position of a person such as the person the Under-Secretary 554 of State has mentioned with the sort of manifest abuse which is rampant and which will continue unless the Government do something about it. If they want to separate the two, let them separate them in the legislation and not use such special pleading as a reason for not doing anything about what can be and often is a disgraceful abuse.
There is a way—but it is one on which the Government have turned their backs—by which the situation of the widow and orphan who need, say, £20 for a week can be dealt with without recourse to an oppressive, usurious charge. That is by the development, improvement and extension of consumer credit societies. This is a very effective instrument in communities where there are large numbers of very poor people. There are consumer credit societies in Jamaica and southern America in which people are able to borrow considerable sums. The Government have consistently set their face against the development and extension of such societies, but it is an answer to the hypothetical situation posed by the Under-Secretary of State.
My judgment—it may be a minority judgment, but it is perhaps worth giving—is that one of the faults which have given rise to the harsh and unconscionable system of interest rates, and the Government's failure to do something about it, possibly arises from our departure from the basic concept of the religious faith upon which this country is supposed to stand. The scriptural prohibition of usury may arguably result in the grinding to a halt of the wheels of the economy, but the greediness of moneylenders who throughout our history have demanded harsh and unconscionable interest rates should be curbed. The Government can, and should, take their courage in both hands and say at what level an "unconscionable rate of interest" should begin.
Another matter which is worth considering when dealing with a Bill of this kind arises from the total failure in the Bill to make provision for any other way of enforcing the rights of, in particular, those who are not well endowed with financial resources. I refer to the failure to provide protection against harassment.
§ The Minister for Aerospace and Shipping (Mr. Michael Heseltine)
I think that the hon. and learned Gentleman has 555 lost sight of the fact that people giving credit will have to be licensed and in all their behaviour the renewal of their licence is a matter for consideration.
§ Mr. Williams
I accept that. I welcome the proposed licensing system and admit that it represents a tremendous improvement on anything which has gone before. Although I have criticisms of the Government, as one would expect, and of the Bill, arising from its omissions, I am glad that a Bill of this sort has been introduced. I admit that the licensing system will in the long term be a great improvement. But what I have in mind is different.
If lenders abuse their position they may forfeit their licence. But suppose that somebody claims to have paid a bill which the lender denies has been paid, or a demand is made which the borrower believes is unjustified because of the conditions of the lending or perhaps the interest charged. The only right which that person has to remedy what he regards as an injustice is to take the matter to court and face what for him might be a terrifying experience and which for anybody might be a costly experience. The Government have set up machinery by which the enforcement officers under the Fair Trading Act—the weights and measures inspectors—can deal with particular aspects of injustice, but they cannot deal with this matter.
Would not a simple and practical way of dealing with the danger of harassment by people who are making, and who will continue to make, unwarrantable demands and challenging those who deny them to go to the expense and difficulty of taking the matter to court be this: to enlarge the powers of the enforcement inspectors so that those who feel that they are being harassed and that they have no remedy can ask the inspectors to look into the matter and deal with their complaint? It would be cheaper, more effective, more private and, in the end, more satisfactory.
I fear that I have outrun my time, but I hope that I shall be forgiven, because I have been interrupted quite often. I have made some criticisms of the Bill in the context of the time at which it has been introduced, but I welcome the measure for its own sake and hope that 556 it is only the forerunner of much more significant and far-reaching consumer credit legislation.
Over the country as a whole a vast load of debt has arisen as a result of the hire-purchase system. My last word is to express the hope that the Government will not long delay their inquiry into the alternative to the hire-purchase system—the chattel mortgage system. Hire purchase has become an incubus, a vast expense administratively, too complicated, and too full of holes.
I speak with some feeling on this matter, becaue not long ago I introduced a hire-purchase Bill a great part of which was taken over by the then Government and is now embodied in legislation. I therefore have a little private, if anonymous, pride in the fact that the Bill reached the statute book. But the Government abandoned one of the things in my, as I believe, better Bill, and that was the opportunity to be afforded to all those who engage in hire-purchase transactions to change them into chattel mortgages. I hope that the Government, having introduced the Bill and having started, however belatedly and in however difficult circumstances, on the path of virtue, will now proceed to ensure that what they have begun well they will finish even more successfully—the task of protecting those who have borrowed, perhaps not wisely but too much.
§ 6.3 p.m.
§ Miss Janet Fookes (Merton and Morden)
I hope not to be too protracted in my remarks on the Bill. I join in the welcome that it has been given by hon. Members on both sides of the House. I am particularly pleased with the general approach of laying down clearly general principles and leaving to regulations their detailed application, thus allowing flexibility as new situations arise. That is right, and I thought that in making the point this afternoon my right hon. and learned Friend was unduly defensive.
There are various points with which I should like to deal, but perhaps I may refer first to enforcement by weights and measures inspectors. I make no apology for raising the matter again because I am concerned about the increasing load being put on these excellent men—and, I should hope, a few women as well, but I fear not.
557 I raised this issue when the Fair Trading Bill was being considered, and I received the usual suave ministerial assurances. I shall need more than suave ministerial assurances tonight to convince me, I should like some facts and figures about the increase in the number of inspectors that will be required and the kind of training that is envisaged to enable them to carry out these provisions. One cannot make these inspectors into beasts of burden. They occupy a crucial position, and they should be treated with consideration and respect in the onerous tasks which they are expected to undertake.
I give an unreserved welcome to the tightening up of methods of canvassing, and I am glad that telephone calls for this purpose are to be prohibited. I have found from my experience with constituents, that they are often more worried by telephone calls than by the doorstep approach, perhaps because the telephone call is impersonal and they cannot get at the caller as they can a person at the door.
I am pleased that the mass mailings of credit cards is to be prohibited. I was the unwilling recipient of one such card. I sent it back with a letter of great indignation to my bank manager, and I am glad that this practice will not be permitted in future.
I should, however, like to inquire further into the relationship between the Director General of Fair Trading and the Consumer Credit Commissioner. I have not read the Bill with that minute attention to detail which some Opposition Members appear to have done, but it does not seem to spell that out and I should have thought that some indication of it would have been helpful.
I have read with interest the memorandum submitted by the Finance Houses Association. I note that the association objects to the inclusion of small businessmen and sole traders in the provisions protecting those seeking credit. I do not agree with the association, because I feel that small businessmen can be just as vulnerable as other individuals in this matter. I note the association's view that certain benefits which are now available to the small businessman will dry up—that is not the phrase used but that is what it comes to—if these protection provisions are extended to him, and I hope 558 that my hon. Friend will deal with that when he replies to the debate.
My most serious reservation about the Bill was dealt with at some length by the hon. and learned Member for Warrington (Mr. W. T. Williams). It is about the decision in the Bill to exclude transactions below the sum of £30. Cogent reasons will have to be presented to me before I can swallow this. I entirely agree with the view that the people undertaking small transactions are the very people who need the most protection. That clause shows a lack of sympathy for and understanding of the point of view of those in a modest position in society. From their point of view a sum may appear large, however small it may appear to us in our capacity as Members of Parliament. It depends very much on one's point of view, and I think that these protective measures should apply to such sums. The Consumers Association rightly suggests that only oral transactions should be excluded from the provision, and with that I wholeheartedly agree.
The Consumers Association dealt at some length in its memorandum with the billing system. I feel particularly incensed about certain billing systems. A relative of mine who has a credit account with a department store found that an account which she had would be outstanding after she had left for an extended holiday abroad. She therefore asked the store—it was Debenhams—whether it would be possible for her to settle the account before she left. The company replied that the system would not permit that to be done. As a result, the account was overdue by the time she arrived back from her holiday and to it had been added the l½ per cent. rate of interest. That does not seem good enough. It was only a small matter, but the principle is important, and it can apply in all kinds of billing systems involving the use of credit cards, such as Access. I cannot tell from reading the Bill whether they are included, but I believe that the commissioner should be able to scrutinise billing systems and set his seal of approval or disapproval on them.
I welcome the Bill, especially as consumer credit is such an integral part of modern life. My hon. Friend the Member for Gloucester (Mrs. Sally Oppenheim) quoted Polonius on being neither a lender nor a borrower.
559 That prompts me to suppose that had this Bill been in force when Shakespeare was writing his plays, he would have had no plot whatsoever for "The Merchant of Venice."
§ 6.10 p.m.
§ Mrs. Joyce Butler (Wood Green)
I have been amazed this afternoon at the ease and familiarity with which right hon. and hon. Members have carried the House through the clauses of what I confess to finding a rather daunting Bill. By the time that one has studied, however briefly, the 169 clauses and five schedules, one begins to wonder why anyone in Britain ever enters into a credit transaction. But that they do, and in ever-increasing numbers, we have been reminded by a number of hon. Members.
I welcome the Bill. However, I want to draw attention to one point that has not yet been made. That is the very short time that has elapsed between publication of the White Paper and the introduction of the Bill. Just because of the complexity of the subject, this is unfortunate. The Minister will know that the Association of Municipal Corporations has drawn attention to this matter in particular and to its inability to arrange any discussions with the Minister since publication of the White Paper although it made representations immediately the White Paper was published because it felt that a number of points should be incorporated in the Bill.
Unlike my hon. Friend the Member for Swansea, West (Mr. Allan Williams)—although I agree with him in chiding the Government for having waited for two and a half years to introduce the Bill—I do not want the Government to rush ahead with the Bill too quickly, because some of these points should be taken into consideration. Although it is too late to put them into the Bill, I hope that it will be possible to do something about them in Committee.
Unfortunately, too, local authorities which will be affected have not had time to consider the White Paper. My own authority, Haringey, has been in the forefront of consumer protection and has recently opened a very successful consumer advice centre in my constituency. It had a meeting on 23rd October but 560 was quite unable then to give any attention to the problems of staffing which might arise, as they will with other authorities, in the implementation of the Bill. The authority which I represent took on additional staff when it opened its consumer protection shop. It will now have to consider whether to take on more staff to implement the Bill or to leave the work to its existing staff, with the consequent danger of over-work.
This is a very serious problem, to which other hon. Members have referred. I feel very strongly about the question of overwork of weights and measures inspectors. It so happens that my brother-in-law was a chief county inspector of weights and measures. He died at a comparatively early age of a heart attack, which was largely brought on by over-work. Unfortunately, this coincided with the early days of the enforcement of the Trade Descriptions Act, when weights and measures authorities were under very heavy pressure of work. Since then, we have had the Fair Trading Act and responsibility for policing, as it were, price increases due to value added tax, and there will be all the additional work, which will create a very heavy burden on inspectors, when metrication comes into effect.
I share the anxiety expressed about this matter. I am glad that it has been expressed by so many hon. Members, because I hope that this consensus will persuade the Minister to look again at the question of putting the sole responsibility for enforcement on the weights and measures authorities. The Association of Municipal Corporations has urged that with the reorganisation of local government this point should be looked at and that the possibility of spreading the work over local authorities generally should be examined. I hope that the Minister will do this, because it is of major importance.
The Minister has already been asked for his estimate of the increase in the number of weights and measures inspectors which may be needed to implement enforcement of the Bill. Is any financial provision to be made to assist the existing weights and measures authority in this work, which will be additional to the burden which they carry already? Emphasis has been laid upon the need for training officers in the financial and legal complexities which are brought 561 about by the Bill. I believe that Schedule 2 contains 31 penal provisions. These will tax the knowledge and understanding of inspectors who have to implement the Bill.
The Minister has not given any indication about where these additional inspectors are to come from or how we are to get them. I understand that in the whole of the London area, while there is in theory an establishment of 160 weights and measures inspectors, in practice there are only 125. It has been impossible to recruit any more; so in London alone there is a shortfall at present of 35.
I welcome very much the provision for giving consumers access to their credit records. That is tremendously important. I hope that it will be widely used. Like other hon. Members, however, I regret very much that the small agreements of under £30 are to be exempt from some of the protection which the larger agreements are to have. I hope that in Committee the Minister will be willing to accept amendments to reduce the amount of £30 to £10.
Time is short and so many of the points in which we are all interested have already been covered. I want, in conclusion, to refer only to Clause 24, which gives the commissioner power to refuse a licence to anyone who practices discrimination in matters of sex, race, religion, colour and so on. When the Gracious Speech was being debated in the House the Minister of State, Home Office indicated that the Bill would deal with the problem of discrimination against women in credit transactions. But I cannot see how Clause 24 does that. The Minister will know that the main complaint of women about credit transactions is that so many firms will not give them credit facilities and hire-purchase facilities unless they can produce a male guarantor. This is very much resented by women. Unless we have some indication from the Minister of what regulations are likely to be introduced to implement the clause, I cannot see how it will be effective in preventing that discrimination.
I dislike hire purchase, as do many people. I have only twice tried out a hire-purchase transaction. On the first occasion, I was so disgusted at having to produce a male guarantor although 562 my credit-worthiness was not in doubt that I vowed never to try again. But so many women have contacted me about this problem that I decided to try out a test case. In this case I had no difficulty in making the agreement. I did it with a shop at which I was well known. I had made many purchases from it. I signed the agreement, and it was sent to the head office. It came back addressed not to me but to my husband, with a space for his signature as my guarantor. I returned it to the firm without my husband's signature but with my banker's reference. Back it came with an insistence that my husband should sign as my male guarantor because that was the rule of the firm regarding transactions with women. There was considerable correspondence, and finally I said that I would not proceed with the transaction if a male guarantor was demanded, because it was a matter of principle with me. Grudgingly the firm accepted my terms because of what they called my "prejudices".
I won that case and have since advised women who feel aggrieved about the male guarantor question to fight until they get what they want. But it is extremely unsatisfactory that they should have to fight and be treated as non persons in this way.
Mr. Michael Heseitine
I share the hon. Lady's prejudices. Much the same situation confronted my wife during the last fortnight.
§ Mrs. Butler
I am glad to know that women have a friend in court in this respect. I should be grateful if the Minister would also bear in mind that widowed, single, separated and divorced women are in even greater difficulty since they virtually cannot make any credit transaction or hire-purchase agreement because of the trouble they experience in trying to find a male relative or friend to act as guarantor.
I should like to have seen in the Bill a provision making it an offence not to accept the creditworthiness of the person applying, so that he or she would be eligible for a credit transaction. I regret the absence of such a provision and should be grateful if the Minister in replying could find time to say how he sees the provision in Clause 24 working to end such an anomalous situation. I 563 cannot see how it could do so at the moment. Can the hon. Gentleman say whether it will be made illegal to demand a male guarantor, or is the procedure to be worked out by trial and error? Is the commissioner eventually to count up the number of complaints against a particular firm and then decide to revoke its licence? It is unbelievable that that should have to happen, but exactly how it will work we do not know.
I conclude as I began by regretting that more time has not been given for comments and consultations between publication of the White Paper and publication of the Bill. I hope, therefore, that the Committee stage will not be taken next week or the week after but that a few weeks will be allowed so that the relevant amendments may be put forward by the Association of Municipal Corporations and other bodies with a direct interest concerning the Bill's enforcement so that it can be amended to meet those points of view.
§ 6.23 p.m.
§ Mr. John Roper (Farnworth)
Like previous speakers, I too welcome the Bill. In general terms I believe that it is a significant step forward in consumer protection. We have all known, and knew before the Crowther Committee made its report, that one of the areas in which consumers were most exploited was that of consumer credit. Last year, during the passage of the Fair Trading Bill, many hon. Members tried to make appropriate amendments for consumer protection. We were unable to proceed, however, because we were assured by the Government that there would be appropriate legislation this Session. I am glad that it has now come.
We will all have seen the horrendous figures in the Crowther Report about the cost of consumer credit. The figures for hire purchase showed that in some furniture shops in 1969, when Bank Rate was only 7 per cent., one had to pay as much as 110 per cent. interest on a hire-purchase transaction. If interest rates were 110 per cent. in 1969, when Bank Rate was 7 per cent., they must be approaching 200 per cent. now, when the minimum lending rate has risen to 13 per cent.
564 In company with other hon. Members, I regret certain omissions from the Bill and the failure to implement other parts of the Crowther Committee's important recommendations. My right hon. Friend the Member for Sheffield, Hillsborough (Mr. Darling) has already spoken about the failure to introduce the concept of chattel mortgages, and I hope that the Minister will tell us more about the reasons for that decision. It is regrettable that there was not at least some provision made for their more general use. Again, the continuation in the law of the concept of hire purchase, against which Crowther recommended, is to be regretted.
I hope that the Minister will tell us about the intended relationship of the Consumer Credit Commissioner to the House of Commons. We learn in Clause 6 of the Bill that he will make an annual report to the Secretary of State and that that report will be laid before the House. What opportunities will there be to question the Secretary of State on the commissioner's activities? Will he be at arm's length so that we are not able to raise matters on the Floor? We should like to know at this stage, and it may well be necessary to return to the question in Committee.
My principal regret is that the Government have not taken up the Crowther Committee's suggestions regarding credit unions. Crowther recognised that the law affecting mutual savings and loan societies was fragmented and unsatisfactory, and in paragraphs 1.1.16 and 1.1.17 it expressed the view that some rationalisation was needed. We should work out what the legal form of organisation for such societies should be. My hon. and learned Friend the Member for Warrington (Mr. W. T. Williams) has already referred to the importance of consumer credit societies and credit unions elsewhere in the world. It is extremely unfortunate that the Government have failed to take up the Crowther recommendations and introduce in this country legislation which would permit their full development.
I scanned the Bill with interest in the hope that I should find a satisfactory legislative structure for credit unions, but I searched in vain, save that I found a fleeting reference to credit unions on page 96, where Part II of Schedule 5 565 makes certain repeals in Northern Ireland enactments. We read there that Section 96 of the Industrial and Provident Societies Act (Northern Ireland) 1969 is repealed. The Minister will know that that section declares that the Moneylenders Act does not apply to credit unions. But that is the only reference to credit unions in the whole Bill.
It is noteworthy that one part of the United Kingdom has for the past four years had the legislation for which Crowther asked. Since the passage of the Industrial and Provident Societies Act (Northern Ireland), there has been legislation in the Province permitting the development of credit unions as a form of industrial and provident society.
No one would imagine that the last four years have been propitious years for any sort of development in Northern Ireland, but the striking fact is that since 1969, when legislation permitted the creation and development of credit unions, there has been a substantial development. The membership of credit unions has doubled, so that about 5 per cent. of the adult population of Northern Ireland are now members of credit unions, and savings in these co-operative credit societies or credit unions have increased fourfold, amounting now to £6 million.
It seems to me that the developments which have occurred in Northern Ireland during the past four years strongly argue the case for the inclusion of similar provision in this Bill for the rest of the United Kingdom. It is sometimes said that there is no demand for such legislation. However, in view of the stunted growth of credit unions in Great Britain without legislation, in comparison with the rapid growth in Northern Ireland since legislation, that cannot be a sound argument.
The two bodies in this country, the Credit Union League of Great Britain and the National Federation of Credit Unions, have both told me of their deep disappointment at the Government's failure to implement this part of the Crowther recommendations. We have here, I suppose, a prime example of the chicken-and-egg argument. In spite of Crowther, the Government say that we cannot have legislation because there is no demand. On the other hand, the credit union organisation says that one of the 566 reasons for the lack of growth of credit unions is the absence of a satisfactory legislative framework as suggested by Crowther.
The reluctance to see credit unions develop is particularly unfortunate in the case of industrial credit unions. Several firms in this country that have credit unions serving their employees in other countries are anxious to establish them in Britain but have been unable to do so because of the lack of a satisfactory legislative framework.
The Minister for Trade and Consumer Affairs spoke of likely changes in the pattern of consumer credit in this country during the next 20 years. I hope that one of the changes in that pattern will be the development of credit unions and consumer credit societies as an alternative consumer credit service for the community. I do not suggest that the creation of the necessary framework would transform the consumer credit situation overnight or that there would be a rapid development of credit unions. However, at a time when banks and finance houses are making indecent profits the development of non-profit-making credit co-operatives could be of considerable advantage to the consumer.
I invite the Minister, therefore, to look carefully at the credit unions operating in almost every other Commonwealth country, in all of which they are successfully established, and then consider amending his Bill to make suitable provision in this country as well. In Australia, for example, the development of credit unions, both in the trade union movement and on a community basis, has been quite remarkable over the past 15 years. From virtually nothing in the mid-1950s, credit unions now have £120 million of assets in Australia and over 500,000 members. Credit unions have been organised almost everywhere in Australia. I was fascinated to read that one of the most successful is the one organised for the employees of the Australian Central Bank who have set up a credit union for themselves.
The principle of mutual organisation and co-operation is an old principle in this country and it is sad, therefore, when consumers have such need for good advice and assistance, that the Government have not seen their way to accept the Crowther recommendations and have not taken 567 steps in the Bill actively to encourage the development of credit unions.
§ 6.35 p.m.
§ Mr. Arthur Davidson (Accrington)
I was interested to see that the Bill replaces various enactments, including the Pawnbrokers Acts 1872 and 1960, the Moneylenders Acts 1900 to 1927, the Hire-Purchase Act 1965, the Hire-Purchase (Scotland) Act 1965, the Advertisements (Hire-Purchase) Act 1967 and equivalent Northern Ireland enactments. It is a sad commentary on the state of the hire-purchase and credit laws that they have been built up piecemeal in an area which touches so many people. Therefore, I welcome the Bill because it at least unifies the law to some extent, but I would like to have seen the whole credit law unified and simplified even further, as was recommended by the Crowther Report.
Many people find it almost impossible to understand the difference between hire purchase, credit sales, personal loans and the various other transactions into which they enter. It is difficult enough for them to understand the details of the financial arrangements into which they are entering without having to compare one type of credit transaction with another. The time has long since passed when legislation should have been introduced to make all credit transactions simpler by getting rid of the distinction between the various types of existing credit transactions.
§ Mr. Alan Williams
In view of what my hon. Friend said—and I am sure that every Member on the Opposition side will agree with him—is he not amazed that the Government have not even started negotiations or consultations on this part of the Crowther recommendations? Although it is two and a half years since the Crowther Report was published, there have been no negotiations and, according to the Government, none will start until the Bill is passed.
§ Mr. Davidson
I am surprised and disappointed because this is a matter which is so obviously in need of reform that, two and a half years after Crowther reported and made such strong recommendations, legislation, or perhaps a White Paper, ought to have been introduced.
568 I do not intend to be churlish, because there is much which I welcome in the Bill and which, I am sure, will be welcomed by anyone who has had anything to do with consumer matters. I wish, however, that the Bill could have spelt out in more specific terms that it was a "truth in lending" Bill and that it was designed to ensure that the true interest rate was stated. I know that that is the intention of the Bill, and that it will be effective, by regulations, in ensuring this, but the public would have been happier if this objective had been defined, or even mentioned, in the Bill. Perhaps the matter can be dealt with in Committee.
Reference has been made by the hon. Member for Gloucester (Mrs. Sally Oppenheim) to the problem of billing errors. One of the problems which people face—and which they will face more and more with the increase of credit card facilities—is the nightmare of arguing with a computer. People receive bills and dispute the amount. They telephone someone and say that the amount is wrong, yet a month later the same error is repeated on the bill, with interest being charged on the disputed amount. These people complain again, to another department, and probably someone using a fictitious or assumed name replies that the matter is being looked into. Yet the bill is sent out again the next month, with more interest being charged, and the error is still there. It goes on and on, and legal proceedings are threatened. Most people are not prepared to face this sort of situation and so reluctantly throw up their hands and pay up. Arguing with a computer is even more difficult than arguing with Government Ministers, which in turn is even more difficult than arguing with civil servants.
I should like to have seen in the Bill a clause which laid down, first, that the credit firm, the creditor, was obliged within a set number of days to acknowledge receipt of a complaint about an error. There should be a further provision making it obligatory for the firm after that to take action to deal with the error. Failure to do so should be a criminal offence. I should like to think that the Government have in mind legislation, perhaps through a clause in the Bill, making it a penal offence to persecute people in the way I have described.
569 Like every other hon. Member who has spoken, I regret that the Government have spoiled an otherwise very good Bill by not extending its full protection to transactions of less than £30. That seems a little petty and unnecessary. I shall not repeat the arguments. Those who borrow small sums are unused to dealing in money transactions, and are even more unused to dealing with credit transactions, finding them very confusing and complex, even under the protection that the Bill would give them and that I would like to give them. They will find it difficult to understand why they are not protected sufficiently by the Bill.
The Consumers Association has welcomed the Bill. As a council member of the association I am happy to repeat that welcome. The field covered by the Bill affects people more and more, although in the present climate of astonishingly high interest rates it may well affect them less and less. The Minister may say that that is a political point, but I deny that.
I welcome the Bill, subject to the defects I have pointed out.
§ 6.42 p.m.
§ Mr. Ted Leadbitter (The Hartlepools)
I shall continue on the note with which my hon. Friend the Member for Accrington (Mr. Arthur Davidson) ended his speech. The £30 limit and the virtual removal of the restrictions that really matter are subjects of paramount importance. I tried to point out in an intervention that thousands of families were affected by that area of borrowing, sometimes in exceptionally vexing ways, by the establishments that make such sums available.
I should like to describe the practice of "snowballing". A person carrying out door-to-door canvassing may approach a housewife who has an urgent need for a small sum of money to meet an immediate domestic requirement. She will be offered £20-worth of checks, £21 to be repaid in 20 weeks. That is interest of 5 per cent., or 12½ per cent. a year.
The checks are expected to be used to buy goods from a number of shops. The check trading undertaking has an arrangement with the retailers concerned, usually receiving as much as 15 per cent. of the face value of all checks going into their establishments. Therefore, the £1 going in check form to the person who buys the checks returns from the retailer to the 570 check trading company a further 15 per cent. over each 20 weeks. Multiplying that by 2½, we obtain an annual figure of 37½ per cent. The total return to the check company is therefore 50 per cent.
That would be interesting if it merely remained there, but it does not. Many of those who are known to be in urgent need of money are then asked "Would you like, say, £15 in notes for your £20-worth of checks?" The housewife, because we are dealing with a field in which people cannot benefit from the more normal, reputable credit facilities, is likely to accept the offer. The checks are immediately passed back to the agent of the check company, and she receives £15 without losing her commitment.
At that moment her worries seem to have been relieved, but that is merely the beginning. The agent returns later, and because that form of credit looks attractive she makes an arrangement for another £20, and in some cases another, and yet another. There have been reports of housewives, finding themselves unable to meet their increasing commitments, having large numbers of debts to pay. Not very long ago there were reports of debts as big as £1,500 in families with no incomes. When it is brought face to face with a calamity that proper advice might have prevented, if it had been available at the beginning, the family suffers not just debt but increasing domestic strain. Many families have been broken up as a result.
I will write to the Minister giving more precise detail so that the Department can consider it. I take it for granted that in the preparation of the Bill the Minister's objectives are not to be questioned. I am sure he wants this area to be regularised to a point where the consequences which I have described can be avoided.
I am disturbed that there is not sufficient clarity in the Bill about debt collecting agencies which function under names which do not accurately describe them. These people gather together, in ways which I regard as questionable, information about millions of people—personal, intimate information—on the most meagre of evidence but which, taken with other spicy pieces of history, represents for the citizen, who is not aware of this collection, a dossier which is used 571 to limit, restrict or end his creditworthiness. Even today some debt-collecting agencies masquerade openly and unashamedly under more neutral names and constitute a source of threat and harassment for far too many citizens.
Not long ago I had a case which arose from a debt which a consumer of energy contracted with a gas board. The Northern Gas Board had used, and is still using, I believe, a debt-collecting agency which sent to a constituent of mine a letter threatening him with public exposure and court action. I said to my constituent "Do nothing. I will deal with this." My constituent was not pestered any more. The consequent publicity brought to light other interesting examples of the use of debt-collecting agencies.
Some nationalised industries, which are supported by large amounts of public money, would do well to examine the principle of establishing within their own organisation machinery able to deal with their own consumers so that injustices are avoided "incompletely". I use that word after much thought. At present women in particular, and certainly old people, receive from gas boards, and in some cases from electricity boards, notices that their debts are cleared, but the debt-collecting agency, which has not been informed, continues to pressurise these people who are not in a state of debt. On the other hand, consumers are being asked to pay bills which they paid as much as 18 months before or, as in one case I can recall, two years before.
There should be a better organisation established within undertakings which supply credit or services, rather than the building up of machinery outside their organisations to act as agents. Under the latter system it is impossible to keep in close contact and play the game with consumers who have cleared debts or with consumers who may be in debt but who, for good reason, cannot clear the debt and need special advice and help from the more commendable agencies that exist, more particularly agencies within the social services.
I hope that under Clause 131 of the Bill the Minister will consider that it is not satisfactory at this stage to have merely a general reference to regulations. 572 There should be a more specific examination of this serious problem.
Where debt-collecting agencies collect confidential and private information about an individual without his knowledge, information which becomes known to him only when credit facilities are denied him, and sometimes not even then, is it reasonable that such a person should be allowed to look at information about himself on payment of a fee to the debt-collecting agency? Is not that stark raving nonsense? I thought that there was still an area of freedom in this country in which a man's private life and business affairs were his own affair, so to speak, and in which he should certainly not be subjected to the embarrassment of having to pay to look at information about such matters if it is in the hands of somebody else. I hope that the Minister will give serious consideration to this point with a view to its being dealt with in the Bill.
Reference has been made to the time lag between the publication of the Crowther Report and the introduction of the Bill. The Crowther Committee was set up by the Labour Government. Therefore, we on this side have a major stake in the Bill and its objectives. That is why there will be no Division on the Bill tonight and why there is on both sides a commitment to examine the Bill in detail in Committee with a view to making it the best Bill possible.
I come now to an aspect which I hope the House will accept needs immediate attention. We might consider with care the following words from paragraph 33 on page 13 of Cmnd. 5427, which was published last September:The doorstep canvassing of loans of money will be banned, but not the promotion of the sale of goods and services on credit terms, including, for example, check trade business.If the Minister is satisfied that money is involved in this kind of business, will he seek to exclude it? Once money intrudes into the check trade business, it gives rise to the need for a serious examination.
I have dealt with two major items, and in order to maintain the high standard of this debate I shall enter into no further detail. I hope, however, that the Minister will agree that we require an exceptionally long session in Standing Committee, such as the Minister and I have enjoyed in the past, but not 573 so long as the Committee stages of the Transport Bill or the Housing Finance Bill, because that would be too much of an embarrassment. The Housing Finance Bill was an incisive and cruel Bill.
It has been said that there should not be too much haste. There is already too much strain and stress in our departments dealing with social services and weights and measures. So I believe that, in addition to having consultations, we should closely examine the manpower of the weights and measures department and the other departments which will be working to meet the requirements of the Bill. It is not sufficient merely to pass an Act of Parliament. It is far more important to do the preparatory work properly, so that when a Bill becomes an Act it can work and will not become pigeon-holed, as so many Acts of Parliament do. This Bill is important to the consumer, and on every front we should be attacking with vigilance.
§ 7.4 p.m.
§ Mr. Caerwyn E. Roderick (Brecon and Radnor)
It is very pleasant to see the Minister for Aerospace concerning himself with consumer affairs. The only danger is that before the debate is concluded we shall be calling him the Minister for Aerosols. I hope that he can come down to our level and answer some of the questions that have been asked.
I do not possess the eloquence of my hon. Friend the Member for The Hartlepools (Mr. Leadbitter), so my contribution will be a brief one. I have not studied the Bill in the depth in which some of my hon. Friends have studied it, neither have I the legal training or the capacity to do so. I should like some assurances before the Bill goes to Committee, because the getting of them—or not—will guide us in putting forward amendments.
In June the Minister answered a Question of mine about the case of a person who had been written to by the Central Register of Defaulters in these terms:Dear Sir, We have been advised by the above that despite applications by them you have defaulted in payment of your account. Therefore take notice that failure by you to make a payment direct to this creditor within the next seven days may result in your name being registered as a defaulter, both locally and nationally. This registration will stop you obtaining any further credit in future. If you 574 dispute this amount, then in your interest you should contact the above creditor immediately.The person concerned had merely withheld payment on a job that was being done by a small builder, until he was satisfied that the work was complete, but this register was being used as blackmail to get the payments earlier. I hope that before the end of the debate the Minister will assure us that debt collecting firms will be regarded in the same way as credit firms, and will need to be licensed.
I have also heard of a person who paid a deposit of as much as £87 hoping to get a job done in a couple of months. He signed a contract; when nothing was done within two months he started writing to the firm; 18 months went by; letters were repeatedly written. The person concerned approached me and I wrote to the firm, but had no reply to my letter, which is a little unusual because people usually reply to Members of Parliament. Eventually, I telephoned the firm, but no action was taken for a fortnight, so I had no alternative but to give the story to the Press. A newspaper contacted the firm and the person had the £87 returned within a week. The situation was ludicrous and should never have reached that stage.
A person in that position is entitled to some interest. Firms claim interest from individuals, but after 18 months the person concerned had no extra money on top of his £87. If he now has to go to another firm to get the job done he will have to pay a great deal more and he will, therefore, have suffered a considerable financial loss. Perhaps we can introduce a provision to cover the payment of interest when a deposit is in a firm's hands for a considerable period.
A solicitor can arrange a private loan for a person to buy a house. Some years ago an acquaintance of mine was warned to look in a contract for a clause stating that a loan could not be recalled at very short notice. There was no such clause, so he went ahead quite happily, but he had overlooked the fact that there should have been a clause in reverse to safeguard him, not to safeguard the lender, because the money was recalled and he was required to repay it within three months. It is difficult to borrow money quickly from building societies when they are not very ready to lend money. He went to 15 building societies trying to get the 575 money before finding one which was willing to lend what it termed a second mortgage. It was nothing of the kind, of course. He was trying to redeem this debt. It is part and parcel of consumer credit, and I believe that we should be looking at the conditions under which solicitors draw up agreements for private lending.
When dealing with Part X the Minister said that the commission would be able to receive complaints about credit reference agencies. From my short examination of the Bill I do not see much detail about the consumer complaints service. We have talked about the commissioner looking after licensing and so on, but I am not too happy about the detail of the scheme for the consumer to be able to complain about a service he has received.
I understand that the weights and measures departments will be used. Is the Minister satisfied that they are the appropriate set-up and that they have sufficient staff? What about areas where weights and measures departments may be as far away as 50 miles from some of the people whom they serve? There are a number of counties in which this will be the case. Will that be adequate for an individual wishing to make a complaint?
What facilities does the Minister propose to use to service residents in rural areas who may live a very long way from their nearest offices? Has he considered the possibility of using citizens advice bureaux which could be brought in as a first step? If they could not at once give the right advice, they could seek it.
We have the Parliamentary Commissioner and the Local Government Commissioner. Now we want a Consumer Credit Commissioner with sufficient funds at his disposal to advertise his services properly. I am not satisfied that we have this clear in our minds, and I should like some assurances about it.
§ 7.12 p.m.
§ Mr. Michael Meacher (Oldham, West)
There is a great deal in the Bill that is obviously welcome and uncontroversial. Like other hon. Member, I shall concentrate deliberately on the remaining problematic areas, of which there are a number.
576 The main weakness surely must be the Government's refusal to accept the Crowther Committee's very strong recommendation about a major reformulation of credit and security legislation in general. This means that the new rules have been prepared for application to the whole range of existing legal forms, from pawnbroking and check trading to hire purchase, leasing and credit cards. Worst of all perhaps, the highly confusing Bills of Sale Acts are retained under the Bill.
The main danger is the complexity in the rules which becomes necessary. The appendices to the White Paper which define in detail a new range of legal categories bear that out. A White Paper more than half of which has had to be devoted to appendices—which itself must be a record—to set out all the intricacies of definition clearly will provide the lawyers with a field day. Obviously this freedom of action invites the industry to devise new forms to take maximum advantage of the consumer, and the Consumer Credit Commissioner can look forward to a fairly active career of stable-door shutting.
The Government defend themselves for rejecting the Crowther Committee's plea which would require a comprehensive register of security interests on the grounds given in paragraph 14 of the White Paper:There are aspects of the existing law in this field which cause difficulty, but they do not have sufficient evidence either of a need for such major recasting of existing law on new principles or of general support for the particular solution proposed by the Committee.Surely it is manifestly essential that the law should provide a set of rules which fairly balances the interests of a secured creditor on one side and those of an innocent purchaser on the other. The Government seem surprisingly unaware of the fact that the need for such registers is strong enough for there to be already at least six in existence, most of them widely used. What is more, last year the Government themselves set up a seventh register—for aircraft mortgages—and that was only a short time after the Under-Secretary of State for Trade and Industry had said that he did not think we wanted a situation in which registration of security interests was done in several different places.
577 As a result of the rejection of a single comprehensive register, the Government have now done what is universally agreed should be avoided, namely to graft on still further excrescences to what is a largely unsifted and unintelligible medley of existing laws.
Nor is it plausible for the Government to argue, as they have done, that the reason for the omission of a new legal framework for consumer credit law is the technical complexity of drafting such legislation when that argument has not deterred them from drafting the Industrial Relations Act, the Housing Finance Act and the new Bill dealing with company law reform.
Another fundamental point which seems to have been missed in the Bill is that the credit consumer still cannot be expected properly to look after his interests in a morass of legal jargon, even if he is equipped with the necessary information as a result of much fuller disclosure. This was the basic attraction of the Crowther proposal to force as much of the business as possible into a simplified mould. In the absence of that, there must be a danger that so much information will be disclosed in so arid a form that the relatively unsophisticated borrower will still not be clear whether he is getting a fair deal. Although it will be an advance for him to know the true rate of a loan, he also needs to know whether that is a reasonable cost for the amount of money he is borrowing and for the period of time for repayment. Otherwise it is difficult to see how consumers can be prepared to put up with the wide range of interest charges that are known to exist—with a rate of 10 per cent. for electrical showrooms, up to 30 per cent. for furniture shops and anything from 50 per cent. to 1,000 per cent. for money lenders.
In terms of social equity it is noticeable that the Bill omits two of the Crowther recommendations. One was that the Government should not enforce the system of down payments or repayment terms on hire-purchase sales sinceit penalises the poor relatively to the more affluent and the young relatively to the old.Though they are not enforced at present, the power to reimpose them is retained partly because they form a very quick-acting economic regulator and partly no 578 doubt because of memories of the highly damaging free-for-all between 1958 and 1960 when statutory hire-purchase controls were also removed. Nevertheless their reintroduction would be inequitable, and that is still possible.
The other and more reprehensible omission from the Bill is the Crowther proposal that users of consumer credit in any form should be treated identically for tax relief purposes. The committee recommended that, if tax relief were allowed on loan interest charges, it should also be allowed on hire-purchase charges. That is an irresistible argument. How in all honesty can the Government offer tax relief on loan interest over £35 a year, which is a major windfall concession to higher-rate taxpayers, when they deny tax relief on hire-purchase charges which would mainly benefit poorer families? There is an unacceptable inconsistency here and I hope that the Government will be prepared to reconsider the matter in Committee.
There are other omissions which are more likely to harm lower-income purchasers. I refer especially to the application of the £30 lower limit in the case of credit sale agreements, revolving credit arrangements and, above all, many finance company agreements, especially in regard to the cooling-off period and finance company responsibility for faulty goods. I do not believe that there is any real reason why the lower limit should not be dropped in these important cases to at least half or preferably one-third of the £30 level.
Yet another omission, concerning which I have had constituency experience regarding gas and electricity bills, is the correction of false billing. The Consumers Association research which was recently carried out in the United States indicated that the American Truth in Lending Act has had to be amended to prevent unfair billing practices, largely because computers cannot adjust to errors on accounts later reported by consumers. A survey in Minneaoplis showed that one consumer in three had been involved in at least one billing error problem. It can be predicted, therefore, that this trouble will also arise unless it is prevented now. Moreover, the problem in this country will be made worse by the otherwise desirable amendment in Clause 71 that the credit card issuer is to be responsible 579 for defects in goods bought with a credit card. It is a fair question to ask what redress is open to the consumer who, when he returns defective goods, finds that his statement is not credited because the system cannot respond to the idea of credits. Is it not necessary that the onus for taking definite action to resolve the error should lie with the creditor both to acknowledge receipt of the claim from the consumer and to act upon it within a definite period of time? I hope that the Government genuinely will try to meet this point in Committee.
My last point is that if as a result of the Bill consumers shop around for the quickest and easiest method of obtaining credit—a highly laudable object of the Bill—they may well increasingly reject the more cumbersome arrangements like hire purchase and seek unsecured loans. If so, this will bring the necessity for comprehensive records of the credit rating of individuals as happens in America. This may become a major issue in this country too. We may be still some years away from point-of-sale computer terminals for credit checking, but that would seem to be the direction in which we may be moving in the near future. Clearly this involves an important issue in respect of privacy, and so far the Government have not revealed their hand in terms of their reaction to this prospect. This obviously affects the civil liberties of individuals.
With those reservations, some of which relate to serious omissions, I recognise that this is a valuable Bill. I sincerely hope that the urgent passage of these consumer protection provisions will not be used as an excuse for postponing the closing of what seems to be a glaring gap in the Bill, namely the introduction of a uniform legal framework for consumer credit.
§ 7.25 p.m.
§ Mrs. Lena Jeger (Holborn and St. Pancras, South)
I shall not complain about the small attendance in the House because at this moment of time, rising as I do from the Opposition Front Bench, nothing gives me greater pleasure. I feel that the attention of the House and the public should be drawn to the fact that there has not been one Liberal contribution to this debate. Indeed, we have not even the pleasure of seeing one Liberal Member 580 present in the Chamber. This surely indicates the hollowness of people who try to get votes on a prospectus of care—a party which says its cares for the individual, for the little man and the harassed little woman. These are the people who are supposed to put everything right, but they cannot give their time to a measure that is of great importance to the consumer.
In my virginal Front Bench experience I hope I shall not be guilty of any misconception. But I want to make clear that, although we are not opposed to the Bill, we are not by any means accepting a society in which an ever-increasing part is played by expensive credit, in which living "on tick" has been given a special status as a way of life—a status which it did not enjoy in earlier days. I am not sure that the present situation will be to the long-term benefit of our people.
We welcome the Bill because it tries to deal properly with certain hazards and practices which are endemic in modern society. Some of us happen to be in politics because we want to change society. We accept the necessity for this Bill as an "ambulance" measure that is essential for the protection of the public, but we shall continue to challenge the basic philosophy of economics that has created this situation.
The Bill may be non-partisan, but certainly the circumstances of its introduction and the timing of today's debate are far from non-partisan. There is a special irony for all of us in that consumers can never have felt more battered by the Government or less protected by authority than they do today. I call the attention of the House to Clause 44, which makes it an offence to put out false or misleading information in an advertisement. I suggest that the first prosecution under Clause 44 should be brought against the Prime Minister, because certainly in Tory advertisements in 1970 the public was never told that the pound in people's pockets would be worth only 77p by September 1973, and it is probably worth infinitely less now.
Clause 120 makes it an offence for "grossly exorbitant" interest charges to be made. What will the courts make of this phrase "grossly exorbitant"? Some of us regard 13 per cent. as grossly exorbitant. If we accept 13 per cent. as 581 the official rate, this will give great impetus to escalating rates of interest in all spheres—housing, shopping, investment, and so on, and especially in terms of borrowing that is so essential to local authorities in carrying out their important work.
I feel a little half-hearted about the Bill bearing in mind this week's news and the Government's policies which have imposed ever higher prices. The consumer is also worried about these matters. To allow a situation in which all the essentials of life get more expensive and at the same time to talk about protecting the consumer is not keeping faith with the public.
I make no apology for being a little philosophical about some of these problems, because this is a Second Reading debate. We have had many informed and useful speeches which I think will be carefully studied in Committee. But I repeat my concern that we are slipping into a situation where we are glorifying credit, living on tick, and where it is counted a winning advertisement to publish the sloganTake the waiting out of wanting",as if there is anything wrong with waiting. Some of us have experienced the pleasure, perhaps the extra enjoyment of waiting.
This creates a climate of easy acquisition which is not healthy in the long term. I do not blame the public. The Government are increasingly living on a deficit, and this is bound to be reflected in people's personal standards. After all, in what many of us thought was the dreadful year of the Labour Government's devaluation, during the whole of that year the deficit was £316 million, whereas last month alone it was £298 million. [HON. MEMBERS: "£335 million."] I thank my hon. Friends for that correction.
§ Mrs. Jeger
I am glad to have that assistance. To talk about protecting consumers in a situation where the country's debt is running at a faster rate per month now than it was per year under the Labour Government is incredible.
582 I join in the tributes that have been paid to Geoffrey Crowther, one of the most distinguished public servants in this country, who gave so much of his time and ability to matters of public interest. The tributes from the benches opposite might have been a little more realistic had the Government found time for one debate on the Crowther Report. Despite repeated pressure from the Opposition, this House has not been given a single opportunity to discuss that report.
It has not been possible to go deeply into many of the recommendations made in the Crowther Report. That is a great pity. The House should have had an opportunity of considering the Crowther Report before the Bill was drafted so that hon. Members might express their views on the recommendations that were then made.
Looking at this problem in the long perspective, it is interesting to recall that in 1552 this House passed an Act prohibiting all taking of interest asa vice most odious and detestable.True, that Act was repealed in 1572, when a ceiling of 10 per cent. was then placed on interest rates. Parliament laid down that the taking of interest not exceeding 10 per cent. should cease to be criminal. It would not be a bad idea to have a revision of that legislation of 400 years ago. Then in 1713 we got down to 5 per cent., and so it stayed until all legislation on usury was repealed in 1854. I mention these facts because they are not irrelevant to the debate.
My hon. and learned Friend the Member for Warrington (Mr. W. T. Williams) spoke most convincingly about the possibility of a legally fixed interest rate. I realise that in the volatile hothouse economics of the present day this might seem impossible. But I remind the House that the greatest period of expansion in our history—the classic expansion of the Industrial Revolution, with its vast commercial and manufacturing developments—was founded on a legal maximum interest rate of 5 per cent. I should not like to say that there were no evasions.
The Crowther Report certainly dealt with fixed rates, and, though it concluded, on page 276,that the fixing of an inflexible ceiling rate is not the answer to the problem".583 it suggested that the subject was worthy of some consideration. The report, on page 275, states:In our view, there is a level of cost above which it becomes socially harmful to make loans available at all.I hope that the Government will look at that aspect of the matter.
It is relevant that interest charges on small loans are restricted by legislation in both Canada and the United States of America. The American Uniform Consumer Credit Code sets a ceiling of 18 per cent. for consumer loans, other than supervised loans made under licence. The Canadian Small Loans Act regulates loans up to 1,500 dollars. It allows licensed lenders to charge a maxim um of 2 per cent. per month on the first 300 dollars, 1 per cent. per month on the next 700 dollars and ½ per cent. per month on the remaining 500 dollars. That, too, is evidence which is worthy of consideration.
My hon. Friends and I very much regret that Part Five of the Crowther Report, which called for an entirely new legal framework for the law dealing with consumer credit, has not been taken up. The unification of the whole legal structure is surely overdue. The Government cannot say that they have not had time. They have had the Crowther Report since March 1971. My hon. Friend the Member for Accrington (Mr. Arthur Davidson), who has great experience in these matters, stressed that it was a matter of regret to him that this recommendation had been set aside.
I think I am right in saying that no hon. Member who has taken part in the debate today has supported the idea of limiting the provisions to sums exceeding £30. I hope that the Government will look at this matter again, because the people involved in the smaller range of purchases who are often the most vulnerable and sometimes the most ignorant, get into the worst muddles. Moreover, the very people whom we are trying to help could find themselves in grave difficulties, because, if they have a series of £30 credits from different sources, they would be totally unprotected and vulnerable to all the problems that the Bill seeks to put right.
Another objection to the Bill is that it has to rely largely on regulations. Surely 584 the principle at the heart of it—truth in lending—ought to be written into the body of the Bill as part of the law. Clause 42 should not only empower the making of regulations but make clear that those regulations require that the true cost of credit is made public. Therefore, that ought to be written into the clause, not left to regulations.
I pay special tribute to my right hon. Friend the Member for Sheffield, Hillsborough (Mr. Darling). For many years he has worked hard as a pioneer, using his expertise and persistence to make some progress in these matters, and was glad to welcome the Bill. But he agreed, from his experience, that the mandatory disclosure should not be a matter of regulation but should be included in Clause 42 and given the full status of the law.
I agree very much with my hon. Friend the Member for Wood Green (Mrs. Joyce Butler), particularly about the position of women. It is a total insult in this day and age for women to be asked to find a male guarantor. He might be more of a shark than she is. In any case, in many families it is the woman who manages all the finances and keeps the family on an even keel, whereas the husband might well spend his wages elsewhere.
Moreover, there is a serious difficulty experienced by women who are widowed, divorced, separated or on their own. I ask the House to take it from me that it is not easy to go and ask some chap to be one's male guarantor. One big difficulty I find is that the male guarantor's wife usually does not like it. I know that one can appear to be flippant about this, but it really is a very serious problem, and I can find nothing in the Bill which will deal with it.
The Minister may say that it will be taken care of in the new blanket legislation about discrimination against women, but many of us want to see something written into this Bill which will end the practice and also the practice whereby so many creditors apply a standard for men totally different from that which they apply for women. Apart from looking for a male guarantor, a woman often has to be more creditworthy than a man—she has to be a professional woman or in a much stronger position in order to get the credit she wants.
585 I hope, too, that in Clause 2 the use of the masculine pronoun throughout in relation to the commissioner is merely the traditional economy of language and that we shall be assured that in this context "he" embraces "she" and that no discrimination is intended in the use of the pronoun.
§ Sir G. Howe
I can reassure the hon. Lady at once. At least since 1882 "he" has been embracing "she" by statute. That has happened in all statutes since then. The hon. Lady has referred to the discrimination aspect. Clause 24 sets out clearly that one of the grounds which the commissioner has to take into account in deciding whether to grant a licence to anyone in the credit business, or whether to withdraw one, is whether that organisation practises discrimination on the ground of sex, amongst other things. Discrimination of the kind the hon. Lady has talked about—less advantageous terms to the female and indeed, in any of the respects she has referred to in dealing with discrimination on the ground of sex—is one of the grounds on which a licence can be withdrawn or refused. The Bill makes a direct attack on discrimination in this area.
§ Mrs. Jeger
I am glad of that assurance from the right hon. and learned Gentleman, and I hope that it will be widely noted, because, as the clause is drafted, while it is true that the objective is set down, I think it needs to be much more clearly spelled out.
My hon. Friend the Member for Wood Green and the hon. Member for Merton and Morden (Miss Fookes) drew special attention to the problem of staffing. We all share their anxiety. Hardly one aspect of local government services in many parts of the country, certainly in London, is not suffering from severe staff difficulties. By this Bill we are to place heavy responsibilities on men and women who will need to have great experience and integrity. I hope that the Government will look at the whole staffing situation. Without adequate staff, there can be no realistic implementation of the Bill.
My hon. Friend the Member for Farnworth (Mr. Roper) made a very important contribution, which I hope the right hon. and learned Gentleman will take into account, in calling for more attention to be paid to credit unions. We 586 on this side cannot, I think, indefinitely accept a situation where the need for credit must always inevitably mean profit for somebody else. Daniel Defoe wrote in 1727 in "The Complete English Trader",Unless the profit answered it, the tradesmen could not afford to be so long without their money.The history of credit is very much the history of its profitability. I would like to see the Government encouraging more development of fair credit through community-based credit unions. This has been done in many other countries and would make a genuine contribution to keeping down the cost of living and taking some of the inflationary element out of the present credit system.
I think that the Opposition—I would not expect it from the Government—should give attention to some form of nationalised finance house which would seek to do a job which is needed to a certain extent in modern society but which I feel is not being well done at present. Again, we are suffering from lack of consideration in the House of the Crowther Report, which said on page 8:Although in total the amount of consumer credit made available by small savings and loan societies … is very small … it is possible that it could be increased …I see no reason, except prejudice, against that. But, as my hon Friend the Member for Farnworth said, until we get better legislation we are not going to have the expansion of this form of credit which would obviously be to the public good.
While we welcome the Bill as far as it goes, we shall in Committee try to put right what we regard as some of its exclusions and to improve a great deal of the detail. It would not be useful now for me to reiterate all the points which have been made by very experienced hon. Members who have studied this long Bill very closely. These points are all of great value, and I am sure will be taken further in Committee. We shall await with interest some assurances from the Government on the main points of our anxiety.
§ 7.48 p.m.
§ The Minister for Aerospace and Shipping (Mr. Michael Heseltine)
The House will join me in welcoming the hon. Lady the Member for Holborn and St. Pancras, South (Mrs. Lena Jeger) to 587 the Opposition Front Bench for the first time. Whilst I welcome warmly the general acceptance which she and other hon. Members opposite have given the Bill, I cannot be expected to go along totally with some of her observations about the Government's record. I find my agreement with her on the Bill in direct contradiction with my disagreement with her judgment on virtually every other matter which she raised outside the narrow scope of the Bill. She will not be surprised at my saying that. Indeed, I expect she would have been disappointed if I had come to any other conclusion.
But perhaps as a gesture, in the spirit in which we all wish to see the Bill dealt with, and of the warm welcome which it has been given, I can say to the hon. Lady at once that the points she has raised about the clause dealing with the making of regulations, to ensure that there is truth in lending, is one with which we have sympathy, and we will certainly look at it in Committee to see whether the drafting can be altered to make a more forceful declaration of the purpose which we all have in mind.
The hon. Member for Swansea, West (Mr. Alan Williams) and several other hon. Members asked about the time within which we saw the implementation and introduction of regulations under the Bill and the amount of consultation that has been, and will be, possible in working out the details. That is bound to involve time. In the White Paper and the Bill, in a number of areas where regulations have to be introduced, we have tried to spell out clearly the basis of our thoughts upon the way in which the regulations will be made. Therefore, people involved in the industry, who will be affected by our proposals have had a considerable amount of time in which to think about the adjustments they will need to make to their forms and methods of conducting business—advertisements and so on—and they now have a wide appreciation of the sort of things we shall want to do.
We shall be able to introduce certain parts of the Bill faster than others. We shall want to move rapidly on the "truth in lending" provisions, and there is no reason why we should not. We hope to see those regulations coming 588 within weeks of the Bill receiving Royal Assent. We believe that there is a wide degree of awareness of what we have in mind. We are appraised of the urgency, and we shall move as fast as we reasonably can, taking into account the many problems.
§ Mr. Alan Williams
I am sure the hon. Gentleman will appreciate that the changing of computer programmes is an expensive and lengthy business. No one can be 100 per cent. certain of the final form of the legislation until it has been to the other place and has returned here. Therefore, the time lag on the part of the finance houses is a problem that must be considered. How does the hon. Gentleman intend to shorten the period?
§ Mr. Heseltine
There is a period of time below which we cannot reasonably go, because the finance houses have to do a thorough job. We can evolve the programme only in consultation with them to be sure that a mess is not made of it, which would be disastrous from everyone's point of view.
The hon. Member for Swansea, West spoke of the number of agreements currently in existence and the rate at which new agreements are coming into effect. These cannot be affected by the Bill, because it is not yet law. The Bill will affect new agreements after a certain date, and we must get as rapidly as possible to the stage where these are covered by the regulations.
§ Mr. Williams
I said that there were 7,000 new agreements a day. The hon. Gentleman is saying that even after the passage of the Bill those 7,000 new agreements every subsequent day will still not be covered until eventually all the procedures in the finance houses have been implemented. It will probably be a year after the Bill becomes an Act before there will be protection.
§ Mr. Heseltine
Until the regulations under the Bill are laid and come into force there is no legal reason why the documentation in each area of the Bill should be changed. We can move very quickly on areas such a "truth in lending", and this we shall want to do. Organisations which are satisfied about the way in which the regulations will move could start adjusting their paper work, where practicable, to give form to 589 the spirit of what we are working towards, in advance of the regulations; but there will be no statutory backing for the changes until the regulations have been introduced.
The hon. Member for Swansea, West, and my hon. Friend the Member for Merton and Morden (Miss Fookes) asked whether the positions of the Director General of Fair Trading and the Consumer Credit Commissioner should be combined. We considered this as a possibility. It is not an issue on which one takes a totally black or white view, because there are arguments why it might have been a possibility. On balance we came to the conclusion that it was right to separate the two.
There were several reasons for this. First, the Director General of Fair Trading has a much wider remit than has the Consumer Credit Commissioner. Secondly, it will be necessary for the Consumer Credit Commissioner to become deeply immersed and specialised in particular problems of the trade with which he has to be associated. Thirdly, the Consumer Credit Commissioner will be an adjudicator, whereas the Director General of Fair Trading is not. It seemed to us that there might be incompatibility between the adjudicating responsibilities of the Consumer Credit Commissioner and the wide functions of the Director General. We accent at once that the two will have to work closely together, but we take the view that it would be better for them to be identified independently.
Several hon. Members followed the hon. Member for Swansea, West in questioning the £30 limit and asking whether it will leave untouched one of the major areas of hardship. When the Labour Government considered this in the context of the Hire-Purchase Act 1965 they decided that the limit was justified. Without wishing to make a party point, the 1965 £30 is not the 1973 £30. I doubt whether any Opposition Member wishes me to produce the figures dealing with the value of the £ sterling between 1965 and 1970. I resist the temptation for the sake of concord between both sides on this important issue. The £30 limit of 1965 is now effectively a lower limit than it was when the matter was considered by the Labour Government, which decided to maintain that limit.
590 It will be possible to change by order the level of £30 if experience shows that it allows an area of hardship to continue. It is crucially important to recognise that in all the areas of anxiety expressed by hon. Members there is this overall licensing system, and the need for the regular renewal of licences. Anyone who indulges in unsavoury practices on a large scale is at risk of losing his licence, so there is a powerful sanction. If it works out that the £30 limit is wrong, we have power to deal with it by order.
The "unrestricted-use" credit of under £30—the cash loan to the person most often hard pressed—will be subject to all the rigours of the Bill. In the £20 trading-checks situation raised by the hon. Member for the Hartlepools (Mr. Leadbitter) there is exemption in respect of the documentation and the cooling-off procedures in the Bill. There were two reasons for that which commended themselves to us. The tally man example given by the hon. Member for the Hartlepools, and the making available of a service within the community whereby people get trading-checks which they can cash at local stores, are considerable and helpful practices.
Under the general exclusions of the Bill, because these practices involve a personal visit, and a visit off trade premises there would have to be a cooling-off period and documentation, which would prejudice the business. In those circumstances, we should have to ask whether we might be doing a greater social ill by destroying that form of business, which is accepted wherever it is well practised, in order to achieve a benefit which undoubtedly would help a very small number of people but which at the moment is not an area about which we in the Department have had evidence of widespread hardship. If there was evidence, we would want to consider it. But we shall have the fallback position of the overall licensing system.
§ Mr. Heseltine
My understanding is that it will be capable of variation up or down. If I find on examination that 591 that is not so, I shall let hon. Members know.
§ Mr. Leadbitter
On the question of check trading I note the Minister's point, which is valid. It should be made clear that reputable trading firms are: not anxious to have pursued in their name the practices which I have described. Nevertheless I hope that the Minister will agree that some of these matters should be examined to see whether they can be brought within the Bill's protective provisions.
§ Mr. Heseltine
They will come within the most important protective provision of the Bill, that is, the overall licensing system. That will probably be sufficient.
The next important matter is the Crowther Committee's recommendation that hire purchase should be abolished. However, sufficient emphasis has perhaps not been given in the debate to the Crowther Committee's view, that, in order to abolish hire purchase, we need to make the taking of chattel mortgages enormously more simple than it is.
I was asked whether I would give the Government's view about whether chattel mortgages are a less desirable form of social credit raising than hire purchase. It has been consistently the view of Governments over a long time that the extensive and easy use of chattel mortgages has an undesirable social menace in it, because people would be able to give, and under pressure will give, mortgages on their furniture or items of household value, in order to raise money. This seems to the Government to be a less desirable way of encouraging people to go about the business of obtaining credit than by proceeding through a hire purchase agreement.
§ Mr. Alan Williams
The hon. Gentleman is not talking about the same thing. He is talking of a second mortgage on existing furniture and the purchase of existing furniture through hire purchase. We are talking about the purchase and ownership of the product. None of us on this side of the House would want the situation to which he is alluding.
§ Mr. Heseltine
The hon. Member could say that what his proposal would amount to is that in abolishing hire purchase it would be possible to take chattel 592 mortgages on the goods which would be the subject of hire purchase. That is a valid point as long as we can amend the law to restrict the granting of chattel mortgages to the items bought at the time. Our concern is that if we so simplified the law in respect of chattel mortgages for that item of acquisition, the whole system of chattel mortgages would be simplified and that would have undesirable social implications. That was why we decided, in the general context of the law as we see it evolving, that it was better to retain hire-purchase agreements, subject to the changes which the Bill proposes.
I come to the question of six months' interest on termination. I know that the Consumers Association has raised this matter—"the rule of 78" plus three months. I draw attention to the White Paper on the subject and to paragraph 18 of Appendix 3. We believe that it is a three months' period, not six months, which is involved. It is a matter of detailed interpretation of documents, and we will want to consider the point.
The question of grossly exorbitant rates of interest and how they work out was raised. The 48 per cent. which is now provided in legislation in respect of moneylenders is not a limit above which the rates of interest become exorbitant. It is the point at which the onus of proof shifts from the borrower to the lender; he must prove that the rate of interest is reasonable. Our concern about the general question of fixing rates of interest which are a hard and fast barrier is that, in order to deal with extreme cases, we have to pitch the rate of interest relatively high. In the Moneylenders Acts it was pitched at 48 per cent., which in virtually every circumstance is a very high rate of interest. But if 45 per cent. is charged it is arguable that that is getting more reasonable, simply by working back from the high ceiling introduced in the legislation.
It therefore seemed to us better not to fix a firm ceiling which would tend to draw people up to it but to have a set of guidelines which the courts would be able to interpret in order to deal more flexibly with all the systems and problems that will arise.
I can with pleasure assure my hon. Friend the Member for Brierley Hill (Mr. Montgomery) that when the Bill is 593 enacted, difficult and hard cases of the sort to which he referred will be covered in a number of ways. For example, the finance company in the case which he mentioned would be liable, jointly with the suppliers, for any defects and failures. This connected lender concept is introduced in the Bill.
The right hon. Member for Sheffield, Hillsborough (Mr. Darling) raised the question of whether the commissioner should work part time or full time. We have left the drafting of the Bill on this matter flexible. However, our intention is that the first appointment should be full-time. It is our view that the commissioner will need a staff of about 90. It is conceivable that, when the question of consumer credit has been brought within the new regulatory framework, the commissioner's job will be less than a full-time job. This is not a commitment that it will be, but it seems sensible to allow flexibility should it prove possible to use it in future. Our intentions are clear. We know how we intend to use the Bill, but we felt it reasonable to draft it flexibly.
The right hon. Member for Hillsborough referred to the problem of obtaining information from a computer. It will not be a sufficient defence under the Bill to say that the computer cannot or will not do what is required. The computer must be made to bend to the requirements of the law. The only issue of which we must take cognisance is the time required to introduce any necessary programme change. The Bill lays down in Clause 72 the rights of debtors and hirers to get information. The public have a clearly outlined right, and it will be no answer to say that the computer does not recognise it.
§ Mr. Darling
The Minister is suggesting that computers cannot make mistakes. Mistakes are not made deliberately, but they do occur. Dunning letters are sent to somebody who has paid his bills, the computer having said that he has not done so. I suggest that authority should be given to local enforcement officers to enable them to take action on behalf of harassed customers.
§ Mr. Heseltine
I appreciate that, but I think the right hon. Gentleman will accept that, in the vast majority of cases, the kind of trading in which the computer 594 sends out statements about bills which have already been settled is not covered by the Bill. It is important that citizens should know their rights when dealing with a computer or an accounting machine which sends them bills which have already been paid. The receipt of a bill does not automatically make it due.
The right hon. Gentleman asked about group licences for mutual clubs. The position here is that a group licence exempts a certain group of people, for example solicitors acting in the procurement of loans for their clients. A group licence would not be given to mutual clubs, but each mutual club could apply for a licence and on receipt of it the employees of a club would be embraced within the terms of the licence.
My hon. Friend the Member for Gloucester (Mrs. Sally Oppenheim) asked a number of questions about disclosures in advertisements. Two types of advertisement will be permitted. First there will be the unspecific advertisement, such as "Bloggs for loans". That makes no specific claim. It merely advertises the type of business in which Bloggs is indulging. Next there will be the specific advertisement which says "Bloggs for £1,000 loans". In those circumstances there must be disclosure of other information, such as the cost in pounds, the percentage per annum, the number and amount of instalments and the total cash payable.
There is also the matter of the prominence of certain information in advertisements. One cannot lay down for visualisers and copywriters the precise form of every advertisement, but one can lay down a general set of rules. That is what we shall do, and it will be for the courts to determine whether an offence has been committed in the way in which advertisements are published.
The hon. and learned Member for Warrington (Mr. W. T. Williams) asked about the use of enforcement inspectors in investigating complaints of harassment. This social problem is dealt with under the Administration of Justice Act 1970 and anybody, including weights and measures inspectors, can prosecute for that offence. In addition the Bill requires weights and measures authorities to investigate breaches, first in order to prosecute 595 on their own behalf, and secondly to give information to the commissioner in connection with his licensing powers. I believe that the power is as wide as is necessary.
The number of people who will be required within the various weights and measures departments to implement the Bill is a matter for discussion with the appropriate associations. My hon. Friend the Member for Merton and Modern was right in pushing me to tell the House what effect the Bill is likely to have on inspectors. I am the first to say that these inspectors are carrying an increasing burden of the ever-growing desire of Parliament to improve the general quality of life in many ways. This is an expert group of men, and it is right to increase their numbers to cope with the problem rather than create a new force to do work which they are able to do. Discussions have been held with the institutes of weights and measures inspectors about training, and this process will continue until we reach a satisfactory agreement on numbers and the kind of training required.
The hon. Lady the Member for Wood Green (Mrs. Joyce Butler) asked about consultation. I thought that the hon. Lady was a little less than fair in suggesting that there had not been consultation about the Bill. I am sure no one would say that consultations start when a Bill is published. The best argument I can put forward is the enormous width of agreement about the provisions of the Bill, not only among hon. Members but among all the associations which have been consulted. It is a tribute to those who prepared the legislation that such a wide measure of agreement has been reached. Not all the matters have been resolved, but it was possible to reach so much agreement only because of the massive consultation that took place, starting with the Crowther Commission and continuing with the White Paper and the departmental consultations.
§ Mrs. Joyce Butler
I am grateful to the hon. Gentleman for giving me the opportunity to correct an impression which I may have created. I said that there was regret that the consultation had been asked for on the White Paper after its publication. The consultation would have been welcomed had it taken place 596 before the Bill was published. It was the undue speed with which the Bill was introduced which prevented that.
§ Mr. Heseltine
I have a list of the organisations which were consulted before publication of the White Paper.
§ Mr. Heseltine
No, before. The list runs to several pages. The views of various organisations were canvassed, and since the publication of the White Paper and the Bill there has been a tremendous response from a number of bodies. I do not believe that the various associations, industries and other organisations can say that there are many areas in which their views have not been taken into account.
Reference was made to discrimination against women, and I think that my right hon. and learned Friend dealt with that. I have no doubt that under Clause 24 the commissioner would feel fully entitled to withhold a licence if it were shown that there was such discrimination.
§ Mrs. Sally Oppenheim
Can my hon. Friend confirm that it is still the law that a husband is responsible for his wife's debts?
§ Mr. Heseltine
It may be out of order to say so, but my wife is listening. In those circumstances, I am prepared to answer that question in Committee, but not on the Floor of the House.
§ Mr. Loughlin
Part III, Clause 20, on page 10, deals with the licence to be issued, and subsection (3) contains a reference toA body corporate empowered by a public general Act".Can the Minister confirm that that is for different purposes, and does it mean that the electricity and gas boards are precluded from the provisions of the Bill? They indulge in extensive hire-purchase trading.
§ Mr. Heseltine
It would be a question of interpretation of the statute which established any particular body corporate. One would have to see whether the terms of the law dealing with it excluded it. This is a general provision, and one would have to look at the particular statute that one was dealing with to find an answer.
§ Mr. Loughlin
I am grateful to the Minister, who is doing his best to help the House. Will he assure the House that he will examine this issue and that, if he finds that bodies of this kind which are doing extensive hire-purchase business are excluded, he will bring forward an amendment in Committee?
§ Mr. Heseltine
On the second part of the hon. Gentleman's question, the nub is whether statutory undertakings such as gas and electricity authorities are excluded. They are excluded in the matter of licences, but they are still included in the other terms of the Bill, such as "truth in lending" and so on.
§ Mr. Heseltine
They do not need to have a licence. On the issues in the rest of the Bill, they need a licence.
I was asked about the relationship of the Secretary of State, and thus of the House of Commons, with the Consumer Credit Commissioner. This matter is dealt with in Clause 3, which sets out clearly what that relationship amounts to. It is exactly the normal situation that one has with other statutorily independent organisations. The matters that are subject to the purview of the Secretary of State are subject to the Secretary of State being questioned in the House. But it would not be a matter of the day-to-day administration, which is excluded from the sort of questions which would be raised in this place. That is the normal situation which applies widely in regard to such organisations.
§ Dr. John A. Cunningham (Whitehaven)
If the commissioner were, instead, someone who was operating in the Department of Trade and Industry—perhaps an under-secretary who was given this responsibility—presumably the Secretary of State would be answerable to Questions in the House.
§ Mr. Heseltine
Yes, he would, but it would be a very different concept from the one we are following in this case. The Secretary of State is obviously answerable for direct employees of the Department of Trade and Industry, in any circumstances of which I have ever been aware.
598 The question of mutual loan societies was raised. Their numbers are very small in Britain. At present the Government do not see any problems associated with them which would merit changes in legislation that could be justified by the pressure which is on all of us in terms of the amount of work that the House has to do.
The hon. Member for Brecon and Radnor (Mr. Roderick) raised the question of retrospective charge of interest where deposits had not been refunded quickly enough. This is not a matter which would be appropriate for this Bill. That is the only answer I can give. The hon. Member also asked whether solicitors should be investigated. That would be a job for the Law Society, which has statutory power to deal with situations of that sort. The hon. Member's third question was whether the commissioner could advertise his services. The commissioner would have such powers, but he will not be offering a complaints service. The weights and measures authorities are responsible for investigations of that sort. The citizens advice bureaux, which are supported by the Government, would also have an important part to play.
One thing that has been most gratifying about the debate has been the enthusiasm with which the Bill has been accepted by hon. Members on all sides of the House. There are areas in which certain matters will have to be explored in Committee. I shall certainly want to take as helpful a view as possible, within the framework of decisions which the Government have asked the House to accept. I thank hon. Members for the courtesy with which they have greeted the Bill. It is an important step forward in improving the social fabric of this country. I ask the House to give the Bill a Second Reading.
§ Question put and agreed to.
§ Bill accordingly read a Second time Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).