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Mr. Robertson: May I pick up on the Minister's point that the provision would be too late once the agreement had been set up? I do not see it that way. The amendment calls for a statement at the outset of the agreement; by implication, that is when the agreement is made. I understand that there is a two-week cooling-off period for agreements. Those two weeks could be used to read the statement to see whether, in the cold light of day, the debtor actually agreed to what was written down and that it was, in fact, what he intended to agree to.
The problem is that the system is not working. People are getting into terrible debt and some companies—I stress that it is only some—are changing the terms of agreements as they go along. It may or may not be legal to do that, and I suspect that it probably is not, but it is still happening and we must address it. I intend to do that with the amendment. Amendments Nos. 18, 19 and 21, which are the next group, also deal with the way agreements should be run in respect of default payments, and we will come to that.
The Bill should address the relative strength of the parties, and, in spite of the Minister's eloquence and detailed information, I must insist on this amendment.
Question put, That the amendment be made:—
The Committee divided: Ayes 4, Noes 9.
Division No. 1]
AYES
Barker, Gregory
Liddell-Grainger, Mr. Ian
Robertson, Mr. Laurence
Tonge, Dr. Jenny
NOES
Battle, Mr. John
Farrelly, Paul
Keeble, Ms Sally
Lazarowicz, Mr. Mark
Plaskitt, Mr. James
Quinn, Lawrie
Sutcliffe, Mr. Gerry
Tami, Mark
Watson, Mr. Tom
Question accordingly negatived.
Question proposed, That the clause stand part of the Bill.
Mr. Sutcliffe: Although we have given some time to the amendments and have had a full debate, it is important to put on record the Government's position on clause 6.
Consumers are entitled to be informed about their credit situation. The clause ensures that debtors receive clear and concise information about their fixed sum credit agreements on a regular basis. Clause 6 inserts a new section 77A into the Act. It will require
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creditors to provide debtors with annual statements in respect of fixed sum credit agreements that have a duration of more than one year. A fixed sum credit agreement provides a facility to a debtor who is entitled to receive a credit, whether in one amount or by instalments. Subsection (1) states that a creditor must provide a debtor with annual statements. The first statement must be provided within one year after the day on which the agreement was made. Subsequent statements must be provided at intervals of no more than one year after the previous statement was issued.
The form and content of annual statements will be specified by the Secretary of State in regulations which will be made under the new subsection (2). New subsection (3) states that a creditor cannot impose a charge on the debtor of costs of producing an annual statement. New subsection (4) states that the creditor is not obliged to provide any statements after the debtor has made his final payment. Subsections (5) and (6) state that while a creditor does not give the debtor an annual statement when required, the creditor is not entitled to enforce the agreement until a statement has been provided. The creditor cannot charge interest during the time when no statement has been provided, and the debtor is not liable to pay any default sum that would have been payable during the period when the statement should have been provided. The default sum is defined by clause 18 and includes sums, except interest, that will become payable by the debtor in connection with a breach of the agreement.
New subsection (7) defines ''the period of non-compliance''. That is the period from the day after the last day on which a statement is required until the day when a creditor provides a statement. New subsection (8) makes it clear that the requirement for annual statements does not apply to non-commercial agreements. Non-commercial agreements are agreements that are not made by the creditor in the course of his business or for small agreements of less than £50. Debtors should be regularly informed of their financial situation. This clause ensures that they are.
Question put and agreed to.
Clause 6 ordered to stand part of the Bill.
Clause 7
Further provisions relating to statements
11 am
Question proposed, That the clause stand part of the Bill.
Mr. Sutcliffe: Hon. Members will be aware of recent concerns that some consumers make only the minimum payment on their credit cards. Clause 7 ensures that debtors are made aware of the potential hazards of such behaviour. Section 78(4) of the 1974 Act requires creditors to provide periodic statements in the prescribed form. Those should be given automatically to debtors and describe the state of their
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running account credit agreements, such as credit cards and store cards. The maximum limit for those periodic statements is currently 12 months.
Clause 7(1) allows the Secretary of State to make regulations requiring additional information to be included in those statements given to debtors—for example, that additional information will set out the consequences of making only part payment, failing to make any payments, or making only minimum repayments. The Department will consult about the form of those warnings with interested stakeholders before the Secretary of State makes any regulation.
Subsection (2) ensures that changes do not apply to small agreements for less than £50. Subsection (3) amends section 185(2) of the 1974 Act where the agreement is with more than one debtor. Anything required by the Act must be done to all debtors, but one of the debtors can sign a dispensing notice authorising the creditor not to comply with the obligation on his behalf for a fixed sum annual statement. That avoids the need to send duplicate statements, and the notice is effective only if at least one of the debtors is still receiving statements.
Question put and agreed to.
Clause 7 ordered to stand part of the Bill.
Clause 8
OFT to prepare information sheets on arrears and default
Mr. Robertson: I beg to move amendment No. 18, in clause 8, page 6, line 35, at end insert
(a) details of the rights of consumers under this Act and the 1974 Act with regard to defaults; and
(b) details of redress procedures available to debtors, with particular respect to the Financial Services Ombudsman and the Financial Services Authority.'.
The Chairman: With this it will be convenient to discuss the following amendments:
No. 19, in clause 9, page 8, line 2, at end insert
(a) details of the rights of consumers under this Act and the 1974 Act with regard to arrears; and
(b) details of redress procedures available to debtors, with particular respect to the Financial Services Ombudsman and the Financial Services Authority.'.
No. 21, in clause 10, page 8, line 37, at end insert
(a) details of the rights of consumers under this Act and the 1974 Act with regard to arrears;
(b) details of redress procedures available to debtors, with particular respect to the Financial Services Ombudsman and the Financial Services Authority.'.
Mr. Robertson: The amendments follow on from amendment No. 17 and address the same problem. Amendment No.18 asks that the rights of redress procedures available to debtors be clearly laid out and that the rights of consumers under this Bill and the 1974 Act with regard to defaults be carried out. It seeks to reinforce the point that the company should be allowed only to do what it originally stated it would do. It should be set out very clearly to debtors what their position is under this Bill and under the 1974 Act,
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what their rights of redress are, and what they are legally liable to pay. I spoke comprehensively on those matters in the discussion of amendment No. 17, so I shall allow the Minister to put forward his line of thinking.
Mr. Sutcliffe: By now it should come as no surprise to the hon. Member for Tewkesbury that we shall be resisting his amendments. That is not a personal attack on him, rather on the content of the amendments.
The requirement for the Office of Fair Trading to prepare and publish information sheets on arrears and default will be supported by regulation to be made by the Secretary of State. Those regulations will specify the types of information to be included, and the form of the sheets will be left to the OFT. The Government have left those decisions to be made in regulations to enable the OFT to decide the detail and to make further changes as and when necessary. It also enables the Government to develop that detail through consultation with consumers and the industry, and it ensures future-proofing. The matters mentioned in the amendments are able to be required in those statements. We are committed to consulting the industry and consumer groups on that detail and to ensuring that there is a balance between the types of information specified and the practical limitations of preparing useful information sheets. We will, therefore, resist the amendment. We will consult all interested parties on the types of information to be included in the OFT information sheets and ensure that they reflect a balance between the need to inform and the practicalities.
We resist amendment No. 19. The requirement for notices of sums in arrears in relation to fixed sum credit agreements is to be supported by regulations to be made by the Secretary of State. As I have said, the regulations will contain the content of the notices and their forms. Those matters are best left to regulations, which ensure detailed provisions for the form and content of the notices and which can be changed if necessary.
As I said in relation to the previous amendment, the Government will be able to consult with consumers and industry. The important point is that since the White Paper, and since the regulations that flowed from it came into force, the journey we have made is one that we have tried to undertake with stakeholders who represent all sides. That is beneficial, and we have set out the most appropriate way forward. We will consult further, and the issues raised by the hon. Member for Tewkesbury and the assurances for which he asked can be dealt with through those regulations. That is a better route.
On amendment No. 21, if we leave matters to regulation, we will move forward on important issues. The hon. Gentleman mentioned advice and redress options. Those will be required in the notices and are to be provided as part of the Office of Fair Trading
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information sheets, which will be required to be provided with a notice of sums in arrears and default notices. We will consult all interested parties. The notices need to be able to be changed to take account of future developments in the consumer credit market. That will not add the burden of excess paperwork to consumers or lenders, and it is appropriate to follow our suggested route. To follow the hon. Gentleman's route would create further burdens and would not be in the spirit of what we are trying to achieve. We ask him to withdraw his amendment.
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