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Mr. Sutcliffe: The hon. Gentleman is right; I shall not be able to satisfy him, despite his valiant efforts and despite the many amendments that have been
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tabled even at this late stage. However, he is right to raise the matter, which was principally highlighted by the motor finance sector. It feels that financially savvy customers exploit the provisions by walking away from car finance agreements. One half of the amount has been repaid when such customers become aware that the remaining repayments exceed the residual value of the vehicle. Therefore, in handing the car back, they leave the finance company holding the loss.
The industry's views about the provisions are well known to the Government. That is why, at the end of last year, we consulted on its future. We hope to publish that consultation shortly. Hon. Members and the hon. Gentleman might not be surprised to learn that the responses vary greatly, depending on who gave them.
Whereas the lenders and the motoring industry fear the abolition of the provisions, groups that represent consumers and enforcers were equally adamant that those provisions should be retained. Having assessed the responses, we have concluded that section 100 and the right voluntarily to terminate should be retained. There are three main reasons why we have concluded that. The first is the lack of consensus, which I outlined. Views were polarised, and in such circumstances it would be difficult to justify the change.
The second reason is the compelling argument that we would need to remove an existing element of consumer protection. The right voluntarily to terminate is an essential provision of the hire purchase provisions—it is the consumer's key safeguard. Given that we cannot remove that right without calling the whole concept of HP into question, we do not believe that that argument has been made. Thirdly, the industry's economic evidence that it produced to support its claimed losses is open to interpretation.
The job of industry is to lobby hard, but we wonder whether changes in, for example, marketing practice and product design, which require large deposits, might alleviate the problem. We carefully considered the amendments—that is why we consulted—but on balance the responses to the consultation did not make an arguable case for repeal. In those circumstances, we believe that we should not remove those forms of consumer protection, and in the light of that explanation I hope that the hon. Gentleman will withdraw the motion and the new clause.
4.45 pm
Mr. Robertson: The Minister has proved that he is an extremely good goalkeeper. He is also, to use the technical term in football, a very good sweeper: nothing has got past him.
He said that section 100 is about retaining consumer protection, which I do not wish to undermine. However, perhaps consumers are paying more for credit than they should be because of it. It is a matter of weighing up and interpreting the evidence, and of striking the right balance. The Department has already looked at section 100, but it may need to reanalyse the situation, as it could become a problem, because more and more cars are being sold—although the section
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does not apply only to cars. This rather strange area of law should be examined. The market was very different when the 1974 Act was introduced, and because of that—if for no other reason—section 100 should be looked at again in more detail. However, I beg to ask leave to withdraw the motion.
Motion and clause, by leave, withdrawn.
New Clause 5
Regulatory impact
'(1) The Office of Fair Trading (OFT) will report to the Secretary of State and to Parliament annually on the impact of its monitoring of businesses being carried on under licences and its determinations to issue, renew or vary a licence under the provisions of this Act.
(2) The Secretary of State will after a period of no more than five years, consult on and publish an assessment of the impact the Act has had in terms of regulatory burden and harmonisation with European Directives.'.
Brought up, and read the First time.
The Chairman: With this it will be convenient to consider new clause 6—
Office of Fair Trading: further duties—
'(1) The Office of Fair Trading (OFT) shall consult other financial agencies and produce a standard requirement for the presentation of interest rates to enable direct comparison between products.
(2) The OFT shall periodically, and at least annually, publish the range of interest rates on the market for specified products.
(3) The OFT shall further publish court rulings and advice of the ombudsman on levels of interest rates for particular products which are likely to be deemed unfair under section 19.'.
Malcolm Bruce: Something like new clause 5 should perhaps appear in a Bill, but it is particularly important in the Consumer Credit Bill.
The Minister acknowledged on Second Reading that the Bill is setting up a mechanism, the full impact of which will not be accessible until it has been in operation for some time. New clause 5 would require the OFT to give an annual report of how it is proceeding and what impact the interpretation of the regulation is having. After five years, the Secretary of State should review not only the impact of the Act and all the regulations and activities applied by the Bill, but any European legislation that is likely to have been enacted in that period. That is in no way to undermine the Bill—quite the opposite—but to ensure that it does not lead to a layering of additional regulations and bureaucratic detail on the industry that gets in the way of the Bill's principal function. That is a matter of genuine concern.
When one talks to businesses—in this case, financial services businesses and banking businesses—they tend to be able to argue that any individual Act or regulation is probably justified and acceptable, but the cumulative effect can be substantial. That puts the onus on the Office of Fair Trading and on the Secretary of State. It does not give the industry an opportunity to set its own parameters, but it does give an undertaking that it will be reviewed, reported on annually and, over five years, it would require the
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Secretary of State to say that he has examined the whole impact and tried to ensure that it has been done as lightly as possible.
Alistair Burt: The hon. Gentleman knows the Government very well if he is concerned that one piece of legislation would lead to a raft of regulations in its wake. While the hon. Gentleman is making his remarks, will he ask the Minister, in his response, to offer an opinion on the general issue of whether sunset clauses that are added to Bills and regulations, which is our policy, would also make a significant difference to the way in which regulation would be accepted by industry and business, which is now literally groaning under the effect of regulations he has described?
Malcolm Bruce: I am content to be associated with the idea of sunset clauses, which my colleagues and I strongly support. However, I want the Minister to focus specifically on the new clause. He and the House have acknowledged that these provisions set up new arrangements, the workings of which will only become apparent over time. I ask for a clear recognition of the need for a review to ensure that the provisions do not create unnecessary bureaucracy, duplication or overlapping that make the delivery of desirable benefits, either to the consumer or to service providers excessively costly. It is a simple clause, and I hope the Minister will accept it.
New clause 6 deals specifically with hon. Members' concerns about potentially high or extortionate rates of interest. The Minister, the Conservatives and I did not agree with the inclusion of a specific maximum interest rate in the Bill. Several hon. Members, particularly Labour Members, wished to see that.
The new clause states that there should be a standard mechanism for setting out interest rates for different products, because credit card interest rates operate in several different ways. Overdraft interest and hire purchase interest are expressed in different ways. The first thing we must do is ensure standard ways of expressing interest rates appropriate to different products, which can be compared so that consumers can see the full range of credit costs. The OFT should produce—at least annually; certainly periodically—a list of interest rate ranges, which will change as interest rates vary.
Subsection (3) of the proposed new clause addresses the concerns of hon. Members who wish to identify and eliminate extortionate interest rates. On the basis of experience and practice, it is for the ombudsman and the OFT to say, ''This is the range of products. This is the upper and lower rate of interest for those different products, and on the basis of ombudsman's rulings or court cases, we will indicate from time to time the level of interest rate that is likely to be deemed unfair.'' That would warn credit providers that if they charge above that rate, they are likely to lose a reference to the ombudsman or to the courts.
The new clause does not insert a specific interest rate into the Bill; it allows that to vary and it leaves it to the discretion of the ombudsman and the OFT. This is a
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genuine attempt to address people's concerns, consistent with the agreement of all Front Benchers that putting a specific interest rate in the Bill would be, for a variety of reasons, possibly counter-productive and difficult to enforce.
I commend both of the new clauses to the Committee. They genuinely meet the concerns of the industry in the spirit and the letter of the law. They also meet concerns on consumer regulation, particularly for those people at the lower end of the market who often face very high interest rates. A mechanism can be built into the Bill that would effectively allow the authorities to identify, at any given time, interest rates that could give rise to a ruling that they are unfair.
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