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Mr. Sutcliffe: Again, I thank the hon. Gentleman for the spirit and the intention of his comment. We do not disagree about what we want to achieve; it is the method of achieving it that we disagree about.I still do not think that the amendment is the right solution, but I recognise that there is a problem. I think, the safest thing to do is, at a later stage, to reflect on the issue how to differentiate the different categories of missed repayment.
Mike Penning: I seek clarification. I am aware that the Minister has had research done, as have other people. What I am frightened about—I think we are all frightened about this—is driving people to the loan sharks and thugs that work on the streets. If people think that they will be harassed for something that they have not done wrong, they will look for an alternative that will not harass them. That is dangerous. Perhaps later we can examine the aggregated period and consider options so that if someone gets four weeks behind, it is not aggregated. What we do not want to do is drive people to the thugs and nasty guys.
Mr. Sutcliffe: I fully accept that, and as I said this morning, the Bill is not the only vehicle that we are using to tackle the problem of loan sharks. Had I been able to answer my question at Trade and Industry questions this morning, I would have talked about what else we are doing. I agree that we do not want to drive people from the legitimate market into the hands of loan sharks. However, I am not convinced that the amendment is the best vehicle for delivering what we all want, because arrears notices are a warning, even though I accept that technically there may not be an arrears position.
Charles Hendry: The Minister accepts that there may not be an arrears position. If so, why would someone be sent an arrears notice? Surely, by definition, an arrears notice should be sent to people only if they are in arrears. If they are not, they should not receive the letter.
Mr. Sutcliffe: This is where the debate on missing payments becomes over-complicated. The amendment does not meet the technical requirements to consider the four weeks or payments over 12 months, so I think that the best way forward is to say that if the hon. Gentleman withdraws his amendment, I will look at how we deal with the issue in a definition and come back to it on Report. On that basis, I hope that he will withdraw his amendment.
Charles Hendry: I am prepared to do that in principle, but will the Minister agree to a meeting at the end of the Committee stage and before Report to see whether we can work out an agreed form of words? If we can agree to that meeting—I am sure that the
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Liberal Democrats would be keen to attend—I will withdraw my amendment.
Mr. Sutcliffe: I am prepared to do that. We are trying to achieve a consensus, and if this is a major point, we must be able to find a form of words that meets all our requirements.
Charles Hendry: I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 9 ordered to stand part of the Bill.
Clause 10 ordered to stand part of the Bill.
Clause 11
Failure to give notice of sums in arrears
Question proposed, That the clause stand part of the Bill.
Mr. Sutcliffe: Clause 11 sets out the consequences for the creditor or owner of failing to give an arrears notice. The Government have carefully considered appropriate sanctions for a failure to provide the notice, and I believe that the best way to make creditors or owners give arrears notices is to penalise them for non-compliance in a way that hurts them most directly.
Subsections (1) and (2) set out the periods in relation to which a creditor or owner will not have complied with the requirement to send an arrears notice. For fixed-sum credit agreements, that will be either after the 14-day period when the conditions in clause 9(1) have been met or for further notices after the six month period. For running-account credit agreements, it will be after the time when the next statement was due. The creditor or owner will comply with the relevant requirements when they have sent a notice to the debtor or hirer.
Subsections (3) and (4) establish the consequences for the creditor or owner during the period when they should have provided an arrears notice to the debtor or hirer. During that period, they will not be entitled to enforce the agreement, charge any interest, or impose any default sum for a breach by the debtor or hirer that occurs during that period. The clause ensures that creditors or owners cannot profit from an agreement when they fail to comply with the arrears notice requirements.
Question put and agreed to.
Clause 11 ordered to stand part of the Bill.
Clause 12
Notice of default sums
Question proposed, That the clause stand part of the Bill.
2.15 pm
Mr. Sutcliffe: A key element of the Government's proposed reforms is transparency of information. An important part of that for consumers is that they should be aware of significant fees and charges placed on their accounts. The clause will require creditors and
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owners to provide notices to debtors or hirers where default sums exceed a specified amount.
A default sum is defined in new section 187A as an amount payable, other than interest, by the debtor or hirer for any breach of his agreement. That could include a late payment fee, a missed payment fee or legal fees. New section 86E(2) states that creditors or owners have to give consumers a notice after the default sum becomes payable, but that notice can be incorporated in any other statement or notice sent to the debtor or hirer. Debtors or hirers should have a reasonable period before creditors or owners can impose interest on default sums. That would enable them to pay the sum before additional interest is charged.
Under new section 86E(4), interest on the default sum can begin to accrue on the customer's account only 28 days after the notice is given. If a creditor or owner does not provide a notice, he cannot enforce the agreement. The debtor or hirer will not be liable to pay any cost for producing or sending the arrears notice. The Secretary of State will make regulations to cover the form and content of such notices, and the regulations will also prescribe the amount of the default fee to trigger the notice requirements and the period by which it must be sent. We will consult on those aspects before the regulations are made.
It is imperative for consumers to be kept aware of their financial situation with transparent information. The clause ensures that they will be kept up to date of any charges being applied to their accounts.
Charles Hendry: Again, the clause goes right to the heart of the lack of clarity in the Bill. So many questions arise from it that we need to spend a little while addressing them. Would information on default sums—for example, when they would be imposed and how they would be calculated—have to be given when a lending agreement was made? That should be the case because it is too late to tell people the consequences when they are already incurring the charges.
Who will judge if a default sum is reasonable? Will it be the courts or the Office of Fair Trading? Why has more guidance not been given on what would be considered to be reasonable? Would the courts or the OFT have the power to reduce a default sum or to strike it out completely if it was unreasonable or if the terms whereby it could be imposed were not clear to a borrower when setting up the agreement? My impression is that clause 15 covers that, but I would be grateful for the Minister's absolute assurance that it does. There is a danger that unscrupulous firms might seek to use default sums to make up for restrictions imposed elsewhere in the Bill. It is not clear whether they would be adequately prevented from doing so, so we need further assurances from the Minister that consumers would be protected.
We also need to know whether the default fee could be interpreted to mean that the whole outstanding part of the debt would immediately be liable to be paid, which could have extremely serious consequences for a borrower. What right of appeal would there be and how could that be considered in the time scale of
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28 days before the fee becomes payable? How would the measure affect bank accounts given that if someone goes into an overdraft, a bank would have to send written notice and then wait 28 days before it could impose an overdraft fee. I am not saying that that is unacceptable—many of us have concerns about overdraft charges—but we need to understand the implications of the provisions fully.
Returning to a concern that I raised earlier, how would the notices be delivered? Would they be posted or e-mailed? Would they have to be sent by registered post and signed for? How could we be certain that the notice is received by the right person? As the Minister knows, fundamental to the Bill is the fact that it shifts the responsibility and liability from the borrower to the lender. The lender must prove that they have acted fairly. Therefore, they would have to be certain that they got the information through to the right person and that that person understood it. That again raises issues of providing the information in different languages, for people whose first language is not English, in Braille for blind people, and in an understandable way for those with learning difficulties. Those issues are not covered by the Bill. Without those assurances and explanations, the clause is inadequate.
Mr. Sutcliffe: The information must be given in writing for the reasons that the hon. Gentleman raised about the burden of proof if a case ever got to court. It could not be sent electronically. For people with sight problems, there is no problem with Braille being used.
Michael Fabricant (Lichfield) (Con): The concept of a silent Whip is an impossibility in my case. When the Minister says that the information can be given in Braille, is he saying that there is an obligation on the lender that it must be provided in Braille? There needs to be some certainty for those people who are recipients of these communications.
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