Clause 61
Consequential amendments relating to ombudsman scheme
Question proposed, That the clause stand part of the Bill.
Mr. Sutcliffe: The clause makes consequential amendments to the 1974 Act and the Financial Services and Markets Act 2000, to allow for the introduction of an alternative dispute resolution scheme.
The clause makes various amendments to the 2000 Act. It adds references to the consumer credit jurisdiction alongside references to the voluntary and/or compulsory jurisdiction where appropriate. That ensures that the consumer credit jurisdiction can operate effectively alongside the existing jurisdictions—that deals with the point raised by the hon. Member for Hornchurch. An amendment to the 2000 Act will allow the FOS to specify the maximum limit of compensation that can be awarded under the consumer credit jurisdiction.
Another change provides for regulations to be made to allow the FOS to disclose information about cases and the decisions to the OFT. That information can be used by the OFT in deciding whether a lender is fit to hold a licence. Under the clause, the OFT can also provide information and advice to licensees on the introduction and operation of the ADR scheme. That information will be agreed in advance with the FOS. Further details on how the OFT and the FOS will work together will be set out in a memorandum of understanding between the two organisations, a draft of which has been seen by the Committee.
The clause is necessary to ensure the consequential amendments are made to the 1974 and 2000 Acts. I hope that the Committee will support it.
Question put and agreed to.
Clause 61 ordered to stand part of the Bill.
Clause 62
Monitoring of businesses by OFT
Question proposed, That the clause stand part of the Bill.
Column Number: 146
Mr. Sutcliffe: I know that the monitoring of businesses by the OFT has been of concern to some hon. Members. The clause imposes a general duty on the OFT to monitor businesses being carried out under licence.
The clause amends section 1 of the 1974 Act, which sets out the OFT's general functions. That means that the OFT will have a clear and ongoing duty to monitor the fitness of licensees. The OFT will be able to take a risk-based approach. Those business sectors that pose a higher risk to consumers will be subject to more intensive monitoring. The OFT will use the information-gathering powers in the Bill to fulfil the duty to monitor licences. That will result in better protection for consumers and more effective use of OFT resources. I hope that the Committee will support the clause.
Question put and agreed to.
Clause 62 ordered to stand part of the Bill.
Clauses 63 to 69 ordered to stand part of the Bill.
5.45 pm
Schedule 3
Transitional Provision and Savings
Mr. Sutcliffe: I beg to move amendment No. 24, in schedule 3, page 64, line 7, leave out 'payable' and insert
'that are required to be paid'.
This is a technical amendment designed to make the wording of the paragraph consistent with section 130A of the 1974 Act, to which it relates. It is a straightforward amendment, and I hope that the Committee will support it.
Amendment agreed to.
Question proposed, That this schedule, as amended, be the Third schedule to the Bill.
Mr. Sutcliffe: The schedule concerns transitional provision and savings. It makes certain transitional provisions for the coming into operation of many different parts of the Bill. It is important to ensure the smooth commencement of the provisions, especially where they apply to existing agreements.
Question put and agreed to.
Schedule 3, as amended, agreed to.
Clause 70 ordered to stand part of the Bill.
Schedule 4
Repeals
Amendment made: No. 30, in schedule 4, page 69, line 38, at end insert—
'(aa) the definition of ''costs'';'.—[Mr. Sutcliffe.]
Question proposed, That this schedule, as amended, be the Fourth schedule to the Bill.
Mr. Sutcliffe: The schedule repeals various sections of different legislation. The changes are important as a consequence of the Bill.
Question put and agreed to.
Schedule 4, as amended, agreed to.
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Clause 71
Short title, commencement and extent
Question proposed, That the clause stand part of the Bill.
Charles Hendry: It would not be appropriate for us to reach the end of the Bill without having a further point of clarification from the Minister, to which he will probably say, ''I hear where you're coming from'', and then explain why he did not really understand where I was coming from at all. There are a couple of points here, which I hope that he can clarify.
Subsection (2) says that different provisions can be introduced at different times, which is welcome, but can the Minister tell us what consultations he will now have with the industry to ensure that he fully understands which measures require a longer period before implementation? As he will appreciate, significant software changes will be required before the Bill can be enacted. It was some six years before all aspects of the last Act came into force. Clearly, we would not expect this to take six years, but there is a strong case for showing flexibility about different provisions coming into force at different times. I hope that the Minister will be prepared to have constructive discussions with the industry to ensure that that can be done properly.
Can the Minister also say a little about the Northern Irish aspects of the Bill? Normally, this would have been a devolved matter for the Assembly, but because it is suspended, that is not possible. What will happen when, we hope, the Northern Ireland Assembly is reformed? Will it pass its own legislation in this area, and will it pass its own amendments? How would that take place? We hope that the suspension of the Northern Ireland Assembly is only temporary. I can see that a furious amount of scribbling is going on, and I am going on so that the Minister can obtain more guidance before he has to respond. Can he tell us what will happen when the Assembly is brought back into being, and how can Northern Ireland adapt the Bill to the needs of the Province?
Mr. Sutcliffe: I understand where the hon. Gentleman is coming from; he is heading in the right direction. I appreciate the points that he makes. He will know from the previous discussions on the regulations that flow from the White Paper that the industry had concerns about the need to change systems. The Government listened to those concerns as well as to those about the size of companies involved. Because the Bill has had widespread consensus and has been welcomed by all sides, it would only be fair to ensure that we did not impose burdens on business. Where there is a legitimate case for a timeframe to be put in place, we are happy to discuss that with the industry. Consultation will take place with all the interested stakeholders, ranging from small businesses and lenders to large companies that can accommodate change quicker than the rest. The hon. Gentleman will know that in the context of better regulation, the Government are required to ensure that all changes that take place are proportionate. Changes will be implemented after secondary legislation, and
Column Number: 148
following full discussion and consultation with all necessary stakeholders.
On the question of Northern Ireland, I agree with the hon. Gentleman that the sooner the situation can be resolved for the Assembly, the better; it is in the best interests of all concerned. On this Bill, Northern Ireland Ministers specifically requested that jurisdiction be extended to Northern Ireland. That will be reviewed following any subsequent change in the circumstances in Northern Ireland.
Given those explanations, I hope that members of the Committee will support this, the final, clause.
Question put and agreed to.
Clause 71 ordered to stand part of the Bill.
New clause 1
OFT'S GENERAL DUTIES
'After section 1 of the 1974 Act insert—
''1A OFT's General Duties
(1) In discharging its functions under this Act to regulate the conduct of licensees, the OFT must, so far as is reasonably possible, act in a way—
(a) which is compatible with the regulatory objectives, as set out in subsection (2); and
(b) which the OFT considers most appropriate for the purpose of meeting those objectives.
(2) The regulatory objectives are—
(a) lender confidence, to ensure the widest possible access to credit;
(b) the protection of consumers; and
(c) the national interest in having an efficient and innovative consumer credit sector.
(3) In discharging its functions to issue guidance and regulate the conduct of licensees, the OFT shall have regard to—
(a) the principle that a burden or restriction which is imposed on a person, or on the carrying on of an activity, should be proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction;
(b) the desirability of facilitating innovation in connection with regulated activities;
(c) the desirability of maintaining a competitive market in consumer credit in the United Kingdom; and
(d) the need to minimise the adverse effects on competition that may arise from anything done in the discharge of its functions.''.'.
Brought up, and read the First time.
Charles Hendry: I beg to move, That the clause be read a Second Time.
The new clause relates to the OFT's general duties. On Second Reading, hon. Members of all parties expressed concern about the wide and open powers provided to the OFT in the Bill. The OFT has scope to discharge those powers, and to regulate the conduct of licensees practically unfettered, as we have discussed. It is given a free rein to impose requirements and penalties based entirely on loose concepts of unacceptable conduct. What the OFT says is what goes. With such wide-ranging powers, it is striking that the Bill contains no provision specifying the objectives and purposes towards which the OFT must act, particularly in a Bill that sets out to achieve so much.
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By introducing an objects clause, new clause 1 provides an important means of ensuring that the Bill achieves the purposes that Parliament has in mind. It is also a vital means of maintaining parliamentary control over the OFT—again, something that is distinctly lacking in the Bill. There is no good reason why such provision should not be included in the Bill. Indeed, it is invariably the case that Parliament controls the exercise of the discretion enjoyed by a regulatory body. The Financial Services and Markets Act 2000 is perhaps the best example. In the opening sections, the ground rules with which the Financial Services Authority has to comply are made clear.
I challenge the Minister to give a single suitable reason why the OFT should not be subject to the same control in this Bill. Surely the interests of consumers will be better protected if the body that seeks to protect them is clear about what it is trying to achieve. The dangerous alternative is to leave the OFT to make things up as it goes along. That is not good regulation, and could be immensely damaging for consumers. Such a provision would also ensure that the industry was much clearer about what was expected of it by the OFT. At present, that clarity is not there.
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