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In section 75 of the 1974 Act (liability of creditor for breaches by supplier) after subsection (5) insert
"(6) The liability of a creditor under this section shall also apply to a transaction effected after the passing of the Consumer Credit Act 2005 outside of the United Kingdom as well as to one effected within it.""
The noble Baroness said: The amendment seeks to amendor perhaps according to some to clarifythe provisions of Section 75 of the 1974 Act. Section 75 provides that if a debtora credit card holderhad a claim against a supplier in a transaction where he had paid with a credit card, he also had a like claim against the credit card company. The credit card company is given a right of indemnity against the supplier.
I shall not take up any time in detailing the arguments in favour of this provision when the 1974 Act was passed. It is sufficient to say that it was to give additional protection to the customer, who is seen as the weaker party to the transaction. It concentrates the minds of the card companies on the suppliers to which they grant the cachet of being one of their sanctioned merchants, as they call them. The fact is that the section has been in force for some 30 years. I have no idea how many times this provision has been invoked, but I imagine that claims under it have been quietly disposed of behind the scenes without recourse to the courts.
However, there is a problem in the interpretation of the provision. Although the entire clause provides specific exceptions, some credit card companies insist that there is an additional one that is not included in the 1974 Act, but which they argue is there by implication. They argue that the provisions of Section 75 do not apply to credit card transactions that have been effected abroad. The 1974 Act does not provide such an exemption, but it is just as likely, if not more so, to be required for those transactions taking place abroad. If it is hard to get redress from a shop in your
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local high street, how much harder it must be in the case of some bargain purchased with a credit card from a market stall in a Mediterranean resort, or even from a swish, smart store in a major overseas shopping centre. The long arm of the local trading officer does not extend to the south of France or the Costa Brava. Credit card companies have the power to get the customer redress simply by the threat of withdrawing the credit card facility from the trader.
The point is that credit card companies make great play in their advertising of the convenience of being able to use their cards anywhere in the world. Since Parliament, in its wisdom, 31 years ago, gave United Kingdom credit card users the protection of a line of redress against the companies that were, in effect, financing the transaction, it should now take this opportunity to close a rather dubious loophole or ambiguity that the card companies claim exists. The amendment makes it clear that the protection given by Section 75 of the 1974 Act to users of United Kingdom credit cards extends to transactions abroad as well as at home. I beg to move.
Lord McKenzie of Luton: The noble Baroness has raised an important issue. Section 75 of the Consumer Credit Act 1974 has the effect that where a purchase for an amount between £100 and £30,000 has been funded by a credit card, the purchaser will have the same rights in respect of a breach of contract or misrepresentation against the credit card company as he would have against the supplier himself.
Amendment No. 34 would insert into Section 75 a new sub-section that would spell out explicitly in the Act that Section 75 applies to a consumer credit transaction outside of the UK, as well as within it. This question of the extra-territorial application of Section 75 is currently before the Court of Appeal in a case brought by the OFT against Lloyds TSB and others. The Government are watching the progress of the case carefully, but I hope that, in the circumstances, the noble Baroness will accept that it would be inappropriate to amend the section before having the court's judgment on its extraterritorial application. The Government will consider what, if anything, needs to be done when the current court case reaches its end. In those circumstances, I ask the noble Baroness to withdraw the amendment.
Baroness Miller of Hendon: I thank the Minister for that information. I did not know about the case in court. I hope that a decision will be taken before the Bill leaves this place so that if the decision does not deal with the matter in the way that we consider appropriate, there would still be a chance to do something about it. I shall withdraw the amendment, but I should tell the Minister that I experienced this problem when I bought an expensive handbag in a smart, well-known shop on Fifth Avenue, New York. When I got home, it was faulty but the store here would not do anything about it, nor would the company that issued the credit card with which I paid for the bag. I beg leave to withdraw the amendment.
(1) In this section
"authorised person" means any person who is
(a) a consumer credit business or consumer hire business; and
(b) a data controller;
"data controller" has the meaning given by section 1 of the Data Protection Act 1998 (c. 29) (basic interpretative provisions);
"personal data" has the meaning given by section 1 of the Data Protection Act 1998.
(2) It shall be lawful for an authorised person to disclose to a credit reference agency any personal data relating to a debtor which are processed by him if the conditions in subsection (3) are satisfied, notwithstanding that the debtor has not given his consent to such disclosure.
(3) The conditions are that
(a) the authorised person has given the debtor notice of his intention to disclose the debtor's personal data under this section; and
(b) the debtor has, within 28 days of the date of that notice, failed to give the authorised person notice that he does not consent to the disclosure of his personal data.
(4) It shall be lawful for
(a) a credit reference agency, or
(b) an authorised person,
to process and use personal data disclosed under subsection (2).
(5) Regulations may make further provision in relation to disclosure of personal data under this section."
The noble Lord said: The purpose of the amendment is to introduce a new clause, which has the effect of modifying the Data Protection Act 1998 to allow a lender to disclose to a credit reference agency information about a debtor, without the consent of that debtor, where 28 days' notice has been given to that debtor, and he has failed to respond. The Data Protection Act has the laudable purpose of protecting the privacy of individuals about whom information is stored, usually on a computer. Concerns have understandably been widely expressed in debates on this Bill about debtors being sucked into a morass of unsustainable debt from which escape is difficult because they incur liabilities which their means will never permit them to repay.
Most lenders already share data on their credit agreements with the credit reference agencies. In order to do that on individuals' accounts, data protection legislation requires lenders to notify the individual that their data will be shared and the purposes for which that data will be used. Since the enactment of the Data Protection Act that has typically been managed by including an appropriate clause in the application process. However, credit agreements entered into before the Data Protection Act was contemplated do not tend to allow for data sharing. Therefore, accounts that were opened prior to that time are not eligible for inclusion in credit files until the account holder gives his consent for the data to be shared.
Lenders undoubtedly have a vested interest in lending responsibly. Responsible lending reduces credit losses, and increases profitability, so that lenders have an economic incentive to make the best
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credit decisions they can. Also, lenders are very conscious of the reputational damage that can ensue from irresponsible lending practices and no lender wants to be seen as causing, or even contributing to, an individual's misfortune. For accounts with a long life, such as credit cards or current accounts, the result is that it could be decades before all of a portfolio is available. The resolution of this issue is the subject of this amendment. I beg to move.
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