Consumer Credit Bill

moved Amendment No. 36:"After Clause 65, insert the following new clause—"    ““LIABILITY OF DEBTOR ON TERMINATION OF HIRE-PURCHASE ETC. AGREEMENT    In subsections (1) and (2) of section 100 of the 1974 Act (liability of debtor on termination of hire-purchase etc. agreement) for ““one-half”” substitute ““three-quarters””.”” The noble Lord said: This amendment seeks to reform the outdated and inflexible law on hire purchase and in particular the half rule, which applies to hire purchase agreements. It is illogical not to do that as part of the Bill, because the 1974 Act, which the Bill specifically sets out to update, encompasses hire purchase. The half rule allows the customer to hand back a vehicle and be liable for only half the amount otherwise payable. Inevitably, there is a stage during each contract when, if a customer were to exercise his right, that would result in a certain loss to the provider of the finance. That would be exacerbated under the Bill because it abolishes the lending ceiling for personal borrowers. As I said at Second Reading, the real loser will be the customer, who will find hire purchase facilities increasingly difficult to come by. The problem of course is in proposing an appropriate amendment. Almost anything one might propose will be subject to criticism for being too crude. One option, for example, would be to abolish the facility altogether, but that would be uncommercial and would disadvantage the borrower. That option, however, has the advantage that it was suggested by the DTI. It would amend the current law to allow a creditor to recover a higher proportion of the amount remaining due under a hire purchase agreement when the vehicle is handed back. That would preserve the right to hand back the car but set what can be recovered at a more realistic level. Increasing the half to 75 per cent would, the Government estimated, produce a balance at about the right level to eliminate the losses lenders say that they are making at present. The consumer’s rights to settle the hire-purchase agreement early and to keep the car under the early settlement provisions would remain unaffected, and those rules have recently been redesigned to ensure greater fairness. I beg to move.