Consumer Credit Bill

moved Amendment No. 2:"After Clause 37, insert the following new clause—" ““OFT’S GENERAL DUTIES       After section 1 of the 1974 Act insert—       ““OFT’s general duties (1)   In discharging its functions under this Act to regulate the conduct of licences, the OFT must, so far as is reasonably possible, act in a way— (a)   which is compatible with the regulatory objectives; and (b)   which the OFT considers most appropriate for the purpose of meeting those objectives. (2)   The regulatory objectives are— (a)   the protection of consumers; (b)   the promotion of an efficient and innovative consumer credit industry; and (c)   maintaining a competitive market in consumer credit.”””” The noble Lord said: My Lords, I apologise for labouring the point on this amendment, but as your Lordships will remember, we withdrew it on Report, reserving our right to bring it back. Our purpose in retabling it is that we felt it should be made clear on the face of the Bill that the OFT’s regulatory objectives should very clearly include a balance between consumer protection, the promotion of an efficient and innovative consumer credit industry and the maintenance of a competitive market. At this stage, I reiterate my declaration of an interest as set out in the Register of Lords’ Interests. Since Report stage I have written to the Minister and I have received a very helpful response on this and on the subsequent amendment. I understand that those letters are available in the Library. I hope he will agree with me that it will be useful to have the debate on the record and that he will forgive me if I go over the points. I should also explain that, as a result of that correspondence, we have removed what were subsection (2)(d) and subsection (3) from the amendment that was tabled on Report. They dealt with avoiding unnecessary and disproportionate burdens on business. We dropped them on the ground that Clauses 19 and 20 of the Legislative and Regulatory Reform Bill would give statutory effect to the commitment of the OFT, currently contained in the voluntary Cabinet Office enforcement concordat, to act proportionately and to minimise the costs of compliance for business by ensuring that any action it requires is proportionate to the risks. However, as an overall point on the amendment, as your Lordships are aware, we on these Benches remain concerned at the extent of the powers of the OFT and this amendment seeks to achieve a balanced approach. In his letter in response to mine, the Minister sought to emphasise a difference between the FSA and the OFT by saying that the FSA has extensive rule-making powers and by contrasting that with the way in which consumer credit is handled. Yet the practical effect of the Bill is to vest huge powers in the hands of the OFT. All the detailed guidance that the OFT will produce will, in reality, be rules for want of another name. It is true that guidance is, formally, no more than that and that it is for the courts to decide matters of law. But local enforcement authorities will treat such guidance as definitive; many, particularly small, businesses will regard it as authoritative; and only the brave, the foolhardy and the rich will challenge it in the courts. Similarly, the OFT’s new licensing powers are extensive and we feel need to be the subject of effective parliamentary scrutiny. We see a conflict between arguing, on the one hand, that a key element of the Bill involves giving the regulator more power to regulate the market, yet, on the other, saying that the powers are not so great as to warrant proper democratic accountability. We feel we need a framework, some parameters within which those rules or guidance are to be set. So the specific objectives contained in the amendment are consumer protection, the promotion of an efficient and innovative consumer credit industry and the maintenance of a competitive market. On consumer protection, the Minister said in his letter to me that,"““the whole purpose of the Consumer Credit Act (and the Bill when finalised) in relation to the OFT is to protect consumers””." He went on to say:"““I am not sure what else you think the OFT should be doing, or would do if there were a specific objective about consumer protection””." I hope noble Lords will forgive my naivety, but just because something is obvious does not appear to prevent the Government stating it. For example, it did not prevent the Government tabling the amendment that we have just dealt with on Clause 29, despite as the Minister said in a separate letter on that subject to several noble Lords, including my noble friend Lady Miller of Hendon, the fact that he thought the previous wording already allowed the OFT to take account of irresponsible lending practices where it thinks it relevant. In relation to the maintenance of a competitive market and the promotion of an efficient and innovative consumer credit industry, the Minister said in his letter to me that the OFT’s published goal is,"““to make markets work well for consumers. Markets work well when there is vigorous competition between fair-dealing businesses. When markets work well, good businesses flourish””." While we may agree with that, nevertheless it sounds like a mission statement. I hope your Lordships will forgive me when I voice scepticism of mission statements which often seem to be pure marketing speak. Since that mission statement—if that is what it is—is written by the OFT, presumably it can be rewritten at any time to suit the OFT’s purposes. So it is a long way short of a requirement placed on it by legislation. This Bill, when enacted, ought to be, so far as reasonably possible, future proof, so the intentions of Parliament should be set out on its face. In his letter the Minister said that,"““we would not wish to create a situation where the OFT might grant a licence to a less ‘fit’ person because it might be desirable to have more of a certain type of business in the market””." That is a reasonable point, but it ought to be the regulator’s job to take difficult decisions. Our point is that we need to require the OFT to take a balanced approach and that there needs to be a benchmark against which to demonstrate that that has been achieved. The amendment would make the OFT more accountable and enable Parliament to assess its performance. I beg to move.