Consumer Credit Bill

It is important that we have that clarification on the record. Given that the legislation is not a consolidating Bill, but merely inserts new measures into existing legislation, such clarification on what the follow-through will be is extremely helpful. We come back to the definition of ““irresponsible lending””. There is some similarity between our consideration of that and our previous lengthy debates on the unfairness test. I have even asked the Minister a question about the unfairness test, and he kindly responded by promising to monitor closely the impact and effect of the test to ensure that it does not have unintended consequences. One needs to read both provisions together, although they are separate. The unfairness test relates to a creditor who wants redress trying to assert that the relationship that was entered into was unfair. However, when considering irresponsible lending, the OFT can examine both matters. It can consider whether someone has been unfair, even though it has said that it will not try to define that. I presume that it says that that is a matter for the courts because of the context in which the provision arose. I hope that the OFT will be prepared to give more clarification on the meaning of irresponsible lending. My hon. Friend the Member for Hertford and Stortford (Mr. Prisk) talked about certainty. The industry needs certainty so that it can prepare properly and effectively for the implementation of the Bill. We will hopefully then not get into enforcement problems due to challenges on whether the provision has been infringed. The question of clarity and certainty is germane. The hon. Member for Kingston and Surbiton (Mr. Davey) highlighted the fact that a balance must be struck. On the one hand, we need to provide protections, but on the other we do not want something that is too prescriptive. We debated in Committee why a prescriptive list that is an attempt to give certainty might lead to a box-ticking exercise, rather than providing the protection to creditors that we all want as a consequence of a Bill. If the system is too vague and uncertain, there is a risk that certain sectors of our community, especially people from socially disadvantaged backgrounds, will be denied credit—full stop. There is a risk that if the system is very vague and uncertain, lenders will say, ““We don’t know what this means, so we are not going to take any risks at all”” and thus withdraw from a specific sector of the market. Some providers lend small sums of money, but the annual percentage rate that they levy suggests that they are engaging in irresponsible lending. However, the monitoring process shows that they provide a service to the market that would otherwise be sucked up by loan sharks and unsavoury characters whose practices we hope the Bill will end. If there is uncertainty, credit could be denied to a sector of the market. Lenders already have to factor in the cost of risk, but because of the small sums involved that may appear disproportionate. I am deeply concerned that failure to provide clarity would have the unintended consequence of playing into the hands of loan sharks and illegal lenders who prey on the disadvantaged.