Lending (Regulation) Bill

---

A private members' bill introduced by Russell Brown (Lab, Dumfries and Galloway) seeking to provide greater protection for consumers and the wider economy from the practices of irresponsible lenders.

The Bill aims to help prevent some of the practices used by some credit and mortgage providers, which have driven people into unaffordable debt and contributed to the current economic difficulties.

The Bill would ban lenders from sending unsolicited credit card cheques to customers along with proposals to block automatic increases in credit limits being offered to customers.

The Bill received government support on some measures, but is unlikely to become law as Christopher Chope (Con, Christchurch) has filibusted the Bill.

Introducing the Bill, Brown criticised credit card companies for sending out blank cheques to people who had not asked for them, warning they were often targeted “at the most vulnerable customers”.

He spoke on unsolicited increases in credit card limits could lead to “unaffordable amounts of credit being available to consumers”. Brown acknowledged that he could be accused of shutting the stable door after the horse had bolted in the wake of the credit crunch. But he said:

“That doesn't mean to say we shouldn't make an attempt to stop - as soon as possible - some of the practices that are included in the Bill.”

For the Liberal Democrats, business spokesman, David Heath (Somerton and Frome) said the government's objections meant that they wanted the Bill to go through but “not in any sort of recognisable form”.

Conservative, shadow minister for business, Mark Prisk told the Commons that personal debt in the UK was, at £1.4 trillion, larger than the country's GDP.

He said he would not oppose the Bill and added that he shared many of the concerns Brown had raised.

But, he added: “We are not yet convinced that the measures, as drafted, are the right way forward.”

Business minister, Gareth Thomas, said the government welcomed a number of Brown's proposals and would be “happy to see the Bill make progress”.

He supported the proposal to ban unsolicited credit card cheques, saying: “There are a number of concerns about the use of these cheques.

“They are usually sent to consumers unrequested, tempting consumers into spending that they may not be able to afford, they typically carry a fee and a higher rate of interest.

“There is now worrying evidence that rather than borrowing for ... discretionary purposes, consumers are using them for essential expenditure and to deal with cashflow shortfalls.

“In the light of that evidence the government welcomes the measures proposed.”

However, he raised a number of objections to other measures contained in the legislation.

Blocking automatic increases in credit limits would have to be put out to consultation, he said.

Moves that would warn people who default on unsecured, rather than secured, loans that they could lose their homes as the result of a court order were supported in principle, Thomas said.

He said he would consult on “whether to require warnings about charging orders” as part of consideration of a new European directive on consumer credit.

But he opposed plans to introduce a standard interest rate calculation as the Office of Fair Trading had already rejected such a move.

Christopher Chope (Con, Christchurch) said the Bill “undermined the principle of individual responsibility”.

Progress

House of Commons

First reading: January 21 2009 [HC Bill 24]

Second reading: February 27 2009