We come to amendment No. 81 in the name of the Minister. Amendment No. 289 is related. With the committee's agreement it is proposed to take amendments Nos. 81 and 289 together.
SECTION 16.
I thought there was a general agreement that we would not take them together.
That is the instruction from the Bills Office.
Sometimes the Bills Office get it right and sometimes they do not.
Is it agreed to deal specifically with amendment No. 81? Agreed.
I move amendment No. 81:
In page 20, paragraph (a), line 27, after "Part III" to insert "or section 117".
The purpose of this amendment is to include in the unenforceability provisions credit agreements which seek to exclude any obligation on the part of the supplier to the consumer which would otherwise be required under this legislation or to otherwise, by any clause in an agreement, endeavour to deny the consumer any rights he would properly enjoy under the legislation. It is an extra consumer protection which the Director of Consumer Affairs has recommended.
To what does section 117 refer?
Section 117 refers to exclusion of obligations or rights. Its purpose is to include in the unenforceability provisions credit agreements which seek to exclude any obligation on the part of the supplier to the consumer which would otherwise be required under this legislation or to otherwise by any clause in an agreement endeavour to deny the consumer any rights he could properly enjoy under the legislation. It is a safeguard provision.
Amendment agreed to.
I move amendment No. 82:
In page 20, line 37, before "was" to insert "other than that at paragraph (c)".
Section 16 (c) provides that a money-lending agreement made by an unlicensed person would not be enforceable by the moneylender. That paragraph is qualified by the following provision which states:
where a court is satisfied, in any action, that a failure to comply with any of the foregoing requirements was not deliberate and has not prejudiced the consumer, and that it would be just and equitable to dispense with the requirement, the court may, subject to such conditions that it thinks fit to impose, dispense with that requirement for the purposes of the action.
Many people consider this is too open and proving that it was not deliberate opens a loophole. A person operating without a licence is guilty of an indictable offence according to the Minister.
It is an indictable offence.
The next section provides that they may still be able to enforce their loan agreement if they can show that they did not deliberately fail to do this. That seems contradictory. People feel that line 37 in section 16 (c) offers too liberal an escape clause. I appreciate there may be a need for such a clause but it is argued that this provision is too liberal for unlicensed moneylenders.
Is the Deputy seeking to exclude subsection (c) from the section?
Yes.
I agree. The thrust of the Deputy's amendment is to ensure that a person who acts as an unlicensed moneylender may not enforce an agreement he enters into with a consumer and dispenses with the defences provided for the provision of credit.
That was the position under previous legislation.
Yes. We should pause from time to time to think about the underlying thrust of the Bill; one of our objectives is to differentiate between licensed and unlicensed moneylenders. All moneylenders have, unfortunately, been tainted with the nefarious deeds of unlicensed moneylenders who prey on vulnerable members in communities, in most cases women, and should be dealt with stringently. It is up to us to make that point clearly in the legislation and provide proper safeguards for the licensed moneylenders as well as making provision for consumers. It will take time to push the unlicensed moneylenders into outer darkness. Deputy Bruton proposes in his amendment that a person who acts as an unlicensed moneylender may not enforce any agreement into which he enters with the consumer and will dispense with the defences for the providers of credit. Three cheers for that as I agree wholeheartedly with his proposal.
Amendment agreed to.
I move amendment No. 83:
In page 20, lines 40 and 41, to delete "dispense with that requirement for the purposes of the action" and substitute "decide that the agreement shall be enforceable".
This amendment clarifies the purpose of the subsection.
Amendment agreed to.
I move amendment No. 84:
In page 20, between lines 41 and 42, to insert the following:
"(d) The Director may, at the request of a consumer require a lender who has negotiated a non-complaint credit agreement to apply to the Court to seek dispensation before any further sums be collected under the agreement.".
If a credit agreement does not comply with the various terms of the Act, the aggrieved consumer would have the right to apply to the courts to make void that agreement. Clearly the court would have to assess the reasonableness of the case. If there is a serious breach of terms under some of the credit agreement restrictions proposed in this Bill, the consumer would have recourse to the Director of Consumer Affairs who could apply to the court for a dispensation from the collection of any further terms. It goes further than simply admitting it is an offence to omit certain things because, in certain instances, the consumer could establish that not only had the credit institution committed an offence but the breach was so serious that a consumer could dispense with his obligations. For example, if the credit institution had misleading advertising or failed to draw attention to some crucial element of the credit agreement which prejudiced the consumer he would have an escape hatch. As things stand all we are saying is that the credit institution would be guilty of an offence for which it could be prosecuted. Being fined would not be of much consolation to the aggrieved consumer but subsequent consumers would benefit from the precedent established.
Is the Deputy saying that a consumer who had been "conned" in some respect when he or she made the agreement can dispense with fulfilling his or her repayment obligations if the lender is found guilty under the advertising standards.
It would not be automatic, the consumer would have to apply to the courts but if the court viewed that the consumer's interest was seriously prejudiced, it could then dispense with the obligations in whole or in part. It is quite easy to see where the consumer has been conned. If the Director of Consumer Affairs takes a successful prosecution the lending institution will be fined £100 but the consumer goes off with his tail between his legs and is still caught.
Will the Deputy examine section 49 to see if this covers his point? Section 49 states:
(1) A person shall not make a demand for payment or assert a present or prospective right to payment in respect of a credit agreement which is unenforceable by virtue of this Act.
An agreement which is not enforceable by virtue of section 16 of the Bill may not be pursued by the creditor unless he has reasonable cause to believe that there was a right to payment. The unenforceability provisions of section 16 cover a very small portion of the Bill, in effect six sections. There is no dispensation required for an unenforceable agreement except that provided in this section from lines 35 to 41. The Deputy is tilting the provisions in favour of the consumer but I think section 49 covers what he seeks to achieve.
In section 16 we specify the unenforceable credit agreements, those that do not comply with the requirements of Part III and section 77.
We have established that it covers six sections.
Does the Minister believe that the unenforceable sections are so comprehensive that there could be no case where a consumer had been seriously prejudiced?
I would not like to be dogmatic about it. An agreement which is not enforceable by virtue of section 49 may not be pursued by the creditor unless he has reasonable cause to believe that he has a right to payment. The unenforceability provisions of the section cover a very small portion of the Bill, only six sections, but it is an important part. There is no dispensation required in relation to an unenforceable agreement except that provided for in this section.
It is my understanding that if a consumer is seriously prejudiced by the fact that he was not given a valuation report he will not have the right to seek compensation. Although I did not make the connection with the other section I have not been convinced. Section 49 deals only with unenforceable agreements. In defining "unenforceable agreement" one returns to section 16. There are only two categories, the first of which covers credit agreements which breach Part III of the Bill dealing with the form and content of credit agreements, and the other credit agreements which breach Part VII which deals with consumer hire agreements. There may be many other instances where the terms of agreements are breached, for example, a failure to supply certain documents in the case of a valuation report. This could prove to be prejudicial to such an extent that one could argue that a consumer has the right to seek financial compensation.
As the Deputy said, a consumer hire agreement which does not comply with the requirements of section 77 and a moneylending agreement which does not comply with the requirements of section 82 will not be enforceable. Section 16 states:
Provided that, where a court is satisfied, in any action, that a failure to comply with any of the foregoing requirements was not deliberate and has not prejudiced the consumer, and that it would be just and equitable to dispense with the requirement, the court may, subject to such conditions that it thinks fit to impose, dispense with that requirement for the purposes of the action.
I think that covers the matter.
That provision will allow a credit institution to enforce an agreement. There may be instances where the agreement would not be unenforceable——
But the consumer feels hard done by.
——but there may be grounds for seeking a legal remedy or compensation.
What the Deputy is saying in effect is that where a consumer feels they have been short changed the matter may be brought before the court and they need not comply with the terms.
Not 100 per cent. Although the Minister of State is creating criminal offences she is not creating the right to compensation for an aggrieved consumer.
A consumer, or the Director acting on his behalf, can bring the matter to the court. The amendment reads:
The Director may, at the request of a consumer, require a lender who has negotiated a non-compliant credit agreement to apply to the Court to seek dispensation before any further sums may be collected under the agreement.
If the Director believes that a consumer has a case he may bring it before the court. That is the proper procedure and the consumer is well protected. I am satisfied with this.
If the borrower believes that he or she has been hard done by and refuses to pay, the only person who can enforce the agreement is the lender. The onus will be on him to bring the creditor to court.
The Bill covers the point made by Deputy Bruton.
Section 48 which deals with the use of terms which are not fair and reasonable does not cover cases where the Director discovers that the lender had not complied with certain obligations, for example, the requirement to issue a valuation report. Does the section cover every case where the consumer has been seriously prejudiced?
Both indictable and summary offences?
Under section 48 the Director can take the matter before the courts where he considers that the terms of an agreement are not fair and reasonable. The Minister of State has said that a consumer may seek redress under this section. I do not think this section covers cases where a lender fails to issue a valuation report to a consumer.
I am satisfied that this issue is addressed in the Bill. I suggest that we resume on this amendment when we meet again.
As Deputy Bruton has expressed serious concern it is worthy of further consideration when we reconvene.
The Select Committee adjourned at 4 p.m.