Clause 30 - Guidance on fitness test
Consumer Credit Bill
10:45 am
Charles Hendry (Shadow Minister, Trade & Industry; Wealden, Conservative)
I congratulate the right hon. Gentleman on introducing the amendment. He raised the matter on Second Reading and asked us to consider it sympathetically. He has made a powerful case for it so far.
It is also a particularly appropriate time to discuss the issue, in the light of yesterday’s headlines on consumer debt. For example, The Independent carried a story about the level of unsecured debt having doubled in the past eight years. The average unsecured debt per head is 42 per cent. of average earnings now compared with 29 per cent. in 1997. The rise in unsecured lending was 16 per cent.; the largest annual rise in eight years.
We are considering a matter of great concern, and indeed the Bank of England issued a warning yesterday about the risk to the UK’s financial system from the surge in consumer borrowing and from people defaulting on debt when those who have borrowed money simply cannot afford to repay. We have also tabled two new clauses, one dealing with credit card checks and one with credit limits, that try to deal with some of the abuses that we feel are apparent. I hope that the Minister will be able to respond in due course.
There are too many examples of lending that has not been carried out responsibly. One of my colleagues has written to me with a letter from a mother in her constituency, in which she writes:
“My son...aged 45 suffers from schizophrenia and is in receipt of anti-psychotic medication for this illness. He has built up a credit card debt of over £30,000 for which he pays interest of about £500 per month. I do not know the exact amount because he will not show me the credit card statements. The incapacity benefit he receives can just about service the interest on the credit card debt. He does not want to go bankrupt and he threatens suicide. In view of his illness it is very difficult to reason with him and he is very reluctant to give up the cards. I would be most grateful if you would contribute to this Bill now before Parliament to help him and people in similar circumstances to overcome and prevent this serious and tragic problem.”
That is not a unique issue; all of us have seen constituency cases like that. On Second Reading I referred to Stephen Lewis, a person with an income of £22,000 who ran up debts of £70,000 on 19 different cards and ultimately took his own life when he could not afford to repay those debts.
Those issues link into data sharing, and we are tabling a new clause on that as well. There should be a case for lenders to lend in a way that would be seen to be evidently responsible. We have described cases that do not involve responsible lending because in part the financial institutions did not know from where else the people were borrowing. More needs to be done to address the problem, and I will be interested to hear how the Minister responds to the amendment.