Oral Answers to Questions — Trade and Industry – in the House of Commons at 11:30 am on 11th December 2003.
What action she has taken to protect vulnerable people from unscrupulous selling of loans.
I thank my hon. Friend for that answer on a matter that causes great misery, particularly during the time leading up to Christmas and the new year, for people of all ages and their families. May I ask him to be more specific and tell the House what the Government are doing to protect people from illegal and extortionate door-to-door loan sharks, who prey on the most vulnerable group of people in our society?
I acknowledge the expertise that my hon. Friend has in this area—I believe that she was involved with citizens advice bureaux before coming into the House. Clearly, attacks by loan sharks on vulnerable people are important to this Government, which is why we have introduced a pilot scheme in Glasgow and Birmingham, whereby the police, local authority trading standards and a variety of other organisations come together to look at ways of tackling loan sharks, because people are always frightened to come forward. We hope that that will determine best practice, and that the scheme will be rolled out to the rest of the country.
I am interested in what the Minister had to say. Does he agree that the unscrupulous selling of loans and various other "unbeatable" financial offers are now coming from all directions to our citizens? I get five letters a week at my London flat addressed to me or my husband, and we also now receive such offers by e-mail and from call centres abroad. Can he reassure me that even if he does not have the instant answer to this problem, he is planning and thinking about how we can stop this constant bombardment of our innocent citizens by people abroad who are no more than fraudsters?
I accept what the hon. Lady says. It is right that part of the White Paper focuses on responsible lending—making sure that lenders lend responsibly—and that a number of scams are operating from Canada and outside the European Union. We have signed a memorandum of understanding with the Canadian Government, the Australian Government and others to try to locate the perpetrators of those scams, and we are working together to try to resolve these issues.
Does my hon. Friend share the concern of many consumer organisations that door-to-door collection of loans should be separated from the selling of loans? Part of the problem is that the relationship built up by people who go to collect debts each week can lead quickly to an exploitative one in which they sell the next round of debt. Will he do something to separate that?
I acknowledge the expertise of my hon. Friend in this field. He is right that we are working closely with the industry and consumer groups to examine the detail of how to separate the problem. What is key is that consumers understand fully what they are letting themselves in for in terms of loans. That is why we are looking for transparency in making sure that a summary box in adverts tells people exactly what they are borrowing, how much they are paying back, and how long it will take them to pay it back.
Does the Minister accept that the unsolicited, aggressive promotion of debt comes not simply from scams in Canada but from our leading banks and credit card companies? Can he explain the logic by which, this morning, the Government are outlawing unsolicited spam on e-mail but are unwilling to act against unsolicited credit promotion by our leading financial institutions?
The hon. Gentleman is not correct that we are not prepared to act. He will read with interest, as I shall, the Treasury Committee's report on how lending operates in the UK, which I understand will be out next week. I am confident that UK consumers will be better off because of the White Paper and, I hope, the Treasury Committee's findings.
It is not only loan sharks who sell loans unscrupulously. I have a constituent who borrowed £4,000 to buy a car. The APR was 28.5 per cent. and by the time that my constituent included add-ons such as insurance and breakdown cover, he found that he was paying back about £8,000. What are the Government going to do about that?
Again, I acknowledge my hon. Friend's work on the matter in her constituency, and she is quite right. We are examining ways of calculating APR because there are two ways of doing that at the moment and we want to make the process simpler. We are also examining the problem for people who get small loans because, as she said, administrative and other charges can make the APR look outrageous. We do not want to put those who provide such loans out of the marketplace because they offer a useful service, but we want to ensure that people are protected and that they understand what they let themselves in for.