I completely agree with my hon. Friend. To be fair to the Minister, in arguments on capping interest rates, that is precisely the problem. What is the point of capping interest rates at 30 per cent. if the APR is 29.9 per cent., but behind the interest rate are charges for default, late payment, not meeting the man with a dog who comes to the door on the right afternoon, and so on? We should look at this issue in the round. I know that the Minister is taking that on board. We could do more in Committee on the detail to get the right shape of Bill so that it gives confidence to good lenders in the industry, drives out the worst and protects the poor.
I want to focus on greater protection for consumers who borrow money, especially the poorest 10 per cent. in Britain who use home credit at some time in their lives. Such people are especially vulnerable to high-cost credit lenders—to interest as well as the extra charges to which my hon. Friend referred. Those without a bank account or a credit card have to turn to lenders at the door or to advertisements for cash on the television or in the newspapers, because they have no alternative way of getting the money that they need. They end up paying most to borrow money—more than the rest of us. They pay the highest price to get the basics for their families.
In the heavy world of economics, we hear of financial shocks coming along, but for a family in the everyday world, that shock could involve the arrival of a new baby. Someone might need a pushchair or a carry-cot or extra provisions. If a relationship breaks down, a young mother might have to set up another home for her children and to buy a sofa, bed, cooker, fridge, curtains and carpets. Those are the financial shocks in the everyday world. A youngster changing school might need a new school uniform and extra clothing. Just a few hundred pounds is a financial shock to people managing on very low incomes.
At first sight and under such pressure, a weekly repayment of £4.99 might look a good deal, but in reality weekly repayments to home loan companies, credit stores and cash-converter businesses involve a huge rack-up of compounding annual percentage interest rates and, as my hon. Friend said, penalty charges which are sometimes hardly noticeable in the small print. Paying back £4.99 over 156 weeks can mean paying £432.38 to borrow the money. A person borrowing £1,000 will pay £700 interest. That is a massive rack-up and we should tackle that. The lending system is locking the poorest into long-term poverty which they cannot break out of.
It is tragic to see in Armley in my constituency people traipsing into the garishly painted Western Union cash converter shop—as if it is out of cowboy land, as it inadvertently and ironically advertises itself—asking for their pension books or child benefit cheques to be held for cash so that they can go across the road to Kwik Save for the goods for the weekend. I am not against people borrowing money, but I want responsible borrowing that balances the budget and I do not want people to be ripped off by being overcharged. We need to address that.
In a special investigative report in last Sunday's edition of The Observer entitled "Living on £3 a Day", there was a detailed account of the Family Welfare Association—a charity that helps people who have no money—dealing with requests for support from applicants who are trying to get by on £3 a day. The chief executive, Helen Dent, commented:
"It is difficult for us to understand what it is like not to be able to replace your children's bedding. There are families who have no capacity to save".
A family cannot save on £3 a day. All that is far from the lifestyle of shopping for fashionable clothes in Harvey Nicks in Leeds, listening to iPods, drinking in chic bars or dining in gastropubs. It is a completely different world. We need regulatory action to give support to people in that world.