I completely agree with my hon. Friend. As a practical suggestion, we could build into the Bill a responsible lending test. That would put pressure on the industry not to go out and lend.
In November 1999, the Treasury—it was the policy action team—published a report in which it estimated that 1.5 million low-income households had no traditional access to bank accounts. They had no access to what we call regular lending services. Such people are at the mercy of the people on the street and the adverts. In November 2004, the DTI, in its full regulatory impact assessment, in the context of the previous consumer credit Bill, estimated that 9 million customers lacked the credit rating needed to borrow mainstream products from high street lenders. However, all those people are getting credit. What is going on? Why is the market not regulated? There is serious financial exclusion for a huge swathe of the population. These people are forced to live not from day to day but from tomorrow to tomorrow. They do so with fear. They dread getting out of bed the next day. Their debts build up and overwhelm them.
What about responsible lenders? Who is helping those who find themselves in that position? Should not lenders play a part instead of saying, "It's their problem. Let them go to a citizens advice bureau and sort out their debts." No. We need to go down the road that my hon. Friend Mr. Mitchell has suggested. Millions of low-income families rely on credit with high interest rates. Lenders pay scant regard to their ability to pay. The sub-prime market, as it is called, with its huge and excessive default charges, catches out far too many people. There is the pay-day lending system, with interest rates of more than 100 per cent. APR. Door-to-door lenders routinely roll over loan charges for home collection and charge not only interest rates but special charges for a "personal service". The structure locks people into a spiral of increasing indebtedness, and effective regulation is needed.
I agree that most consumer credit businesses treat consumers fairly. I am in favour of credit business as a whole, and most companies comply with their current statutory obligations. However, there are unscrupulous consumer credit businesses that ruthlessly exploit the poor. We should be getting a grip on them. We need to tackle unfairness in any aspect of the consumer credit relationship. That is in the Bill. We need to root out misleading and unfair selling methods, including irresponsible lending. We have gone some way towards that in the Bill. We need transparency in the way in which fees and charges are applied to accounts. We have gone some way in the Bill to getting there. We need to prevent unfair treatment of accounts in arrears. That is somewhere in the Bill. We need a system of effective redress. That is in the Bill. The germs are there but they could be strengthened. The Bill goes much of the way to addressing these issues.
It is proposed to replace extortionate lending with the unfair relationship test. The extortionate lending provision did not work. After 30 years of the previous Act, only 31 cases were brought before the courts to reopen an extortionate credit bargain. Most of those who were in difficulties could not bring their cases to court. They could not get there because the process was too complicated, too expensive and too risky. We should not replace a test and at the same time continue with lack of access to the court. The court might be there, the law might be there, but nobody can make use of the facility to secure protection.
The courts interpreted extortionate lending too narrowly. I understand why my hon. Friend the Member for Great Grimsby is saying, "Don't tie us down there again. Leave it broad." He is saying that that creates space. Between total openness and narrowness must be some space for specifying what the unfair relationship test should be.
My hon. Friend the Minister might say that we should leave the matter to the wisdom of the courts and that we should not tie their hands. There is sense in that. My worry, however, is that poor borrowers in debt do not get anywhere near the courts to sort out their debts. In reality, they are not usually taken to court for non-payment of a debt. Their loans are rolled over into future borrowing and lending. They are told, "You can have another loan to see you over." The spiral of indebtedness increases without the borrower getting near a court.
Borrowers do not want to go to court. They prefer to tie themselves into more debt. Low-income borrowers are not likely to seek court action. They will not receive legal aid. They cannot go before a court to allege unfairness or to try to seek enforcement of their rights as set out in the Bill. They will not see a court as a place that they can use to get redress. It is difficult for them to go before a court. Low-income borrowers may be in court for other matters—for example, not paying other bills. They do not see a court as being on their side. There must be real opportunities to ensure that poor borrowers have effective redress.
The Minister might say that the alternative is to go to the ombudsman. There are two caveats here. There has been good discussion before the introduction of the Bill, and I am not saying that the Bill will not work. However, there is a problem that needs to be ironed out. If the ombudsman has an office in London, and only London, the procedure will not be much use in Leeds and Bradford. People will not traipse down to London to sort out their problems with the ombudsman. The structure must be examined. A more fundamental point is that the ombudsman will wait for court decisions on what is unfair before settling disputes. The courts will be used first. We are still locked into the court being the key in defining the unfair relationship test.