Orders of the Day — Consumer Credit Bill

Part of the debate – in the House of Commons at 4:00 pm on 9th June 2005.

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Photo of Adam Price Adam Price Spokesperson (Economy and Taxation; Education & Skills; Miner's Compensation; Regeneration; Trade & Industry) 4:00 pm, 9th June 2005

It is certainly important to consider that issue because of the possibility of a perverse incentive for lenders to drive their customers further and further into debt, as we have heard—provided, of course, that they can make some repayment. Figures produced by Debt on our Doorstep suggest that banks made £3 billion last year from default charges, and we have all been on the receiving end of them from time to time. Certainly, enshrining the principle in law that a default charge can only represent the additional cost involved to the bank and ensuring that such things are transparent is worth considering.

Thirdly, the Bill should cover my much-cherished interest rate cap. The Minister very charitably said last time that he would look at that again, and now is a perfect opportunity for him to do so. Despite his assurances, we do not want to wait another 30 years to deal with the problem. Of course, we have taken six years to get from when the OFT pointed out the failings of the existing legislation on extortionate lending—as far back as 1999—to where we are now. Surely, it would be better to introduce an enabling clause to allow the Minister to provide interest rate caps through secondary legislation, as he proposed to do with other measures under the Bill, if only because, as has been suggested, such caps would constitute draconian measures to focus the attention of those people in the industry who perhaps need to be educated about their corporate social responsibility.

I was surprised to hear the Liberal Democrats citing Government evidence. After the dodgy dossiers that we have had from the Government, I would be careful about believing every unqualified thing that they produce in support of their policies. There is certainly fairly good reason to doubt some of the conclusions and data in the Policis report, and we have discussed that previously. Perhaps it would be possible for the Government to look again at some of the shortcomings of that research, certainly in relation to Germany.