Consumer Credit and Debt Management

Part of Backbench Business — [18th Allotted Day] – in the House of Commons at 2:31 pm on 3 February 2011.

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Photo of William Bain William Bain Shadow Minister (Environment, Food and Rural Affairs) 2:31, 3 February 2011

My hon. Friend makes an extremely powerful and accurate point. The looming crisis in personal debt was summed up last April by Citizens Advice Scotland, which said:

"The problem is not just the number of people who are in debt.... It's the extent of the debts that those people have."

Having analysed the problem, it found that

"On average, Scottish debtors have debts that are 50% higher than they were five years ago. And for every £1 they earn per month, the average Scottish debtor owes £28 in debt."

Today, we have the opportunity to begin the process of ensuring that that burden does not rise through this Parliament.

Lorely Burt mentioned the EU consumer credit directive, but in many ways, that has added to the problem facing us today. Previously, providers were required to give two thirds of successful applicants for credit cards the advertised rate; under the directive, that will fall to just 51%. That change will leave millions of consumers paying more than they expected when they applied for credit, and people in that situation will increasingly resort to short-term credit.

Five minutes from my home and my constituency office, in Springburn shopping centre, is a BrightHouse store. I shall share with the House some of the prices that my constituents were being charged for basic goods last week. For a washing machine with a cash price of £703, the payable amount under the BrightHouse credit scheme was £1,558.44. For a freezer with a cash price of £773, the amount payable through BrightHouse was £1,714.44. For a children's bunk bed set, the cash price was £345.69, but the BrightHouse credit charge was £765.96. We have the time to act now. I urge Members to seize the opportunity and to stop my constituents and those of Members on both sides of the House having to experience that sort of abuse from the short-term credit industry.

In the short time left, I shall mention Provident cheques. Provident specialises in lending small sums, typically between £200 and £300, but with borrowers having to take out the loan for the longest borrowing period, we have seen interest rates ranging from 170% to 500%. A customer borrowing £200 over 55 weeks pays £330, equivalent to an APR of 177%.

Members in all part of the House must surely appreciate that markets must have morals. We can act today to begin the process of regulating the industry. I urge the House to grasp the opportunity.