Backbench Business — High-cost Credit

Part of the debate – in the House of Commons at 1:02 pm on 5th September 2013.

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Photo of Stella Creasy Stella Creasy Shadow Minister (Home Affairs) 1:02 pm, 5th September 2013

I absolutely agree. In that future model of a finance system that will work for people struggling in a system in which the cost of living is continuing to rise, credit unions absolutely need to be supported to expand and grow. We know that they make up only about 6% of the total finance market in this country, but that is alongside a capping process.

The time for arguing about whether capping is the most effective intervention in this market is over, because the evidence from other nations is overwhelming. The question we should be asking ourselves is what we can learn from that for the UK, because the UK credit market is different. We have always been a nation of people who are much more willing to borrow, and so the terms and reference frames for any kind of cap must reflect that. That is where the Financial Conduct Authority could come in. That is why we fought so hard to give it the power to cap, and why I am pleading with the Government not to sit on their hands yet again on this issue.

The Financial Conduct Authority takes over in April next year. It is hampered by the fact that it needs to see the evidence about the UK credit market. It needs the credit reference data and other evidence from the companies, all of which claim that they are responsible lenders, yet about all of which we have heard stories of bad conduct. Indeed, Citizens Advice has shown that some are not even following 10 of the 12 good practice codes. If we are really serious about resolving the problems in this market, let us ask the FCA to do its job but also give it the data so that it can do so from the get-go in April. We should tell the companies to give it the data about their credit market, their profit ratios and how they are operating so that we can see how and where a cap would influence the UK credit market from April next year. Let us not kick this issue into the long grass yet again, because we now have a window of opportunity.

I am sure that many Members, like me, have people in their communities who have £10,000 or even £15,000-worth of unsecured personal debt hanging over their families. Asking those families to make long-term choices about education, social care and housing costs is a non-starter in that context. Those debts are racking up because of these kinds of practices. We could help them to manage the cost of living, to manage their borrowing and to make ends meet if we do our job today and get the regulator the information that it needs so that it can make the choice about what kind of cap would work in the UK. I think that the Japanese model is the way forward, because it has been done in practice along with the industry and consumer groups. Let us not have another three years of talking about how terrible these problems are and having to work in our communities with fantastic groups such as Movement for Change, the trade unions and the credit unions to try to deal with them when we could do something to avert them in the first place.

I hope that Ministers will today make the commitment to push the industry to give the information to the Financial Conduct Authority so that it can hit the ground running from April 2014 and finally bring in the cap that British consumers deserve.