It is a pleasure to follow Justin Tomlinson and congratulate him on his powerful speech and his impressive shopping list, much of which, as he will know, is included in my High Cost Credit Bill, of which he was a strong supporter. I am grateful for the support that the Bill received on both sides of the House, and today’s debate is demonstrating a great deal of unanimity about how we need to tackle payday lending. I am only sorry that the Government did not take the opportunity to build on that cross-party unity by supporting the Bill on
After recent developments, the measures that we all seek are even more important. Since
Earlier this week I met staff at Centrepoint, who told me of the shocking way in which payday lenders are now targeting the vulnerable young people with whom they work. In a country-wide survey, it found a significant increase in the number of young homeless people turning to payday loans. It found young people, mostly under 21 and out of work, taking out payday loans for food and other essential purchases or, as other Members have said, to pay back other debts. As one Centrepoint worker said:
“These payday loans are a killer…I have young people that owe thousands.”
The reasons that young people gave were ease of access, irresponsible promotion, a lack of affordability checks and misunderstanding of costs—all factors that other Members have raised and that my Bill would tackle.
We need effective regulation of payday lenders that would stop them giving loans to people who cannot afford to pay them back; stop hidden and excessive charges; stop repeated roll-overs; stop lenders raiding borrowers’ bank accounts without their knowledge; stop irresponsible and misleading advertising; and require lenders to promote free and independent debt advice.
I should like to use this opportunity to respond to some of the points that the Minister made in her speech in the debate on my Bill on
That is certainly a point of significant difference, and I refer to the comment of my friend Mr Walker, who has been a great supporter of the Bill, that it is the responsibility of Parliament to right the wrongs that are brought to it, not by getting involved in the detail of regulation but by giving clear policy direction where it is appropriate, in this case to the Financial Conduct Authority.
In July, the Minister said that the FCA would produce a draft rulebook in September, which would go out for consultation. We are now in September, albeit in the early days, but on making an inquiry to the FCA yesterday I was unable to find out when the rulebook would be published or what the arrangements for consultation were. I would be grateful if the Minister told the House when those rules will be published.
I turn to how the Minister thought in July we should handle some of the problems that we all agree exist. On advertising, she said that when considering regulation it was important to proceed on the basis of evidence, and that her Department had commissioned research. However, she made it clear that she agreed that there was irresponsible practice, which has been referred to again today, and said that people should be signposted to debt advice. Does she agree that we need research not into whether advertising should be regulated but simply into how? Will she update the House on the research and confirm that the FCA will regulate advertising?
I think we all agree that lenders should assess affordability, which they do presumably so that they can determine ceilings above which they should not lend. If that is the case, does the Minister agree that we should give the FCA the responsibility to set ceilings? We know from experience that we cannot trust the lenders.
On roll-overs, the Minister acknowledged in July that
“if some companies are making significant proportions of their profit from roll-overs, their business model in fact depends on people’s not repaying in time”.—[Hansard, 12 July 2013; Vol. 566, c. 692-693.]
She said that the FCA would look into the issue. However, the Office of Fair Trading has told us that 50% of payday lender revenue comes from the 28% of loans that are rolled over or refinanced at least once, and that 19% of revenue comes from the 5% of loans that are rolled over or refinanced four or more times. A number of Members have referred to that aspect of the problem today. Does the Minister agree with all the organisations working in the area that we should simply direct the FCA to limit roll-overs?
Finally, there is the crucial issue of CPAs. My hon. Friend Chris Evans referred to a horrific example in his excellent opening speech today, and my hon. Friend Yvonne Fovargue also referred to them. In her speech in July, the Minister referred to the clauses in my Bill that would require lenders to give three days’ notice of CPAs and inform borrowers of the right to cancel. She said:
“Those measures are already in the voluntary code. If they were stuck to and ended up in the FCA rules, that would be helpful.”—[Hansard, 12 July 2013; Vol. 566, c. 697.]
If that is the case, why not simply tell the FCA to put them in the rules? Will she confirm her view that measures on CPAs should be included in the rules and should be part of the published rulebook and the consultation?
To give other Members an opportunity to contribute and to give the Minister ample time to reply to my points, I will draw my remarks to a close. Those of us who have spoken today, and Members who supported my Bill back in July, are committed to ensuring that there is effective regulation of payday lenders. We will not give up until the measures contained in the Bill are in place, whether or not through the Bill itself, to ensure effective regulation and tackle the scourge of payday lending.