Backbench Business — High-cost Credit

Part of the debate – in the House of Commons at 2:53 pm on 5th September 2013.

Alert me about debates like this

Photo of Jo Swinson Jo Swinson The Parliamentary Under-Secretary of State for Women and Equalities, The Parliamentary Under-Secretary of State for Business, Innovation and Skills 2:53 pm, 5th September 2013

We have had an excellent and constructive debate, and I thank Chris Evans for introducing it and the Backbench Business Committee for allocating time. I appreciated his welcome for the action the Government have already taken, such as on the research into advertising and the FCA strategy that we are due to see soon with the publication of its rulebook. I understand and appreciate his concern about the speed of change, and the frustration he feels. His party colleague Ian Murray said the pace of growth of the payday lending industry has been extraordinary. The Government and regulators have, of course, been working to keep up, and I think we have seen in recent months that that has been happening.

Various alternatives have been mentioned. One of them was the possibility of introducing low-limit credit cards, and I have explored that with the UK Cards Association and others in the industry, as I think it could be one of the alternatives that might work. Of course, it would not work for everybody; as we have heard, some people who take out payday loans are keen to make sure that they get something quickly and with that level of convenience. Indeed, some may not pass the credit scoring that would be required for some of those credit cards. That underlines the importance of the affordability assessments, because people are currently passing the checks by payday lenders and perhaps some of them should not be.

My hon. Friend Jackie Doyle-Price talked about the PAC report and the importance of this House sending a clear signal to the FCA that it expects it to use its powers to intervene where there is poor practice, and I absolutely agree with her. We do expect that, and I have made that abundantly clear to the FCA. Today’s debate has also been very helpful in making it clear exactly how strongly the House feels about this issue. I am sure that the FCA will be following this debate, but just in case it is not, I will happily write to it to draw that to its attention. Indeed, next week I will be meeting Martin Wheatley to have further discussions on this issue.

My hon. Friend mentioned that she was disappointed that the Office of Fair Trading had failed to use its powers to revoke licences. That was true at the point at which the PAC took evidence from the OFT, but she will be pleased to know that since that report was published it has revoked three licences—so those powers are being used.

I commend Stella Creasy for all her campaigning on this issue; we had a positive meeting to discuss it earlier this week. Obviously, the profitability of payday lenders has been high up in the news this week, and we agree on the level of profits being derived from default fees, roll-overs and so on. That is why it is so important that the Competition Commission is investigating this market. It has already begun its investigation, issued its issues statement and invited comments from interested parties by later this month.

We discussed in detail the other day the points that the hon. Lady made about total cost capping. I appreciate that we perhaps have a difference of opinion on where exactly the evidence points, the possible negative impacts of fees being charged elsewhere—a displacement effect—and whether or not there would be less sympathy for lenders than difficulty. That said, it is vital that the FCA has that power and has the evidence. Her point about ensuring that the FCA can get off to a flying start when it takes on the responsibility in April 2014 is important. I have been keen to ensure that it is able to do that, and it has said it is prioritising the issue.

On the hon. Lady’s point about data sharing in the industry, I encourage lenders to liaise and share their data with the FCA in advance of its taking over that responsibility. The OFT has a data-sharing agreement with the FCA, so data that it has can be shared, with all the appropriate confidentiality protections in place, as one would expect. It would be helpful if the industry would share further data with the FCA, and when we had the summit the industry indicated its willingness to be as helpful as possible. I hope that it will be able to take that up.