I was going to come on to this point but I will do so now. I did not see “Newsnight” but I read about the report in today’s papers. It seems demonstrably unfair. I have two sons in their 20s. I have no idea whether they take out payday loans but I know that at some point in the next six years one or both of them might think of getting a mortgage—if they keep working hard. It does seem demonstrably unfair that someone taking out 50 quid for a payday loan today could be automatically denied a mortgage in six years’ time. If the noble Lord will permit me, I propose to draw that to the attention of the FCA.
There are two elements to this. First, there is the point that the noble Lord made about what might be on the website to point this out. There is also another issue, which is whether it is reasonable for people offering mortgages automatically to deny them to someone who may have taken out a small payday loan and paid it off rapidly. I do not know, for example, whether that rule applies to somebody who has taken out a loan under the traditional method of door-to-door payday-type loans that we had in this country for many decades. I shall draw that to the attention of the FCA.
I was just beginning to say that we will have a full debate on Third Reading, and I can commit to operating, as the noble Lord, Lord Sharkey suggested, on Committee stage rules. Having sat through many debates in your Lordships’ House, I do not think that, even if I said that we were resistant to noble Lords’ proposals, that would make a huge difference to the behaviour of noble Lords. In any event, I am happy to give that assurance now.
Turning to the amendments before us, starting with that tabled by the noble Lord, Lord McFall, the Government share his deep concern about the potential for consumers to be misled by lenders. It is essential that consumers are well informed of the risks before entering into an agreement. However, I believe the noble Lord’s concerns will largely be addressed by the FCA’s proposed rules, or already exist in legislation.
Regulations made under the Consumer Credit Act 1974 in accordance with the consumer credit directive currently require that creditors provide adequate information to enable the consumer to assess whether a proposed credit agreement is suitable to their needs and financial situation. Requirements on lenders to be clear to consumers are also set out in the OFT’s Irresponsible Lending guidance. These requirements will be transposed into binding FCA rules. The noble Lord was worried about guidance; this is being transposed from guidance into rules.
The FCA has also proposed a tough package of measures to restrict how payday lenders can access money from their customers’ bank accounts via the continuous payment authority mechanism on their debit and credit cards. These include limiting the use of CPAs to two attempts, and banning part payment. The FCA is also proposing to turn the guidance around the use of CPAs from the outgoing regulator, the OFT, into binding FCA rules. Several of the provisions set out in the noble Lord’s amendment are therefore directly covered by these proposed rules, including a requirement for lenders to give the debtor a statement of their rights in relation to the CPA, and the ability of a borrower to cancel a CPA at any time.
The Government believe that the provisions set out by the noble Lord and not reflected in FCA rules will not, in practice, serve to improve consumer protections. Requiring lenders to provide additional information to consumers on their legal rights presents a real risk of information overload and confusion for consumers. As the noble Lord said in Committee, no one wants to be swamped by hundreds of pages of dense legal text. It is also important to balance awareness of legal rights with promoting awareness of the Financial Ombudsman Service, the free service to help consumers resolve disputes. Taking a case to court can be too expensive for consumers.