Consumer Rights Bill — Report (3rd Day)

Part of the debate – in the House of Lords at 4:00 pm on 26 November 2014.

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Photo of Lord Higgins Lord Higgins Conservative 4:00, 26 November 2014

My Lords, I have not spoken previously on the Bill, but I spoke at considerable length on the banking Bill—now an Act. In the concluding stages we discussed payday loans at considerable length. I was anxious, right at the end of the proceedings, that we should not simply encourage the Government to impose a limit on the charges paid on payday loans but also on the rate of interest. This was resisted by the Government at the time. Therefore, I am as happy as the noble Lord who has just spoken that the Financial Conduct Authority has, in fact, come out with a series of proposals that considerably improve the environment in which we are discussing payday loans and this amendment. In particular, it has imposed an initial cost of 0.8% per day rate of interest, a fixed default fee which is capped at £15, and a total cost cap of 100%. All these are very welcome.

Nonetheless, in the context of this amendment, the situation is far from satisfactory. I looked at the supporting papers, which the Financial Conduct Authority is putting forward. It calculates the APR equivalent to what I just said as 1,270%. I think we have to consider very carefully whether it is right in saying that the limits it has set will be in danger of eliminating short-term loans if one compares that APR with the cost of capital to the companies which we are discussing.

I will speak a little on the amendment because, as I indicated earlier, I am very sympathetic to some of the arguments that have been put forward. My problem is with the drafting of the amendment. As I sought to point out earlier, although the right reverend Prelate suggests that the amendment is to deal with the watershed, it does not refer—I think I am right in saying—to the watershed as such. My problem is that I suspect that the Government will be reluctant to accept the amendment in its present form. Perhaps my noble friend, in replying to the debate, will indicate whether that is so or whether they are sufficiently sympathetic to the objectives of the amendment that they will come back at Third Reading, or will encourage us to come back at Third Reading, with a more specific form of amendment than that which we are asked to debate, and that many Members have suggested we ought to vote on today. I think that there are some problems. It is not entirely clear, for example, how one is going to demonstrate that a particular advertisement is deliberately targeted at the people we are trying to protect by this amendment.

Overall, I hope my noble friend can reply sympathetically and that we can come back, if not today then at a later stage, with an amendment which is acceptable and which will achieve the objectives that I think are right. It is quite wrong that these adverts should be targeted—as I believe they are, but it is difficult to prove—at children. The Children’s Society rightly points out the extraordinary extent to which the adverts appear to be having an impact on young children, who in turn will be having an impact on the attitude of their parents. Therefore, I think that this is something on which clearly we need to take action—but it is not very simple, and we need to get the legislation right.