Lord Bird

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That the Bill be now read a second time.

Lord Bird (CB)

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It is a great honour to be talking about poverty again in the House. Whenever I get to the House, I would love to jump up and say that we are not doing enough for the poor; we are not creating the escape ladders for people in poverty. If you look at the work that I have been doing over the last 26 years, it has nearly always been aimed at how we can dismantle poverty in the lives of the neediest. One escape route is obviously around education and housing and the opportunities that you get through work—but another thing, which is hidden, is how expensive it is to be poor. It is incredibly expensive. If you are poor, you pay more for your electricity, gas and credit. That is why this Bill is based on the work that the Big Issue has done over the last seven years, when we have been working with a credit agency called Experian. We have worked to find the records of 1.5 million social tenants and to look at ways we can reduce the cost of their credit and, we hope, move them incrementally towards democracy and justice. As we know, the poorer your life is, the less likely it is that you will be able to participate in democracy. Democracy is about choice and the poorer you are, the less choice you have.

The work that we have been doing with the Rental Exchange looks into the ways in which people’s rent can be used when they go forward to get themselves a credit rating. Interestingly, if you are a mortgage holder, and if you pay your mortgage on time and do not miss it too often, you will automatically have a higher credit rating, because the credit agencies will look at you and say that you are a jolly good chap, woman, student or whoever. But you might have been living in social housing, or in another form of rented accommodation, for one year, five years, or 10 years. There are the boxes to be ticked at the bottom of the form saying, “Are you a tenant?” or “Are you a householder?” and, if you are a householder, that box is ticked. If you are a tenant, the paper is normally thrown away, not even considered, or you will be given a very low credit rating, because they do not take into account the fact that you are paying your rent. You could be an incredibly good tenant, paying regularly for many years—or you could be a lousy mortgage holder.

There is this injustice, and the Creditworthiness Assessment Bill is an attempt to change the way the credit agencies look at this social morass, this social gap, this representation almost of a class line that is drawn between those who are in luck and those who are not in luck—the people we want to address. The Big Issue has done this work and is proposing to carry on with it. I am proposing that we change the legislation so that the credit service providers have to take into account the fact that people have paid their rent. There are, however, a number of problems, because some people’s credit score could go up, while others’ could go down. We need to make sure that those people whose credit is poor and will stay poor, or even get worse, are helped. What happens now is that nobody’s credit is taken into account if they are a renting tenant. We therefore do not know how we can put our arms around those people who need to be supported in credit and who do not have a credit record. These are some of the considerations that need to be made. We have to be very careful that we do not help only the low-hanging fruit, so to speak. We need to also socialise and engage with those people in need of support.

The other thing about having a credit record is that it means you also have a digital identity, which means that you exist. There are so many occasions in this world, and they will increase, where people do not have a digital profile. Without a digital profile, the real problem is that not only will you not be able to get credit, but there will be all sorts of other knock-on effects. The poorest among us often do not have a digital profile, and we need to address that as well.

I will not go on, because there are some very good speakers following me who can do all the numbers and so on. I am very pleased that we have a tidy little bunch of people. The Government have in some ways gone towards some of the things that we need to do. In the Budget the other day, there was a suggestion that there will be a £2 million competition to support fintech firms—which I think means finance technology firms—to look at a financial or technological solution to collecting this data. I should like to think that this is not a torpedo but an attempt to carefully negotiate our way through the body of knowledge that the Big Issue, Experian and others have built up, bearing in mind that we do not want to leave people behind. One of the worst problems with having a bad credit record is, if you are buried in it, that it closes down the whole of your life and stops you living. We need to address that. I beg to move.

Baroness Thornton (Lab)

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My Lords, I am aware that this Bill, conceived by the Big Issue and the noble Lord, Lord Bird, has been a long time in gestation, and I congratulate the noble Lord on bringing it to the House. As we all know, it is an important rite of passage for a noble Lord to introduce their own Private Member’s Bill, and I identify with the passion, ownership and protectiveness that come with it. In this case, I share them with the noble Lord and am very keen to offer my support to his timely and important piece of legislation.

I share the noble Lord’s motivation behind the Bill, which is to address the shoddy deal that people who rent, people on low incomes, those trying to turn their lives around and possibly the homeless get from our banks, credit agencies, loan sharks and businesses such as BrightHouse. As the noble Lord said, the ones who can least afford it are being ripped off.

It is no surprise to me that BrightHouse was ordered to repay £14.8 million to a quarter of a million of its customers after the Financial Conduct Authority found that it had not been a “responsible lender”. The regulator said that in many cases BrightHouse had not properly assessed its customers’ ability to repay and they would now be compensated. Indeed, I am very pleased that there are alternatives to BrightHouse, with fair and ethical lenders such as Fair for You, a not-for-profit credit provider. There are not enough of them and they are not as able as BrightHouse to market themselves.

I declare an interest as a senior fellow of the Young Foundation, which carried out research a year or so ago into the experience of those on low incomes with high-cost credit. Its report pointed out that access to credit is an important part of 21st-century living, as the noble Lord said, with many people relying on it to purchase everything from a new home to a mobile phone.

For some people, credit is also an important element in simply managing their day-to-day living. It can help people to deal with economic shocks, manage the consequences of an irregular income and spread the cost of high-price items. However, access to affordable credit can be a major challenge for many households, typically classified as “sub-prime”, who then turn to higher-cost options such as home credit, payday loans, rent-to-own, and pawnbrokers. Some lenders estimate that 12 million people in the UK are using the alternative, high-cost credit market because they lack access to mainstream credit. So the noble Lord is quite right to point out that there is a gross inequality in our society when it comes to access to the credit that everybody needs.

Following its research, the Young Foundation is next week launching an online campaign to raise awareness about making rent count—if anybody cares to look for it, it can be found on #rentcounts—and about how it costs more to be poor. It is doing this in partnership with the Big Issue and in support of the Bill.

The fact is that millions of people are excluded from affordable credit because they do not have a credit history. The financially excluded are in a Catch-22 situation. Without a credit score, applicants are declined by mainstream providers and considered riskier customers, but the only way to build a credit score is to have a form of credit, such as a mortgage or credit card, in the first place. Most people on low incomes manage their limited money very carefully, yet banks, utility companies and other retailers can discriminate against them, and indeed they do so. An estimated 2 million people, many of whom are social housing tenants, take out high-cost loans because they cannot access more affordable credit. That is unjust. As the noble Lord pointed out, it is a division in our society.

Individual credit providers—mortgage lenders, for example—are already able to use information such as rental history if it is available. The intention of the noble Lord’s Bill is to ensure that a customer’s rental and council tax payment histories are explicitly taken into account as part of this process, by giving the FCA the power to make a new rule to this effect. As the noble Lord said, the Big Issue has been working with the consumer credit reporting agency Experian to develop the Rental Exchange. That is an important project, which I accept has led to the Bill coming to this House. It has shown two things. The first is that the project is too complex and not well-known enough to be used as you would want it to be used. Secondly, it shows that market solutions are not necessarily the answer; it shows that one of the answers to the problems of credit rating and creditworthiness is a regulatory one.

I was pleased to receive a briefing from the RLA suggesting that, according to a survey of 3,000 of its members, 60% of landlords are in favour of the proposal. It says that the proposal is good both for landlords and for tenants. I agree and I thank the RLA for its briefing.

It seems to me that this is a good idea. The Government have indicated at certain times that they recognise that it is right to take account of the payment of rent to assess creditworthiness. As the noble Lord, Lord Bird, said, the Bill is about equity and fairness. Why should people who manage their money and pay their rent not have their diligence recognised in their credit rating? This is discrimination against renters and people on low income, so I hope that the Government will back the intention and the idea that is contained in this excellent proposal.

Baroness Grender (LD)

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You have paid your rent all your life, in full, on time. You go online to buy a washing machine. You fill in your credit details. Because you are renting in social housing, that washing machine will cost you somewhere between £300 and almost £1,000 more than it would cost someone with a mortgage. How on earth can that be fair—the poorest paying the most?

That is why I am absolutely delighted, on behalf of the Liberal Democrats, to support the excellent Creditworthiness Assessment Bill of the noble Lord, Lord Bird. Social mobility and fairness were close to our hearts during the coalition Government. Some battles on that we clearly lost, but one of our biggest wins, in my view, was raising the tax threshold so that today those on the lowest incomes pay over £1,000 less tax—something that David Cameron clearly said in 2010 that he would not deliver.

Indeed, this Bill overlaps with some of the key themes in our recent manifesto, where we pledged to implement the recommendations of the Lords Committee on Financial Exclusion, which highlighted the need to address lack of access to bank accounts and low levels of savings, proposed making financial inclusion a statutory objective of the FCA and called for financial literacy to be incorporated into a curriculum for life in state-funded schools in England. Fairness for those who rent was the reason for my Renters’ Rights Bill last year, which focused in particular on banning tenancy fees. I am delighted that this is now a Government Bill and look forward to welcoming it in this place.

By 2021, nearly one in four people will be renters, a quarter of whom will be families with children. More than 4.3 million will be social tenants. The majority of those social housing tenants—78%—pay their rent on time, but an estimated 2 million of those mostly social tenants take out high-cost loans and are trapped in what is called the poverty premium, paying an additional £1,300 on average for the basics, such as energy, phones, white goods and furniture. Those same tenants who pay their rent—78%—are often managing bills, juggling finances and paying a far higher proportion on their housing than many who are owner-occupiers, especially in London. Imagine if all the rent that they had paid was looked on as an equity. It would be a different situation altogether when they applied for credit. As the report by the House of Lords Financial Exclusion Committee put it,

“a sizeable number of UK citizens lack access to even the most basic financial services, while still more are forced to rely on high-cost and sub-optimal products which can prove damaging to their long-term financial health. The ‘poverty premium’, whereby the poor pay more, serves to exacerbate the effects of financial exclusion, reinforcing a vicious circle”.

So how can we ensure greater fairness for these tenants? Big Issue Invest’s Rental Exchange is a good example of how the Bill can work. Since my days at the charity Shelter, the Big Issue, under the leadership of the noble Lord, Lord Bird, has been recognised as a great force for social change. Its Rental Exchange scheme with Experian is no exception. Since launching in 2010, more than 1.5 million tenants across the UK have been represented by the scheme, with an option to opt out so far taken up by only 1% of tenants. It has been a great success. By using rent data, this brilliant project has transformed credit freedoms. In more than 80% of cases, tenants gain an improved credit score when their rent data is shared, and the evidence also shows a jump from 39% to 84% in their digital identity where rent data is included in credit files.

Anyone who has worked with or met people who are homeless is familiar with the vicious circle. You do not have an address, so you cannot get work. Nowadays, as the noble Lord, Lord Bird, described, if you do not have a digital address or digital credit rating, the same issue and problem applies. But these tenants deserve to be part of the mainstream of consumers in the UK. As the Financial Inclusion Commission report published in September said,

“lower cost lenders could be willing to lower their income thresholds for loans if they had access to additional information on household income and earnings. Lowering the threshold from £15,000 to £12,000 per annum could make an additional 4.8m consumers more attractive to mainstream and lower cost lenders”.

That is the 4.8 million consumers who currently struggle to access normal levels of credit for no logical reason.

As the report of the House of Lords Committee on Financial Exclusion put it,

“We recommend that the Government provide all necessary assistance, including legislation where needed, to further combat financial exclusion caused or exacerbated by high-cost credit”.


The Bill does just that.

Finally, I have some words of comfort for the noble Lord, Lord Bird, whatever the Minister now says. A year ago, I stood on this very spot and asked that lettings agency fees be banned for tenants. The arguments by the Minister against were lengthy, but no great surprise—that it would impose significant operational costs. I am sure that we will hear that argument today. We might even indulge ourselves on this Friday afternoon in a bit of ministerial answer bingo. The Minister might suggest that “a market solution is best”, which is another one to expect or that “transparency already covers this area” and that “the empowered consumer is already there”. All those arguments were deployed against my Bill only a year ago, but they were all arguments that the Government sensibly changed their mind on. I hope, for the sake of those tenants whom we have talked about today, who deserve nothing short of fairness and a level playing field, that once again, the Government will see sense, change their mind and adopt this Bill in full.

Baroness Wilcox (Con)

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My Lords, I am grateful to be allowed to speak in the gap because it gives me an opportunity to say that I am now back in the consumer world, having just taken on once again the presidency of the National Consumer Federation. Some 10 years on, I am listening to very similar things.

It has been marvellous to see the noble Lord, Lord Bird, stand up and speak in words that he would say are not very clear or clever, or that no one knows quite what he is talking about, but we all do know what it is that the noble Lord speaks for. The noble Baronesses, Lady Thornton and Lady Grender, have also spoken in the debate. They do not sit on my side of the table, but I have great respect for both of them because they know what they are talking about and we have been there before.

What I am happy about is the fact that we can get people to talk about their debt issues in public. We never got to the position of the French and Germans where you could borrow money only if you actually had money—the only way to get money was to go into the black market. One thing that we have managed to do, in all the various ways this country has been run, is to allow people to stand up and say, “I am in trouble”.

I like to think that my noble friend Lord Bates, whom I have known for a fair time, will give us a very good answer. Having listened to the debate, after all these years it seems to me that it is the same story: those who can will get it and those who cannot do not. It is important that people in difficulties must be seen so that we can get to them in order to help. I hope that the Minister will do that today.

Lord Davies of Oldham (Lab)

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My Lords, I too congratulate the noble Lord, Lord Bird, on his Bill and on his speech introducing it. Of course he has great experience of people who have difficulty coping with debt. We all know that an unacceptably large percentage of our population are daily facing challenges which can often be quite extreme. I suppose that the Government and the Prime Minister would say that they fall into the category a little below those who are referred to as “just about managing”. The worry is how large those two groups are. My belief is that they will come to haunt the Government as they seek to cope with the declining economy.

The problem has been identified clearly by the noble Lord, Lord Bird, and other speakers in the debate, who have reflected a strong consensus in favour of the Bill: society stacks the cards against poor people. An anxiety that we have expressed for many years now and which still leads to terrible deficiencies in our society is the absence of any real financial understanding of how household budgets should be handled. I know that attempts have been made in recent years to increase the provision of financial education, and under considerable pressure some progress has been made, but it is still easy to meet people who have no concept at all of some of the most basic aspects of household finance. That is why this problem is so acute. More than 1 million of our people do not have a bank account, which is indicative of the limitations they face.

Of course, as has been described on both sides of the House, the more limited your financial health, the more costly it becomes to tide over in difficult circumstances when debts are incurred. Credit companies inevitably favour safe investments and discount heavily against those with limited assets. We recognise this because it is an aspect of the market, and indeed we may hear a little more about the operation of the market before the debate concludes. However, there are very good reasons why those with limited resources should be anxious about market forces because they can be cruelly affected by how they work.

We know about those forces in relation to housing costs, and we know also that one of the fundamental problems in our society at present is the generational difference between those who were able to purchase their homes at prices within their means, given that their mortgages took up only a limited amount of their wages, and the situation today. Now, the decline in the economy and the extraordinary increase in house prices—attached to the wage freezes and impoverishment of our people—means that, for the generation coming on stream now, the issue has become a crisis.

The Government may be making some moves. In the Budget, we had indications that at least the housing crisis will be addressed, but we all know that the Budget projections on how the housing need will be met mean that it will be a decade or so before we start to see any real substantial matching of supply to demand. Housing costs, which after all relate to the question of having a roof over one’s head, will continue to burden so much of our population.

Last evening, when I was thinking about the Bill and about indicating my complete support for it, as well as that of my party both here and in the other place—my party has expressed strong commendation of the Bill—I thought I would be addressing a House with a substantial consensus of opinion. However, Governments are always good at busting consensus if it does not meet their particular rubric. As a result of communications received by the noble Lord, Lord Bird, only a day or so ago, I know that the Minister must indicate today that the Government do not think that the Bill is the appropriate solution to the problem. For the Government to change the terms of the debate 48 hours or so before we are due to debate the Bill is pretty poor conduct on their part. I excuse both noble Lords opposite—they have both been in the Commons and therefore seen, from time to time, exercises of which no one could approve. I have no doubt that neither of them was involved in this exercise, but I ask the Minister to pay due regard to what we on this side of the House regard as a somewhat unfair operation on a Private Member’s Bill at such a late stage.

I have no doubt that the Minister will say that is because the Government have a better idea and that the better idea is market orientated. Of course, in certain philosophies, of which the Conservative Party is the clearest exponent, just to use the word “market” means commendation immediately. I am not sure that the Government are bent upon improving the Bill, but they are bent upon trying to take credit for the enormously successful campaign of the noble Lord, Lord Bird, which, through the Big Issue and his experience he has operated over a considerable period of time. I think the Government are seeking to snatch a modicum of credit for the fact that they are responding to this development of public pressure. I have no doubt that they will get away with it; after all, they have a majority in the House of Commons, I am told, although it seems to have a certain process of erosion attached to it. Today, on the basis of a very limited mandate, the Government are setting out to indicate that they intend to stop this Bill in its tracks, because although the Minister will persist with his usual commitment and present the opportunity for future arguments, I have no doubt that the Government will be working toward their own agenda, which does not include the passage of this Bill.

I am sorry to have brought a slightly discordant note to proceedings, but it is on the basis of what I think is one of the latest incursions upon a Private Member’s Bill. Remember that we as parliamentarians value Private Members’ time and the ability to get Bills through. They should not be wrecked by the Government unless there is a very good cause. The cause in this case seems not to be an improved position over the Bill but the Government seeking to take credit when in fact credit is due to the noble Lord, Lord Bird, and all those people who have supported him throughout the whole of this campaign.

The Minister of State, Department for International Development (Lord Bates) (Con)

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I am sorry to rise on such a discordant note from the noble Lord. I have a slight memory of being a Back-Bencher in this place on the Opposition Benches when there was a certain very distinguished Deputy Chief Whip by the name of Lord Davies of Oldham. He knew how to deal with Private Members’ legislation when it did not quite fit with the Government’s approach at the time. I assure the noble Lord that that is not the approach we are taking towards the Bill. The announcement, which I will come to shortly, was not rushed out 48 hours before. It happened to be part of a Budget Statement that had as its main theme helping people into the housing market, which is at the heart of what the noble Lord, Lord Bird, said.

I have to place an interest on the record. The noble Lord, Lord Bird, was a hero of mine long before he arrived in this place. He has done more to help the poor of this country than virtually anybody else I know. It is fantastic that he is here and it is wonderful that he continues to be an advocate—a voice for the voiceless—in our society.

The Creditworthiness Assessment Bill is about Britain’s rental tenants having restrictions placed on them in the availability of credit. They are fortunate indeed to have such a powerful champion in the House of Lords as the noble Lord. The issue at hand concerns the ability of lenders and credit reference agencies to accurately assess the creditworthiness of prospective borrowers. Currently, a history of meeting rent payments is not routinely recognised in people’s credit scores and is not commonly taken into account when banks conduct mortgage affordability assessments. For those without a long history of borrowing on a credit card, this raises the cost of borrowing. The noble Baroness, Lady Grender, articulated that point. This leads to a state of affairs where the poorest pay the most, as the noble Baroness, Lady Thornton, mentioned in her remarks. This problem is commonly described as the “poverty premium”. Those words were used in the debate. It also creates a significant barrier to getting on to the housing ladder because it raises the costs of getting a mortgage.

I recognise that banks must take into account other factors when assessing mortgage applications, including the multiple additional costs that come with home ownership. None the less, rental payments are usually an individual’s largest monthly outgoings and are therefore a significant indicator of one’s creditworthiness. For this reason—I underscore this sentence—it is right that a history of successfully paying rent should be recorded and recognised.

In addition to the noble Lord’s Bill, my colleague Paul Scully in the House of Commons brought a petition by 147,000 people who wanted their rental payments considered in their mortgage application. Their views are echoed by many hundreds of letters sent to Members of the House of Commons and received by the Treasury each month. This is clearly an idea whose time has come.

The Bill states that all firms carrying on credit-related regulated activities, including mortgage lending and providing credit scores, should be required to,

“take into account rental payment history and council tax payment history when assessing a borrower’s creditworthiness”.

I share the Bill’s objectives. We have a clear unity of purpose in seeking to help rental tenants get a fair assessment when they use financial services. Our concerns are ones only of means, not ends.

I am trying at this point not to get drawn into rehearsals of speeches that may have been given in the letting fees abolition efforts of the noble Baroness, Lady Grender, but I believe that the solution to this issue should avoid imposing further regulatory requirements on lenders, landlords or credit reference agencies. Additional regulatory requirements could generate a significant burden for these businesses. For example, given that mortgage lenders currently lack easy access to rent payment data, this approach would force them to go out and acquire it before making each new loan, which represents a significant logistical and technological challenge. This would not be in keeping with our aim to make Britain the best place in the world to do business.

Furthermore, anything that places a burden on lenders could negatively impact the availability of credit in the future: if we make it harder for lenders to offer mortgages to rental tenants, they may decide to offer fewer of them. That would of course be counterproductive to the objectives of the Bill. At minimum, additional operation costs would be likely to be passed on to consumers in the form of higher prices. Both those outcomes would be counterproductive, in our view. My noble friend Lady Wilcox has been a formidable champion of consumer rights over many years, and it was wonderful to have her contribution.

We share a common ambition in seeking to help as many hard-working families as possible get access to credit, ensuring that tenants get due recognition for a history of meeting rent payments on time, but we must endeavour to find a market-based solution rather than a top-down imposition—a solution that works for both consumers and businesses. That is why I am pleased to inform the House that, in the Autumn Budget Statement, the Government announced the rent recognition challenge, a £2 million competition, open to all, challenging the UK’s world-leading technological firms to develop new applications to enable rental tenants to record and collect their own rental payment data and share it with lenders in mortgage affordability assessments and credit scores. Furthermore, these apps could be used in a revolutionary new way, given that open banking technology comes into force in January 2018.

When a tenant pays rent out of their current account, this transaction is encrypted and secured, meaning banks have no easy way of accessing or verifying the information. However, with open banking, individuals will be able to use innovative new solutions to share this current account data through secure channels in a way that they were unable to do previously. Creating this competition allows the Government to serve not as a disrupter of the free function of markets but rather as a catalyst; to promote action, drive innovation, and harness the ingenuity of the private sector. Rather than placing the burden on businesses, this approach aims to empower consumers by giving them the necessary tools to collect, control and share their own data. The challenge will open to applications in January 2018: I encourage all firms with an interest in this important policy area to apply.

The noble Lord, Lord Bird, in his excellent introduction to this debate, asked how it benefits social housing tenants. The challenge is designed to produce solutions applicable to both the social and private rented sectors. We also support the rental exchange scheme, which does important and effective work. The noble Baroness, Lady Thornton, asked about the cost of credit. It is too high for people on low incomes. The Financial Conduct Authority proposes to clarify that firms should consider not just whether a consumer can repay, but whether they can pay without causing financial distress.

The Government’s introduction of a cap on the cost of payday loans was widely welcomed. We have introduced the concept of fee-free banking for many families, to encourage them to have a digital presence and therefore increase their ability to access credit. A key part of that is to ensure that we have people in work and, through measures such as the national minimum wage, to ensure that they can afford it. The noble Baroness, Lady Grender, mentioned raising the tax threshold, which has made a significant difference, taking 4 million people out of paying tax altogether.

I thank all Members who participated in the debate and particularly the noble Lord, Lord Bird, for bringing the matter to the House’s attention. I also thank him for the work that he, the Big Issue and Experian have done over a period of seven years in this role. I encourage them to recognise that their efforts are not in vain. They are making progress and this issue is being raised up the agenda, a fact which was recognised in the announcement that my right honourable friends the Chancellor and the Economic Secretary made in relation to the Budget.

In the aftermath of the damage incurred by the global financial crisis, reforming the financial services sector to work better for consumers has long been among the Government’s top priorities. The rent recognition challenge is the next step in this effort. Creating new and innovative solutions to allow tenants to record and share their rental history would make the credit assessment process fairer, provide a helping hand to aspiring home owners and help to build a better Britain for rental tenants, which is the end that we all seek.

Lord Bird

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I thank your Lordships very much for that interesting discussion about what we all agree is an irregularity that happens when you live in poverty. It is one of the many irregularities there. What I found quite interesting about the Minister’s response is that when it comes to a market-based solution, which the Conservative Government would obviously love to promote, there is a bar on operating in the market healthily. People say, “I have a mortgage, therefore I am much more reliable and bankable than if I am a tenant who pays rent”. What is so interesting is that there are probably millions of such people who the lenders would love to lend to, but they do not have the information. They do not have the key to the door. If it was a true market-based solution, it would be a matter of turning to tenants and saying, “Show us how reliable you are by showing us the data you’ve collected over the years by paying your rent”.

The Bill opens up the possibility of enfranchising a whole group of people who are disfranchised now. Fintech goes towards the idea that you can gather your own data and share it with a third party, which may or may not choose to lend you the money. There are ways towards a solution and the fintech will come along, irrespective of whether we see it in, but there is this entrenched idea. The work of the Big Issue has proved that the evidence is there that millions of people are being disfranchised, and that it is affecting the health of the market. If we really want to find a market-based solution let us look at a true one that includes those people, who are not able to participate in the market.

The Bill is also a bit broader in its base; it is not exclusively about people getting mortgages. I think there was a kind of wrong-footing—not intentional, because I trust the Government to be noble in all things—that we are talking about mortgaging and housing. We are actually talking about, for instance, people moving into social housing. When you go into the apartment, what have you got? You might have a gas oven or an electric oven, but where are the white goods? You move in, you are on universal credit and you have to wait until you can buy the goods that enable you to feed your family. What happens? You then have to turn to BrightHouse. You have to turn to BrightHouse because you are desperate to feed your children and therefore you have to go to a very narrow sector of the credit market, and that sector knows that you are hoist by your own petard when it comes to your poverty and it is going to charge you through the nose. That is a disreputable thing masquerading as a part of democracy. You take it or leave it. We need to recognise that somebody’s credit score should begin to liberate them and enable them to begin the process of their own reconstruction. It is about people reconstructing themselves, irrespective of how hard and tirelessly we work to extend the franchise that we need to extend around credit.

I thank noble Lords for taking part in this debate, which I enjoyed very much. I very much enjoyed the comments made by the noble Lord, Lord Davies. I can see he is not a pusillanimous man. He upped the game. I enjoyed the contributions of the noble Baronesses, Lady Thornton, Lady Grender and—unfortunately I did not get her name.

Lord Taylor of Holbeach (Con)

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Lady Wilcox.

Lord Bird

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God bless you. I am only a new boy. When, or if, we get this Bill through the House, it will benefit all political persuasions in the House because we will all be able to do our job around poverty a little better, but we will also have to make sure that in the detail, where we know the devil is, we do an awful lot of work for people who are left out and whose credit is damaged.

I was out last night talking to some homeless people. A big problem is that they have no credit references. One of them, a young woman, had been driven out because of problems around credit and her ability to respond to it. When you see those things, you know that we have an emergency on our hands and we need to do something very desperate. One of the ways we can do that is by helping people with their credit while making sure that people who are not the low-hanging fruit do not get left behind. We have to ensure that there are all the safeguards so that people can opt out and not be punished in the process. I thank all noble Lords.

Bill read a second time and committed to a Committee of the Whole House.

Lord Blencathra (Con)

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My Lords, I beg to move the amendment in the name of my noble friend Lord Naseby. He cannot be here today but he has asked me to make it clear that he is not opposed to the principle of this Bill, as am I, but he is worried that it ties the hands of the FCA and is too prescriptive. That is why he seeks to delete the word “must” in the first group of amendments and substitute it with “may”; rather than the instruction to the FCA to “ensure that”, he suggests “consider whether”; and the word “should” in the final amendment in the group is a grammatical change.

In all of these amendments he was guided by the advice of the Consumer Credit Association and I would like to justify the amendments by explaining the CCA’s concerns. I want to set out this properly in this group so that there is no misunderstanding where my noble friend is coming from—the amendments are not a rabid desire for unfettered market forces. These are not so much probing amendments as airing amendments, if your Lordships will accept the term, to air the concerns of the CCA. I know that the noble Lord, Lord Bird, with his tremendous experience in this matter, has considered them and will have impeccable detailed arguments against them. If that is the case, then we will have succeeded in airing these amendments today.

The Consumer Credit Association says that it is not against the general evaluation of credit referencing systems; however, it considers it inappropriate and disproportionate for the law to force firms to use and pay for rental data—or any other specific type of data—in their commercial assessment. It is concerned about what it calls unintended consequences.

At face value, most people would think that requiring lenders to use more data would inevitably lead to better decisions and improved consumer outcomes. However, a number of complexities appear not to have been properly considered, says the Consumer Credit Association. For instance, the rents of just under 4 million households—that is 40% of the rental market—are subsidised via housing benefit to the extent of about £5,000 per household per year. This means that the rent payments in these cases reflect receipt of subsidy rather than a tenant’s propensity to pay. Where the subsidy is paid direct to the landlord, this effect is even more pronounced. In the same vein, non-payment of rent may often reflect delays in paying the benefit rather than the unreliability of the tenant. It also says that well over 1 million tenants are already in arrears on their rent. The proposal would not help this large group; on the contrary, these consumers would find it more difficult to access credit and would therefore become even more financially excluded.

The collection and use of rental data is being marketed to landlords as a means of reducing arrears. The proposal would give unscrupulous landlords who fail to repair their properties increased leverage over tenants, because it would increase the risks for a tenant making any reasonable attempt to withhold or set aside their rent against getting repairs done to the building.

The CCA also says that it is not a given that council tax and rental data would add value for all types of lenders in all situations, yet all firms would be required to pay for this data whether or not they used it. This would be commercially inefficient and the cost would be passed on to consumers through higher prices for credit. It is the CCA’s strong view that firms are the best judges of whether it makes commercial sense for them to subscribe to products such as rental exchange and credit lending. Compelling them by law to do so would, on the other hand, be inappropriate.

Consumer representatives are divided on the potential impacts of the proposal but have flagged the risks of possible harm to some consumers. The Centre for Responsible Credit, for example, has urged caution, because failure to pay rent could lead to the loss of a home, bailiff action and, ultimately, imprisonment. Mainstream lenders are unlikely to consider the data predictive. For many people who miss a rental or council tax payment, it could lead to complete credit exclusion or higher cost credit.

The rollout of universal credit is expected to lead to a significant increase in rent arrears for housing benefit claimants. Similarly, private tenants face rising rents and a freeze on local housing allowance rates. In evidence to the Treasury Select Committee on 28 February this year, both StepChange and Citizens Advice acknowledged the potential negative impact. StepChange said:

“That is fine if the thing that is going to be included is something that you are paying well and on time. If you are behind on your rent and your council tax payment, all that is going to do is enhance the social exclusion for those individuals”.


Matt Upton of Citizens Advice said:

“It is important to acknowledge that it is a double-edged sword. As you say, we see lots of people struggling to pay those bills, and that will not necessarily affect them in a positive way … of the clients we see who struggle to access credit there is a proportion for whom credit referencing is a factor. For a greater proportion it is not the big factor”.


The ambition to increase access to credit for those who rent is laudable. As said by the noble Lord, Lord Bird, I believe that it will help about 80% of tenants, but the CCA says that the proposal’s potential benefits are uncertain, unquantified and currently unsupported by robust independent evidence. My noble friend Lord Naseby thinks that more studies on this must be done but he respects the point of the noble Lord, Lord Bird, that millions of honest, hard-working tenants who pay their rent and council tax would benefit from having their good record of payments used to get a mortgage or cheaper white goods.

I know that the noble Lord, Lord Bird, is keen to pick up the 20% who are in debt and seek ways to get them out of that hole, but my noble friend finds the CCA’s worries and concerns quite persuasive. As I read them, I found them persuasive too. I look forward to the answers of the noble Lord, Lord Bird, and the Minister. All we wanted to do was give these amendments an airing, raise the CCA’s concerns and wait to hear the answer.

Baroness Lister of Burtersett (Lab)

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My Lords, I am very supportive of what the noble Lord, Lord Bird, is trying to achieve with the Bill. I have to admit, I was not aware of the issue until I read the debates on it and the Big Issue article he wrote.

I also have some worries about the potential unintended consequences raised by the noble Lord, Lord Blencathra, which I have communicated to the noble Lord, Lord Bird. We have to think about the context: more people are getting into rent arrears, partly because of universal credit and partly because of cuts to the benefits they rely on—in or out of work—at a time of rising rents. We know that council tax arrears are also going up because of what has happened to the council tax support system. This group of people will not be helped by the Bill. That is understandable: the Bill will help those with a good record, which is very useful and important. In his reply, I would like the noble Lord, Lord Bird, to assure the House that things will not rebound on that group and that they will not be in a worse position than they otherwise would have been. It would be helpful to have that assurance on the record.

Baroness Thornton (Lab)

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My Lords, I supported the noble Lord, Lord Bird, on Second Reading. This Bill is a small but important public policy step to help bring creditworthiness equality to people who are good payers of rent and credit. The questions asked by my noble friend and the noble Lord, Lord Blencathra, are important.

First, this is not the silver bullet to solve the problems of creditworthiness; it is one thing that might assist. If the Bill passes and lenders are required to incorporate rental data, individuals can opt out of any system of rental payment data sharing. That is the first thing that needs to be put on the record. For most, the inclusion of such data is part of a positive journey to more equal access to affordable credit, although I agree that it is vital to be guided by those who are not as fortunate, including those let down in various ways.

Missed or late payments from a third party, including from the DWP, can already be noted on an individual’s credit file through what is known as a “notice of correction”. This principle is applied to any “notified payment” on an individual’s credit file, including a spousal dispute, incorrect calculation or late payment. Although I agree that it is right to be alive to the laws of unintended consequences, here, the consumer would be in control. That is very important. They can opt out and add notices to their credit file. As we will no doubt be looking into after the APPG inquiry, rental payments and electricity payments are normally the last things that an individual fails to pay. For people in this situation, any previous non-payment of non-essential items will already have affected their credit score, but if we can help these people, we should. I hope that the work being led by John Glen MP and HM Treasury with the noble Lord, Lord Bates—we had a very useful discussion about this—is taking this important consideration into account via the Rent Recognition Challenge. The noble Lord, Lord Bird, will raise this point later with the noble Lord, Lord Bates, and discussions are ongoing.

Reforming the consumer credit world is a big undertaking. Although we may not be able to immediately change someone’s circumstances through this measure, we may be able to better support them and prevent them getting further into the quagmire of problem debt. As the FCA put it to the noble Lord, Lord Bird, before Second Reading, it is important to know who is in trouble to,

“get our arms around them and help them”.

I thought that quote was very appropriate.

Baroness Kramer (LD)

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My Lords, I am a real fan of the unamended version of the Bill. Some 40 years ago, when I was in my early 20s and trying to get credit for the first time, I remember the struggles—I think that most women will share them because of the era—of trying to establish any kind of credit history and demonstrate that I was reliable and could manage my finances and the stresses and strains of all of that. I had to go through the most convoluted routes to establish that history. In the Bill, the noble Lord, Lord Bird, has captured the opportunity for many people to use their reliability in making key payments—rent and council tax—to establish credit history. In some ways, the noble Lord, Lord Blencathra, gave the game away when he mentioned, very early, that part of the industry’s resistance is based simply on the cost of gathering this data. I really do not think that that should be an obstacle to so many people who demonstrate in their lives that they are capable of managing money being able to make the decision that they need to access credit and have a reasonable avenue to do so.

Baroness Grender (LD)

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My Lords, we on these Benches fully support the Bill as originally drafted and therefore oppose the amendments in group 1 for all the reasons set out so far by other Members. Renters are such a large part of the population now. They have every right to be full participants as consumers. I will give a very specific example: if you are a renter in social housing—78% of renters in social housing pay their rent in full and on time—and you go to buy a washing machine, currently, because you are described as high risk, you will pay between £300 and £1,000 more. Could somebody please explain to me how it is possible that someone can steer clear of arrears when they are in a scenario where, if they are not an owner-occupier, they pay between £300 and £1,000 more for a washing machine? We need to stand firm on the current wording in the Bill and not allow this probing amendment to be aired. A small change in the renting threshold would mean that an additional 4.8 million consumers would be more attracted to mainstream and lower-cost renting.

On arrears, while I understand that this is a point of concern, the whole point of this is to bring people who are renters into the sunlight with information about them. The FCA has also said that it would be good to know who these people are. The alternative is unscrupulous lenders. That is where we drive people to if they are not in the full sunlight of creditworthiness and there is data about them. For those very brief reasons, we urge noble Lords to reject these amendments and to understand that renters are increasing in number. Just today the BBC announced that the proportion of 35 to 54 year-olds who live as private tenants has nearly doubled in 10 years since 2006. The real problem is that the number of people who are renting is doubling but government policy is not keeping pace with this scenario. This very fine Bill tries to do so.

Lord Desai (Lab)

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My Lords, I did not speak in the Second Reading debate but I add my support to the Bill sponsored by the noble Lord, Lord Bird, and speak against the amendment. The Second Reading debate showed that several things were being put together and confused. The Bill’s purpose is simple. Obviously the problem is that the poor do not get access to credit, or they do at very high interest rates. That is not the problem that would be solved here. There is also the problem that lots of people are in arrears. If they are they will have a low credit rating. That is often as true for owners. That is not a problem.

The virtue of the Bill is to say that if people are behaving like regular, honest payers of their debt on time they ought to get some sort of compensation or reward for that. If people are paying rent regularly they should be treated on par with those who pay their mortgage regularly. It is such a simple idea that I do not know why people are upset about it. For one thing, the cost of recording payments is much lower than it used to be because they are completely automatic. If we can tell the FCA to persuade people to get into a blockchain system that would be a very efficient way of recording payments, both on the part of the landlord who receives it and the tenant who pays it. It would be very easy to build up a databank of regular payments. From there we could easily get on to some sort of financial app that will give them the credit they deserve.

If we keep the Bill to this particularly narrow but very useful aim we should be very happy to support it. It is required that we do not treat two groups of virtuous people unequally. Those who pay their mortgage on time and those who pay their rent on time should be treated equally because they are both behaving honestly.

Baroness Gardner of Parkes (Con)

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My Lords, I listened very carefully to what my noble friend said in introducing the amendment, but I really think it is a very bad amendment. It throws out the whole value of the Bill completely. It would just reinstate the current position. That is not what we are aiming to do. We are aiming to make this possible for people who really have no knowledge or awareness of finance or how to do things. These people would be the very ones to be overlooked with a “may”, because they do not push themselves forward in the same way, yet they need the information and the help, certainly if they have been good payers of rent. I remember when I was looking to get a mortgage for the first house I ever bought—I did not succeed in getting one at the time. The whole house cost £7,500, which in those days was a lot of money. A dental chair-side assistant was paid two pounds 10 shillings a week; a highly skilled receptionist was paid £7. We are talking about a long time ago. Although those were times when I knew nothing whatever about mortgages, these are times when you need help and you want to have your case considered. The more modest you are or willing to be squashed the more you were squashed. It is not a good amendment and I am sorry to say that I cannot support my noble friend on it. I want to retain the status quo in the original wording of the Bill, which would be very much more helpful to those who need help.

Baroness Tyler of Enfield (LD)

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My Lords, I also support the Bill in its original unamended form. I will explain briefly why. I apologise that I was unable to be present at Secon I fundamentally believe that there should be parity of treatment between tenants and homeowners d Reading. as others have already said.

I had the privilege of chairing the Lords Select Committee on Financial Exclusion last year, which explored the connection between consumer credit and financial exclusion. We heard that for the many low-income households without financial safeguards, credit, including high-cost, short-term loans, was the only way of keeping on top of family finances for regular or emergency expenditure. As we all know, this phenomenon is particularly prevalent owing to increasingly precarious work and the casualised forms of employment around, meaning that both income and expenditure needs for individuals and families can easily spike without warning.

It was clear to us—the committee heard this very strongly indeed from the evidence—that consumer credit is increasingly the de facto safety net for many people on low incomes to meet essential needs. But we also heard that many credit agencies do not take rent into account. Most social and private renters therefore often have thin credit histories and do not have access to the lower-cost mainstream lending options. What we heard most of all—this is why I feel so strongly on the issue—is that those people are too often forced to turn to high-cost and predatory sources of credit, such as payday lenders or rent-to-own companies.

Frankly, I was shocked when I heard some of the eye-wateringly high forms of interest on credit and how much it can cost for someone who goes to somewhere such as BrightHouse to buy white goods or something like them. They are paying so much over the odds. This directly contributes to the poverty premium, established to be at around £1,000 per year per person, which is paid by poorer people for products and services because of a lack of consumer credit or creditworthiness. As my noble friend Lady Grender said, this particularly affects young people. On Tuesday this week we heard excellent work from the Intergenerational Commission of the Resolution Foundation that showed that one-third of millennials can now expect to be renting for their entire lives. We have to make sure that policy is in line with the reality of how people live their lives.

The chief executive of BrightHouse gave evidence to our committee in 2016 and made the point that its customers had very few options. It is time to give those people some other options and to bring them back into the mainstream. This Bill does that. It can help redress some of the damage of exclusion and insecurity that plagues those struggling to make ends meet and prevent an already disadvantaged Generation Rent falling into further cycles of debt and despair. It really is time that we make rent count and it is long overdue that we do.

Baroness Wheatcroft (Con)

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My Lords, I support the Bill in its unamended form and echo what the noble Baroness, Lady Tyler, just said. BrightHouse had to repay £14.8 million to 384,000 clients last year because the Financial Conduct Authority judged its behaviour to have been unreasonable. The Bill makes available more reasonable credit, although not necessarily the cheapest, to all those who rent.

If you do not have a credit record, life is very dangerous. I went on to the web this morning to see quite what finance was available. Fast Loan UK claims to offer:

“Responsible Loans For Everyday Lives”.


The APR it charges on one of its loans is 907%. That does not sound terribly responsible to me.

One source of reasonable credit for people on very low incomes and who need it most is credit unions. We have often spoken in this House about the need for more credit unions. They do a good job, but there are nowhere near enough—there are 384 members of the credit unions association. However, if you search for “credit union loans” on the internet to find out where you might access them, you come across “Credit Union Loans” with an APR of 277.5%. The irresponsible lenders have twigged that the way to get customers is to pretend to be what they are not. They are not responsible lenders. While I support the Bill in its unamended form, I hope that we might encourage the FCA to police this sort of thing rather more carefully.

Lord Hain (Lab)

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My Lords, the noble Baroness’s point about credit unions is vital. On my way to London early on a Monday morning, I often see people near Neath station queuing outside their credit union. For them, it is a lifeline.

Lord Best (CB)

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My Lords, from the Cross Benches, I support the noble Lord, Lord Bird, and oppose the amendment. I know that the motivations of the noble Lord concern mostly poorer people who need credit to buy white goods and the rest—we have known for many years that the slogan, “The poor pay more”, has been more than true—but I want to refer to those members of Generation Rent who have a chance, albeit a sometimes slim one, of being homeowners and need every help in getting their creditworthiness to the highest-possible status to move from being a tenant to a homeowner, and who are held back by the way in which credit agencies operate. It may be said that the people in Generation Rent do not wish to be homeowners —that they live an “Uber lifestyle” in which you do not own a car; you call Uber. That can apply to many aspects of life. However, surveys continue to show that people wish to be homeowners and for very good reason: home ownership brings with it security, which you do not get in the private rented sector. Even if your tenancy is for a full year, a lot of people find that it is hardly enough to enable you to settle down and, certainly, to bring up a family—we are now seeing ever more families in the rented market.

Home ownership remains an aspiration. Although you might be paying more for a mortgage on day one—if the mortgage company can provide a loan for you—rents will rise roughly at the level of earnings, which is RPI or CPI plus 1% or so, year after year and, in 25 or 30 years, those rents will be enormous. When you come to retire as a tenant, a lifetime of tenancy means having to move home on retirement because your income will drop but your rent will keep rising. Home ownership gives you not just the security of tenure but the financial security of knowing that, although it may take 25 or 35 years, eventually you will be free of debt. Anything that inhibits people from breaking into home ownership, which is what people aspire to, is extremely important.

People say, “Nowadays in London and the south-east, what is the point of talking about home ownership? Prices are so far beyond the reach of those on ordinary incomes this will never happen”. We now have planning consents across London for an enormous number of new apartment blocks. We are seeing come out of the ground 520 apartment blocks of more than 20 storeys for residential use. A massive housebuilding programme is coming down the line. Those who have built those apartment blocks, some of them overseas investors, believe that the starting price will be about £500,000 for the majority of the flats. Someone who is on £50,000 a year—there are not that many people on such a salary—will be able to get a mortgage of £250,000 and not £500,000. The trouble is that we are running out of Russians; we are running out of overseas buyers who are prepared to pay £500,000. I predict that home ownership, which has been in sharp decline, will come back into fashion. The opportunities will recur; prices will have to come down to meet the incomes of those who aspire to own. We should ensure that the credit lines for them are as clear as possible, which is what the noble Lord, Lord Bird, would do.

Lord Davies of Oldham (Lab)

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My Lords, I indicated at Second Reading that Her Majesty’s Opposition were very much in favour of this Bill. In a debate in Westminster Hall, the shadow Finance Minister made it clear that he too was in favour of it.

I appreciated the way in which the noble Lord, Lord Blencathra, introduced the amendments—it was more probing than assertive. He will have recognised that representatives of almost every part of the Chamber have been against the amendments and said that the Bill should stay as it is in this crucial provision. The noble Lord, Lord Bird, is more qualified than me to respond to all these points and I shall therefore defer to him, but he must have been encouraged by the enormous support across the Chamber for his Bill as it stands.

Lord Kennedy of Southwark (Lab Co-op)

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My Lords, I strongly support the Bill in its unamended form and do not support the amendments proposed by the noble Lord, Lord Blencathra. When the noble Lord responds to the debate, can he tell the Committee a little bit more about who the members of the Consumer Credit Association are? I do not know whether BrightHouse is a member of the CCA, but if he could tell us it would be helpful.

I grew up on a council estate in the 1960s and 1970s. Both my parents worked and made sure that they paid their rent—it was the first thing they ever did. My dad had two jobs to ensure that our rent and rates were paid. It is important that people who meet their financial obligations week in, week out have that taken into account when they seek credit. As the noble Lord, Lord Best, said, it is always the poor who pay more, and that is totally unfair—of course, that goes for many things in life. When I go into my local newsagent, I see people queueing up with their little fobs to get their electricity; they pay more. And there are other things—it is just unfair. What the Bill does, on which I congratulate the noble Lord, Lord Bird, is begin to make sure that, if you have a good credit record, that is taken into account properly, so that when you seek credit you can get a fair price and will not always have to pay the most.

The Minister of State, Department for International Development (Lord Bates) (Con)

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My Lords, I thank my noble friend Lord Blencathra for moving the amendment, but before I turn to the amendments I shall make some general remarks about the noble Lord, Lord Bird, and his Bill. I should state categorically that the Government’s position is not one of opposition to the purpose he seeks and which so many noble Lords have spoken very powerfully about, which is to ensure that people’s rent or credit history is taken into account when credit decisions are made. The question is about the means by which we achieve that, whether this legislation is the right way to do it and whether we should seek to mandate it.

My noble friends Lady Gardner and Lady Wheatcroft were right to point out that, in effect, the amendments would undermine the Bill because they would give to the Financial Conduct Authority discretion, which in many ways it has at present, to act in these ways should it so wish. The underlying concern is very real, and it is shared by John Glen, the new Economic Secretary to the Treasury, who is working very diligently on this, and it is shared by the Government. We recognise the very real concerns of people on low incomes seeking to access credit.

The report of the committee chaired by the noble Baroness, Lady Tyler, to which the Government have responded, called in its recommendations for having a Minister for financial inclusion, and that is something we have made some progress on. Financial inclusion is very important, and we are building upon a series of measures that we have sought to introduce, starting with the cap on payday lending, to stop the exploitation that was happening, with some of the horrendous interest rates that my noble friend Lady Wheatcroft referred to.

One of the problems was that a lot of the poorest people did not have bank accounts. Therefore, we introduced basic bank accounts, which are fee-free accounts, to get people into that area. Another initiative, which the noble Lord, Lord Desai, talked about, is the use of technology: he referred to blockchain and fintech solutions, which I shall come to shortly. We see great potential in open banking, allowing people to share their bank records online—their payment history, their incomes and outgoings—with people from whom they might be seeking credit. Again, that may be something that helps in that area.

Several noble Lords talked rightly about the appalling way that the poorest in our society are preyed upon by illegal money lending—loan sharks, as they are referred to. In fact, John Glen, the Economic Secretary, announced less than a month ago, I think, that we will be putting another £5.5 million into the fight against illegal loan sharks in England, Scotland, Wales and Northern Ireland.

The noble Lord, Lord Hain—and, I think, the noble Lord, Lord Kennedy—made reference to credit unions. We see credit unions having a huge role to play in this area: that is one reason why the coalition Government introduced significant investment in credit unions and changed the way in which they can operate. Some £38 million was put into helping credit unions to form, to operate and to raise capital: we think they are a crucial part of seeking to tackle this type of exploitation.

The Minister of State, Home Office (Baroness Williams of Trafford) (Con)

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I was.

Lord Bates

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You were? I am sorry.

That is why we now have a Secretary of State for Housing, Communities and Local Government. With all these points I am trying to set out that we do not believe that this Bill is the right way forward because it is too prescriptive in its approach. The amendments cut across the purpose and effect of the Bill so we do not support them either. But we are mindful of the importance of the responsibility to act in this area and we are doing that in a whole range of areas, as I have outlined to the House today.

Lord Kirkhope of Harrogate (Con)

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My noble friend Lady Wheatcroft made important remarks about the exorbitant rates charged to people who are often very vulnerable in the impression that they receive when being sold these products. Following those remarks, does my noble friend not agree that the plethora of advertising—particularly on television—which presents itself to these vulnerable people ought to also contain, as in the case of cigarette sales, clear warnings on every such advert that independent advice or advice that might be obtainable through government agencies or others should be taken before anyone commits themselves to such appalling transactions?

Lord Bates

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My noble friend is right to draw attention to this. This is why we have the FCA as an independent body to regulate activities in those areas. It is why it took the robust action it did in the case mentioned earlier by the noble Baroness, Lady Wheatcroft.

Lord Campbell of Pittenweem (LD)

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I am most grateful to the Minister for giving way, particularly since up to now I have been only a spectator to this legislation. I was particularly taken by the fact that he referred to illegal moneylending and the so-called sharks. It is important to remember that the people who have to go to those sharks cannot hope to achieve any kind of credit from the kinds of operations that the noble Baroness, Lady Wheatcroft, referred to. The loan sharks’ weapons are intimidation, abuse and sometimes violence when it comes to recovery. Illegal moneylending is notoriously difficult to prosecute and therefore I would be grateful to hear that the Government understand that and that the initial sum which has been offered is not the end of the matter.

Lord Bates

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Just to update the noble Lord on this point: the money that has been announced will help investigate and prosecute illegal lenders and support victims and those vulnerable to loan sharks. Overall, this is a 16% increase in funding. In England £100,000 seized from loan sharks will be spent on encouraging people at risk of being targeted by loan sharks to join a credit union as an alternative. The quadrupling of funding will help vulnerable consumers access a safer form of finance and get their lives back on track.

Lord Kennedy of Southwark

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We often hear that financial institutions are fined for doing things wrong. I know that those fines go into the general fund and are used for various things. One good thing they could be used for would be to support the credit union movement so that it can advertise the alternatives that are around. It is not just the monetary fines, it is the fact that the punishment is advising the public to go elsewhere and that there are cheaper alternatives. Often the credit union movement cannot have adverts in the Tube and on the buses and elsewhere, and it cannot fund phone lines. It would be useful and a good way to deal with fines from financial institutions. Perhaps the Minister will take that back to his colleagues in the Treasury.

Lord Bates

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I am very happy to take that back. It is an example of the innovative ideas that we can discuss as alternatives to the measures before us today in terms of legislation. As the noble Lord was speaking, I was thinking of the Libor fines. Those sums were significant —some £600 million or £700 million—but the then Chancellor designated that they would be given to the families of servicemen and the emergency services. There is an example there. My point is that I think there are solutions which would better achieve the effect that the noble Lord, Lord Bird, is rightly trying to achieve.

Baroness Kramer

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My Lords, the Minister has been very generous with his time. The virtue of the Bill of the noble Lord, Lord Bird, is its sheer simplicity. So often Governments come up with incredibly fragmented, complex and convoluted attempts to solve a problem. The Minister pointed a moment ago to the cap on payday lending. He will remember that the Government resisted that right to the very last, with exactly the same kinds of arguments about fintech, alternative approaches, different ways of dealing with it, cost and trying to crack a nut with a hammer. But they now laud that cap on payday lending. My suspicion is that if they decided to support the Bill brought forward by the noble Lord, Lord Bird, they would very soon be lauding that solution, its simplicity and its universal application.

Lord Bates

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I hear what the noble Baroness says but, as other Members have pointed out in the debate, there is the risk of some unintended consequences as a result of taking this approach. I have also outlined that we are not dismissing the problem, but are seeking an alternative route to solving it which we believe will be more effective and fairer, and avoid some of those unintended consequences. If that turns out not to be the case, of course we are always open to review our position vis-à-vis proposals such as this, and we will continue to act in that way because our first priority is to protect the most vulnerable and help them make a better future for themselves and their families by getting access to home ownership.

Lord Bird (CB)

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I really enjoyed that. That was a brilliant array of political parties coming together in the House. I am really glad. I am also glad that the noble Lord, Lord Blencathra, introduced the amendments in his name and that of the noble Lord, Lord Naseby, because they allow us to address the laws of unintended consequences. The noble Baroness, Lady Lister, also raised the question.

I come from a long line of people who did not pay credit. I am not likely in my dotage to be grassing up the people I come from. My mother used to go to a doorstep lender, who would direct her to a particular shop, where we paid through the nose over and again in the 1950s, 1960s and 1970s, until she died in absolute poverty in the late 1970s. I am not going to grass these people up, I assure your Lordships. Actually, I am much more interested in the 15% or 20% of people who are going to find it very difficult to get credit. They are finding it very difficult to get credit now.

Lord Blencathra

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My Lords, one of the unintended consequences of moving and speaking to such apparently innocuous amendments was to get a passionate speech from the noble Lord, Lord Bird. It is worth being the sacrificial lamb to hear that incredibly powerful speech.

When I was in my 20s, before I was elected, I was an even more precocious brat than I am now and everything was clear-cut and certain. There was right and wrong, and black and white. Then I became elected and everything became grey. There was no right and wrong anymore; it was all a bit uncertain. When I read the briefing from the CCA I thought, like my noble friend Lord Naseby, that there were some good points in it on some relevant matters, which were worth airing on the Floor of the House. I say to the noble Lord, Lord Kennedy, that I have no idea who the supporters of the CCA are. I did not inquire as I did not think it was relevant. I thought the arguments and worries it had were worth airing, no matter who the backers are.

The only other point I want to pick up is from the noble Baroness, Lady Kramer. I think she was a bit unkind when she said that I gave the game away in saying at the start that the provision would force firms to use and pay for rental data. My motivation was not to flag up concerns about organisations being made to pay but to float some of the worries of unintended consequences. I could retaliate to her by saying that, of course, Experian may make a lot of money out of dealing with the 4 million who have good credit at the moment and are paying their rent on time. The economic argument may cut both ways.

I think that I floated those arguments in less than five minutes and I can be very brief now: I do not think that I have commanded a majority of the House. I can say that to the noble Lord, Lord Davies. Mind you, the Government have not commanded a majority of the House on 14 crucial issues and they were not necessarily wrong either. However, I find the arguments of the noble Lord, Lord Bird, and others who have spoken incredibly persuasive and powerful. We have done our job today. We have given these amendments an airing and heard persuasive arguments against them. I beg leave to withdraw the amendment.

Lord Blencathra

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My Lords, I can be even briefer in moving and speaking to these amendments. They are fairly self-explanatory, so I do not need to go through them in detail. They would provide for a review of how successful the measures have been and for a sunset clause.

Amendment 4 would ensure that the effectiveness of the rules is assessed after two years of their operation. I think it is important to do that, whether my amendments are accepted or whether the Bill as it stands passes into law. The legislation and the FCA rules would cease to have effect no more than three years after implementation unless, further to the FCA’s report, Parliament approves their continuation. This is a sunset clause, in line with better regulation principles. It is similar to the approach taken in the Domestic Gas and Electricity (Tariff Cap) Bill. If Parliament is to direct an independent regulator such as the FCA to introduce rules on a particular issue, then my noble friend Lord Naseby and I think it reasonable to seek to ensure that if those rules are not having the impact Parliament hoped for, they would cease to have effect.

I see that other noble Lords have tabled amendments which I think do roughly the same thing, unless I have completely misunderstood them. I may have done so and am happy to be corrected. Amendment 4 would insert a simple new clause so that after two years, we would review how well the Bill is working and give Parliament a chance to continue with the rules or not, as the case may be. I beg to move.

Amendment 5 (to Amendment 4)

Baroness Grender

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My Lords, this is a probing of an airing, to give the technical term. The primary aim of this amendment is to counteract the other amendments tabled by the noble Lords, Lord Naseby and Lord Blencathra. Amendment 5 has been tabled to say, “This needs to happen now”. Its primary point is that the FCA needs to conduct a review and do it now.

I am fully aware that the FCA is at the moment conducting a high-cost credit review. However, its most recent conclusion is that it is,

“prepared to look at solutions designed to increase the choice”,

and encourage the,

“availability of alternatives to high-cost credit”—

in other words, more delay. The main point I want to make as a result of this amendment is that tenants cannot wait any longer. The number of tenants is doubling and government policies are not keeping pace. What we need is the immediate implementation of this, not to wait and have a two-year delay. That is the primary reason for this probing amendment. I thank the noble Lord, Lord Kennedy, the right reverend Prelate the Bishop of St Albans and the noble Baroness, Lady Jones, for supporting this amendment. It is an amendment to an amendment, so if the noble Lord, Lord Blencathra, withdraws his amendment, it falls by the wayside.

When I had my Private Member’s Bill banning tenants’ fees, the Government used the unintended consequences argument, asked whether the problem could be solved via the market and then rightly changed their mind, but it is taking a very long time for this to come through. I sometimes wish that the Prime Minister had put a date on this, rather than on one or two other items that have come before noble Lords this week.

I take the opportunity of this amendment to say to the Minister that I think he should support the Bill and give it a fair wind, and that the Government Benches should give a fair wind to more time for it so that it has its Report and Third Reading stages and is sent to the other place. The number of tenants is increasing enormously and legislation is not keeping pace. The FCA needs to conduct an urgent inquiry into the people who were described in the debate on the previous group of amendments, and for that reason I am attempting to amend the amendment.

Lord Bates

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My Lords, I think I can be brief on this group. I thank my noble friend for moving the amendment. This group of amendments concerns the proposal for the Financial Conduct Authority to conduct a review into the experience of rental tenants, with particular regard to their ability to demonstrate their creditworthiness under the existing rules.

I remind the Committee that the FCA recently consulted on proposed changes to its rules and guidance on assessing creditworthiness in consumer credit and has undertaken research on this subject, which carefully considered the factors that firms take into account when making lending decisions. This consultation made direct reference to the current limitations on sharing rental data and the potential for new technology to alleviate them. That is the purpose behind the rent recognition challenge.

Furthermore, in April 2018 the FCA announced that it will conduct a market study on credit information. A consumer’s credit information affects how likely they are to be able to access a range of financial services, including mortgages, loans and credit cards. Consumers may experience harm, such as restricted access to credit, if this information, such as rental payment history, is not shared effectively. The FCA’s aim is to ensure the credit information market works as well as possible to maximise the benefits that it can deliver for consumers. The FCA will also collect evidence to gain a better understanding of the potential for harm in this market and, if necessary, identify remedies. This study will be launched in quarter four of 2018. Finally, the FCA conducts a review of all new interventions as a matter of course and continues to monitor the market for consumer detriment on an ongoing basis.

In conclusion, I put it to the Committee that the need for a further review by the Financial Conduct Authority into this issue is unclear, as the regulator is already carrying out extensive work in this field. The Government’s position on the Creditworthiness Assessment Bill therefore remains unchanged.

Lord Bird

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I am pleased that the noble Lord has withdrawn—I feel a great victory. We have to move on to the next stage, and I thank the noble Lord, Lord Bates, for this great opportunity to respond to what we said. I thank the noble Baronesses, Lady Grender and Lady Thornton. It seemed all a bit “spaghetti” just now, so forgive me my trespasses. I will sit down. Thank you very much indeed.

Lord Blencathra

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My Lords, this was a simple little amendment asking for a review of the law after a couple of years. I did not understand why the noble Baroness, Lady Grender, needed to amend the amendment. If she did not like what I was seeking to do, she should have just opposed it. I can understand her saying that we cannot have the bit whereby a resolution of Parliament could reject it after a couple of years, but rejecting a review after two years seems a bit unreasonable. I was not seeking to delay the Bill for two years. The amendment merely states—and I happily stand to be corrected—that after the Bill promoted by the noble Lord, Lord Bird, is in force, the FCA should conduct a review after a couple of years. That seems a completely safe and innocuous thing to do. However, I make that point in defence of my amendment. We have been discussing this important Bill and these amendments for just one hour and 10 minutes. That has been a worthwhile way to spend that time. No one on any side has sought to delay the Bill or to wreck it. The noble Lord, Lord McAvoy, will confirm that between 1997 and 2001, if I and my late colleague Eric Forth MP wanted to delay a Bill we could keep going all night, but we are not in that mood and that mode because this is a rather good Bill. I felt the amendments deserved an airing this morning, which they have had.