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The Economic Secretary to the Treasury (John Glen)
It is a pleasure to serve under your chairmanship, Sir Graham. I thank the right hon. Member for North Norfolk (Norman Lamb) for raising the important issue. I read his article in The Times Red Box today and I have looked into the matter in some depth. I hope that I will be able to respond to his core request.
The right hon. Gentleman is committed to helping to improve the lives of those with mental health problems. In particular, his efforts alongside those of my hon. Friend the Member for Plymouth, Moor View (Johnny Mercer) and the hon. Member for Liverpool, Wavertree (Luciana Berger) during the passage of the Financial Guidance and Claims Act 2018 have ensured that those in mental health crisis have an alternative access mechanism to enter breathing space, which is a policy I will touch on later.
I appreciate the right hon. Gentleman’s concerns about the content of debt collection letters. I have an example here, and he is right to draw attention to the language used and its intimidating nature. I share his concerns regarding the impact that such letters can have on vulnerable people, as he set out clearly. I understand that 6,000 individuals have signed a petition by the Money and Mental Health Policy Institute to call for the prescribed content in debt collection letters to be updated.
If hon. Members will permit me, I will set out the Government’s overarching objectives for the consumer credit market, then get to the core point. The Government’s vision is for a well-functioning and sustainable consumer credit market that can responsibly meet the needs of all consumers. Of course, that vision extends to how firms treat consumers when they encounter financial difficulties. That is why we fundamentally reformed the regulation of the consumer credit market by transferring regulatory responsibility from the Office of Fair Trading to the Financial Conduct Authority just over five years ago, on 1 April 2014. When that transfer took place, 82 sections of the Consumer Credit Act 1974 were repealed and replaced by FCA rules, but 167 sections could not be easily replicated and remained in the Act, including the sections that dictate the prescribed content of debt collection letters.
The information requirements in the 1974 Act aim to protect consumers by reducing the information asymmetry between firms and customers. Where there is a requirement for information to be reproduced using prescribed wording, that is intended to highlight important messages on a consistent basis and to ensure that firms give consumers the information that they need to make informed decisions, across the wide variety of consumer credit products.
The FCA had a statutory duty to review the retained sections of the Consumer Credit Act by 1 April 2019. Its review considered whether the remaining sections could be transferred to FCA rules, as the right hon. Gentleman suggested, without having an adverse impact on consumer protection, and whether those sections remained appropriate for today’s market. On 25 March 2019, the FCA’s final report was laid in Parliament. It is a substantial piece of work, as I am sure he knows. I welcome the report and the significant and extensive analysis undertaken by the FCA during the review.
The Government are undertaking a programme of work to review the FCA’s findings and consider whether further reform of the consumer regulatory regime is needed. Indeed, a few weeks ago, I had an extended session with officials to discuss the programme of work relating to the Consumer Credit Act and better understand the breadth and depth of the issues that are manifest in it.
I acknowledge the point that the right hon. Member for North Norfolk made about, essentially, a quick win with respect to the reform of the letter, leading to a more substantial and extensive piece of work, and I will examine carefully what he said and take that back with me, to try to understand what could be possible. As any financial services lawyer will attest, the Consumer Credit Act 1974 is a complex and technical beast, and we want to ensure that we take an holistic view of it, considering it in its entirety so that further complexity is not created and no adverse and unexpected outcomes arise. However, I recognise that changing the wording on a letter would not appear to be a significant issue with respect to the wider implications.
Norman Lamb
I appreciate the Minister’s constructive response. As an ex-lawyer, I think it is perfectly possible to address the real mischief here by adapting the letter using more constructive and up-to-date wording without undermining the broader objectives of the 1974 Act.
John Glen
The right hon. Gentleman rightly reiterates the challenge, and I take it on. At this point, I should also mention the reference he made to the work of the hon. Member for Leeds West (Rachel Reeves) on bailiffs. There is absolutely no excuse for aggressive tactics from enforcement agents, and that is why the Ministry of Justice has launched a call for evidence, looking at the need for an independent regulator. The call closed in February 2019 and the Government will respond in the summer. I am meeting with the relevant Justice Minister just after the recess to press for robust action, so that is very much on my agenda as well. I recognise the right hon. Gentleman’s portrayal of how deeply wrong some of those behaviours are.
Hugh Gaffney
Sometimes a letter gets passed on to another debt collection agency and then another, so pressure is being put on individuals all the time. If I remember rightly, each time a letter is passed on more money is added on. I ask the Minister to have a look at that.
John Glen
The hon. Gentleman makes a reasonable point, and that is something we need to examine carefully when we consider what needs to happen in this area. I thank the hon. Gentleman for his intervention.
Stakeholder views will be essential to inform the Government’s decision making, and I would welcome the opportunity to meet the right hon. Member for North Norfolk and any other interested colleagues across the House to better understand how this important issue should be addressed as our policy thinking progresses. During my time in office, I have encountered many individuals who have been in financially vulnerable circumstances and I have compassion for the unique challenges they face. Indeed, only last week I welcomed to the Treasury some individuals with lived experience of financial difficulty, to hear in more detail how they had got into those situations.
I would like to take this opportunity to assure the right hon. Member for North Norfolk that reviewing the mental health aspect of the prescribed content in debt collection letters will be top of my list of priorities during this programme of work. The issue requires continued dialogue to understand what the best outcome for these vulnerable individuals would be, and how best to deliver it. Given the letter’s rather terse words referring to a solicitor, which are really not appropriate and could have been written a long time ago, I will reflect on the right hon. Gentleman’s point about the changing nature of debt advice and about how best it can be presented.
That does not mean that those most at risk will not see benefit in the near future. I draw attention to the significant work that has been undertaken to meet the Government’s manifesto commitment of implementing a breathing space scheme, which I alluded to earlier. The scheme will give the most vulnerable consumers 60 days of respite from creditor action, to access debt advice and put their finances on a sustainable footing.
Yvonne Fovargue
Can the Minister confirm that the breathing space would also apply to statutory authorities, for example local authorities, which are possibly the biggest users of bailiffs?
John Glen
I will come on to that point in a few moments, but my instinct, as I think the hon. Lady knows from my visit to the all-party parliamentary group on debt and personal finance, is that if the breathing space does not contain the maximum amount of public sector debt it will not be meaningful. At this moment, however, I cannot formally confirm how the scheme will work, but I will say a few more things in a few minutes.
The Government set out the detailed policy for the breathing space scheme in a consultation launched in October 2018. As part of the scheme, firms will not be able to communicate directly with consumers to request repayment of debt. In particular, the consultation paper set out the design of an alternative access mechanism for those in mental health crisis. The mechanism would enable those individuals to enter breathing space without having directly accessed debt advice. I feel very strongly about the mechanism, as those suffering from a mental health crisis may find it particularly difficult to engage with debt advice services in the way that people without mental health challenges do.
The consultation closed in January 2019, and the Government will shortly publish a response to set out their approach to the whole scheme, before laying regulations to implement breathing space before the end of the year, which is when a comprehensive answer to the question asked by the hon. Member for Makerfield (Yvonne Fovargue) will be provided.
In conclusion, I share the concerns raised by the right hon. Member for North Norfolk and recognise that, in certain cases, the content of debt collection letters can increase consumer harm. I hope I have assured him that the issue will be at the top of my list of priorities when considering further reform in the consumer credit regulatory framework. I take the point about whether the letter issue can be expedited separately, and I look forward to working with the right hon. Gentleman to better understand the most timely and effective way of remedying the problem. I thank him very much for bringing the matter to the House.
Question put and agreed to.