Consumer Rights Bill
Debate between Baroness Drake and Lord Stevenson of Balmacara
Baroness Drake
My Lords, I support all of the amendments in the group, but I want particularly to speak to Amendment 105P. The mere existence of the payday loans, high-cost consumer credit market is to me a consumer detriment, particularly for vulnerable consumers who access it, but of course that is not an issue which is up for debate under these amendments. The FCA remit is to regulate markets, not to outlaw or to ban these companies. Only the Government can drive the policy needed to secure for not-for-profit affordable lenders sufficient capital liquidity to provide an alternative source of credit. Amendment 105P seeks to address the issue, because notwithstanding the regulation of payday lenders, the need for affordable credit still remains for a particularly vulnerable group of people. As I say, only the Government can drive the policy to address this issue. In the mean time, given that the payday loan market exists, the demand side has certain key characteristics with which we are all familiar. A high proportion of borrowers experience financial distress. Many will come from less well-off socioeconomic groups and will have few assets. A significant number of borrowers will have two or more loans, exposing them to unsustainable and spiralling debt.
Many borrowers get payday loans to cover basic needs, including the needs of their children, yet many are in acute repayment difficulties. According to the CMA, more than one-third of loans were not repaid on time or at all, often bringing considerable consumer harm relative to the amounts that were borrowed in the first instance. That is a demographic crying out for intrusion by the Government to create a sustainable market for affordable credit, as these people will still be vulnerable to the need for that credit. Amendment 105P turns its attention to the fact that the standing need for affordable credit for this vulnerable demographic has to be addressed by the Government.
Amendment 105P also captures the argument that the introduction of a broader levy funding base should not be a lost opportunity to significantly expand the availability of a free debt advice service. That is a compelling argument. By comparison, the new pension freedoms and choice agenda due in April 2015 comes with a guaranteed guidance service on the assumption—quite rightly—that the position of pension savers and consumers in the marketplace will be more vulnerable to poor decision-making without such guaranteed guidance. A levy is being raised from among the relevant providers of financial services which is to be dedicated to funding that guaranteed guidance.
No doubt the argument will be made that significant numbers who would benefit do not seek debt advice and that the allocation of funding to a debt advice service has to be proportionate to the demand for such guidance. My response to that is to say that the Government should take the lead in stimulating or creating the demand and the take-up for that debt advice service. I am sure that the proposed pension guarantee guidance would not be deemed a great policy success if few people took advantage of it—even more so with vulnerable people exposed to unsustainable debt and high-cost consumer credit, missing the opportunity to expand the availability and the take-up of a free debt advice service would not be a policy success. Amendment 105 in particular says that we are dealing with a particular manifestation of the need for credit. However, even in addressing the payday loan companies, the systemic problem will still need to be solved: how people can get access to affordable credit and how they can get access to and use a free debt advice service.
I should perhaps declare an interest in that I am a member of the TPAS board which is currently involved in delivering the pension guidance guarantee. Hopefully, that will not detract from the merits of my argument.
Lord Stevenson of Balmacara (Lab)
My Lords, I declare my interest as the retiring chair of StepChange, the leading debt advice and solutions charity, which has already been mentioned this evening.
This has become a rather wide group of rather disparate amendments, and I worry that some of the important points that need to be made in this area might get lost. As well as dealing with the very important issues about the impact on children of payday loan advertising, the amendments in my name and that of my noble friend Lady Hayter propose measures, as we have just heard from my noble friend Lady Drake, to ensure a further clearing up of the payday lending sector as a whole. There are other amendments still to come which deal with elements that go together as part of this overall policy.
This is rather a dense set of amendments, and I apologise in advance for spending some time on the two amendments to which my name is attached, Amendments 105P and 105Q, but I think they are important. However, I do not want to lose the very good speeches that we have already heard. Somebody asked what the state of play is now in childhood. My noble friend Lady Crawley said that we have to think quite inventively about how the language of children’s protection needs to be modernised when we are dealing with issues such as advertising more generally. Even to talk about restricting adverts in a system which is 50 years old—the watershed—is to ignore the complete change in viewing habits that we are currently living through, with people watching individual programmes in a variety of different information-gathering machines, such as tablets and iPads.