Creditworthiness Assessment Bill [HL]

Baroness Grender Excerpts

2nd reading (Hansard): House of Lords
Friday 24th November 2017 Lords Chamber

[Baroness Grender (LD)]

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.