Creditworthiness Assessment Bill [HL]

Baroness Kramer Excerpts

Committee: 1st sitting (Hansard): House of Lords
Friday 11th May 2018 Lords Chamber

[Baroness Thornton (Lab)]

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)]

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)]

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.

--- Later in debate ---

[Lord Bates]

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]

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]

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.