Financial Services Bill

Lord Archbishop of Canterbury Excerpts

Wednesday 28th November 2012 Lords Chamber

[Lord Kirkwood of Kirkhope]

My Lords, if I may interrupt the exchanges between the two Front Benches, this is a very welcome development from the Government. I absolutely support the course of action that is being taken and I can assure the noble Lord, Lord Mitchell, that I have the same concerns as him in terms of the argument he mounted, but this is a more sensible way to proceed.

I was pleased that the noble Lord, Lord Mitchell emphasised the fact that access to credit for low-income households is an important part of some of the changes we are introducing to the benefit system over the next five to 10 years. As we know, because colleagues have had important discussions about this matter, one of the changes brought into being by universal credit is that credit for all benefits taken together is paid, not weekly or fortnightly—as we have been used to in the past—but monthly. It will be a dramatic change for many low-income households that are used to weekly or fortnightly management of cash budgets in order to get through payment of their weekly responsibilities without getting into debt. When universal credit is fully rolled out in 2018—so we have a little time to get this right—I am absolutely certain that families will need access to small amounts of money to see them through when benefits either run out or, as I think is inevitable, fail to be paid. At the moment, if you do not get your housing benefit, your jobseeker’s allowance can tide you through. If you do not get your universal credit, you get nothing. If you get nothing for one month it is really serious; if you do not get the benefit paid for two months, you are in penury. Controlled access to this kind of loan is an important part of the process and we must not throw the baby out with the bathwater.

I know, as well as anybody in this House, the effect of loan sharks and the many sharp practices which must be controlled. What I cannot understand—this is the reason why I rose at this moment, to say to my noble friend that his suggestion is very welcome—is why we do not have a statutory code of conduct for licensed practitioners who are members of the Consumer Finance Association. If they had licences and they breached the code of conduct, whether it was about inappropriate, usurious rates of interest or criminal methods of collecting outstanding amounts of money, their licence would be withdrawn. I am just about to finish a period as a lay member of the General Medical Council so I know what a regulator can do and what fitness to practise means to a medical practitioner who is on the shady end of clinical practice, and it works.

In taking away this amendment, I hope the noble Lord, Lord Mitchell, will look at the Bristol work, which is a serious piece of work—I know because I have checked—that will contribute a lot to the debate and which many colleagues in this House might like to get access to before they make a final decision on this matter. I hope that he will weigh that in the balance. I hope the Minister, when he comes to recast the amendment—bilaterally, I trust—will think seriously about whether there could be some way of at least not ruling out the FCA adopting a statutory code of practice which would meet all the legitimate concerns that are coming from all sides of the House. I hope common sense will prevail and I hope that the noble Lord, Lord Mitchell, feels able, in all conscience, to withdraw the amendment. I can assure him that there will be as much pressure put on from this side of the House as is coming from that side to get this thing right before the Bill is passed.

[The Lord Bishop of Durham]

My Lords, I welcome with other Members of the House the statement made by the noble Lord, Lord Sassoon. One of the points made by the noble Lord, Lord Mitchell, in his excellent speech was about the dysfunctionality of the market. As was said, interference and capping of interest rates normally drive people towards loan sharks with unintended consequences of a very serious order, as we see in many parts of the country at the moment. However, if you look at the profits being earned in this market, it is clear that the barriers to entry are so high that there is absolutely no way in which people can come in and start shaving off the abnormal rates being achieved through participation in this market. If it was working, the interest rates would drop—it is as simple as that. The rates are clearly usurious—to use an old-fashioned expression. It used to be said in the old days that you could not take away people’s beds and cloaks because they were essential for life—that is the Hebrew Scriptures; today, equivalent things are being taken away as a result of those very high rates of interest. It is a moral case, and it is bad for the clients and bad for all of us in this country when it is permitted to happen.

I hope that over the next few years, thanks to two other amendments that have been agreed by the Government over the past few weeks during the Report stage—one puts an obligation on the FCA to look at access to finance in areas of deprivation and the other, through other means, will enable the FCA to know exactly what is happening in terms of lending in areas of deprivation—we will put together in this House a package of measures that will enable this market to be effective. But that will take time. The proposed amendment that will come next week will be permissive, not obligatory, and will enable regulatory authorities to ensure that, in the interim, there is not this abnormal rate seeking which has been so damaging in so many of our areas, including many in my own diocese.