Affordable Credit for People on Low Incomes

Debate between Lord Field of Birkenhead and James Cartlidge

Wednesday 5th December 2018 Westminster Hall

[Frank Field]

I totally agree with that. I suggest that there is no silver bullet. Clearly, credit unions have a part to play, but they are not as thriving in Birkenhead as they are in others parts of the country. Therefore, we need a whole strategy of policies, so that the geographical chance of life neither protects people nor leaves them vulnerable and unprotected. If someone has a really good, strong credit union and they are a member of it, that is good news, but if there is no credit union, or if their pattern of behaviour does not easily fit into what the credit union requires, it is difficult for them. I want to draw the Minister on that later in the debate.

The leaflets that are now going out in our constituencies claim that there are no late payment fees. I am pleased to be able to say that, unlike other companies that lend people money when they are extremely vulnerable, there is no evidence at all that the people coming for repayment come with baseball bats to enforce that repayment. But of course, Provident has another strategy, so it does not have to do that. To use another example, one of the volunteers in the Feeding Britain network tells us that one of her friends who got close to paying off her debt with Provident was immediately offered another loan. If someone has problems repaying, they are offered other loans, so the loans mount up and become very substantial, and if they are towards the end, Provident tries to make it part of their working-class economy that they should have loans, by suggesting that they should take another loan.

I thought that, before I come to what I would like to see as part of the Government’s strategy, I would talk about the hard sell. One mother went on to the website to see what the loans prospects were. Having merely gone on to the website, she said that she was being called up eight times a day until she took out a loan. There is quite a hard sell here. As well as picking on areas that are vulnerable because universal credit is being rolled out and picking on the vulnerable areas across the country in periods such as Christmas and the summer holidays, there is a real danger that merely inquiring about a loan means that people then get the hard sell.

What about the strivers? For example, we had two people in work and two children who borrowed £100 from Birkenhead, and they were anxious about paying bills and feeding those children. They ended up having to pay back a few pennies less than £500. We have also seen the Scarlet Pimpernel effect in Birkenhead. If someone googles loans, Google throws up, in the first instance, those loan companies that are likely to cost them the most to borrow from. Will the Minister look at whether there is a case for saying that Google should display what we could all agree are the best companies to deal with, not those with the highest charges?

[James Cartlidge (South Suffolk) (Con)]

Will the right hon. Gentleman give way?

[Frank Field]

I will happily give way to an ex-member of the Select Committee on Work and Pensions.

[James Cartlidge]

I very much enjoyed serving, up to the time of the general election, on the Select Committee chaired by the right hon. Gentleman. He has great passion in this area and has just made a really interesting point. What would concern me about online advertising is this. Probably these companies are simply purchasing through the Google Ads algorithm; I imagine that there is very little way for them to have the sort of control described, but it is an extremely good point that the companies charging the most interest will have the biggest budgets to pay for Google ads and so on, which almost inevitably means that they will come near the top. We should look at that; it is a very good point.

[Frank Field]

That is a really good point, and the Minister is nodding, so I know that we are going to get action on it. I am immensely grateful for that intervention.

Let me take another website—Doorstep Loans in Birkenhead. It aims specifically at single parents. It says, “We understand your position. We can help you through a loan.” It says to those who are unemployed, “We understand your position and the particular problems you have. What about a loan from us to help there?” It says to those with a bad credit score, “What about a loan to you?”, knowing that they cannot get one from elsewhere. Those with disabilities are also lined up for special treatment.

Let me switch to Leicester, which has also given us some information. One pensioner took out a loan to help to buy Christmas presents. She is now repaying £100 a month for that loan. That is hardly a good prospect for her—it is a very large part of her pension. Derbyshire, too, shows a really worrying trend. Provident went to one of those houses that are known to have young people in supported accommodation, who are very vulnerable, and managed to sign up every person in the house for a minimum of a £100 loan.

Putting fires out is part of the Minister’s job, but so is thinking creatively about the future, as he has always done on Feeding Birkenhead, so may I put before him the idea of a citizens’ bank? It would not be a silver bullet; it would be part of many other things. If we had asked poor people to help to design universal credit, none of them would have said, “I work to a five-week month or a four-week month for payments.” They would have said, “This benefit needs to be designed for me, which means daily payment or weekly payment.” I very much hope that we could take things a stage further and include poor people in designing the bank, so that it would be a bank that they wanted. I hope that we can pick up the hon. Gentleman’s idea, which was in the Budget, about interest-free loans. I hope that we could sign up the Department for Work and Pensions so that users of the bank would make agreements for loans that they paid back in a manageable way—paid back, with their agreement, from benefit—so that there would be a minimum element of bad debt.

As we all know, Wonga said that it had to charge 5,000% because of the bad loans that it had. It had many bad loans precisely because it was charging 5,000%. I think that if we could eliminate from the system people who cannot pay and the few who will not pay, we would have a very different, and viable, model. My plea to the Minister today is this. Might people who are interested be able to come and talk to him further on the idea that I have described? Might we also not exempt the banks from their responsibilities? Many of my constituents have problems because of the way that the banks behave. The situation is pretty bad: the banks give large sums of money—thank God—to their foundations, and those foundations give out money to projects to undo some of the damage that the banks themselves cause. I therefore hope that this is the opening of another chapter on how we get decent banking systems that fit the moral economy of life for working-class people, rather than roughing them up.