Consumer Rights Bill

Debate between Lord Mitchell and Lord Higgins

Wednesday 26th November 2014 Lords Chamber

[Lord Mitchell]

I absolutely agree, my Lords, but one step at a time. Not just Newcastle United but Blackpool have a kit with “Wonga” on the front. I am told that one can even buy babygros from Blackpool with “Wonga” on them. It is just awful.

I was about to say that I will resist the temptation to comment on the value of Wonga’s ethical stance on anything; noble Lords will know what I am alluding to.

Perhaps I may be so bold as to say that the Government have been totally been taken in by these payday lending companies’ public relations campaigns and lobbying efforts. These people are not stupid. They do not advertise on children’s TV programmes because they know that this is unacceptable, even for them. Instead, they advertise on TV when children just happen to be watching. The average British family watches more than four hours of television per day; some programmes are children’s programmes and some are not, but one thing we know for sure is that the kids all know the jingles. They laugh at the puppets and are well aware that money is easily available and fun. The children know this, yet the ASA has trivialised their exposure to this marketing. The payday lending companies are very sophisticated; their marketing is brilliant. They have spent tens of millions of pounds trying to persuade us all, very successfully, that payday lending is a good thing—that it is cool, fun and gives you a wonderful lifestyle, free from worry.

However, as we know, because we have seen it at first hand, unaffordable debt is a blight on our society. We have seen vulnerable and desperate people succumb to the seduction of payday lending advertising. As the noble Lord, Lord Alton, has said, “pester power” has now entered the lexicon of advertising—using children to nag and persuade their parents to take out payday loans. Who could resist their appeal, particularly with Christmas coming up?

The Children’s Society, in its excellent survey on the debt trap, has come up with a series of statistics that have already been mentioned in this debate and which I will not mention again. However, they are pretty damning and show that payday lending advertisements are seen by children. As I say, the payday lending companies at this very moment are spending millions of pounds on daytime advertising and are directing much of it at our children. In introducing the amendment, we aim to restrict this pernicious advertising.

[Lord Higgins]

My Lords—

Financial Services (Banking Reform) Bill

Debate between Lord Mitchell and Lord Higgins

Monday 9th December 2013 Lords Chamber

[Lord Higgins]

My Lords, I want to make two very brief points. The amendment refers to “charges” and to “high-cost credit”. However, the words “interest” or “the rate of interest” appear nowhere in the amendment. I would have thought that there was some case for explicitly including that in the Bill, because the use of the other, rather wider, expressions leaves too much scope for the situation to be fudged. I would be grateful if my noble friend would say something about that.

We have been talking very much about payday loans and their provision; but it has become apparent that a number of charges made overall by clearing banks sometimes can approach, if not exceed, the limits charged by payday loan providers. I would like my noble friend’s assurance that the organisation will take account of that also and, if necessary, deal with the problem of very high overall charges—particularly with regard to unauthorised overdraft charges, for example—made by clearing banks as well as by payday lenders.

[Lord Mitchell (Lab)]

My Lords, my head has been spinning in disbelief since the introduction of this Government’s amendments. Even two weeks ago the Prime Minister, the Chancellor and the Business Secretary were resolute in their opposition to any form of capping of interest rates offered by payday lending companies and other suppliers of short-term credit; yet here we are today, legislating for just such a cap. We are stating to the FCA that what was previously defined as a “may” now will become a “must”. That is a good outcome and I, for one, applaud the Government for this massive U-turn. It could not have been easy for them to eat their words, but politics is politics and if the heat has got too hot it is time to get out of the kitchen.

For nearly four years I have been working on a campaign to regulate payday lending. Of course, I knew about loan sharks and the terrible misery that they cause; but I had not really focused on the way this industry was developing. When I did, I was aghast. Here was a business that was enticing people into debt and playing on their vulnerabilities. Any way you cut it and any way you measure it, 6,000% interest is beyond morality and decency. I felt that it had to be regulated and that it was my duty to do so within this Parliament.

Last year we managed to persuade the Government to include an amendment to the Financial Services Act that gave the Financial Conduct Authority the power to regulate all aspects of payday lending and, in particular, to cap interest rates. We gave it the teeth, but sadly it did not bite. Indeed, it decided that it was not yet persuaded that these rates should be capped at all. One can only wonder: if 6,000% had not moved the FCA, would 10,000% or 100,000% do so?

A little-known fact is the extent of financial support that payday lending companies receive from the City. I have read that Barclays Bank lent Wonga over £250 million; when I investigated further I found that the number was very much higher. If you consider how much all the clearers and all the other financial institutions must be lending to the payday lending companies, the number must be many billions of pounds. The City purports to have washed its hands of this grubby sector, but in truth it participates by using payday lenders as surrogates.

I have this to say to Barclays and, in particular, to its chairman. If your mission really is to clear up the mess of the last 15 years, then please tell me: what is your bank doing, funding the payday lending industry? We have come a long way in these past four years and tonight will be a milestone. But we need to go further still. I address these comments to the FCA. Please ban all advertising for short-term loans targeted at children. It is bad enough that people have to borrow money from the payday lenders—but giving payday lenders carte blanche to use sophisticated advertising to encourage young children to persuade their parents to get into more debt has to be morally wrong.

Despite appearances to the contrary, I am not against the payday loan industry. We need it, it is essential and it must be successful, but we want an industry that offers loans at fair rates and does not extort. I think that this amendment achieves just that.