High Cost Credit Bill

Debate between Robin Walker and Lyn Brown

Friday 12th July 2013 Commons Chamber

[Lyn Brown]

I agree with my hon. Friend’s analysis.

Community Links is a valued and well-established charity in my constituency that has worked tirelessly on behalf of disadvantaged communities for more than two decades. Its clients include people who have taken out payday loans as a means of supporting regular family expenditure. Community Links tells me that over the last year or so it has seen a 20% increase in payday loan problems, which its advisers attribute to the ease of access and application. It has given me two examples to share with the House of real everyday problems faced by my constituents.

The first client is a married woman with two school-aged children. The family own their property and are paying off the mortgage. She was in part-time employment, working as an administrative assistant, and her husband had been made redundant, so the family had to manage and struggle on her single wage. She started to take out payday loans in order to clear unexpected bills, but she then began to use the loans as a way of increasing family income.

Although she was highly experienced at juggling the loans, one by one the loan companies started to contact her regarding repayment. When she went to Community Links for advice, she had four payday loans with four different companies—short-term loans with high interest. She had also been using her credit card to pay for family expenditure and the total debt was about £7,000. She tried to negotiate the payments herself, but the companies simply were not interested. She felt threatened by numerous telephone calls, sometimes many on one day, and visits to her home address. Although she is a very competent individual, she became swamped by the loan companies’ demands and sought legal advice as a result. Community Links advisers drafted a financial statement, negotiated with creditors and arranged reasonable payment terms. It also arranged for her mortgage payments to be reduced in order to bring down her expenditure to match her income. The Bill’s proposals on affordability and access should help prevent the build-up of such calamitous debts. If she had not gone to Community Links, or if it had not had the staff to help her, I shudder to think what would have happened to her and her family. It would have meant default on the mortgage and homelessness. She would then have had no choice but to apply for housing benefit and would have had found herself, as is often the case in London, in substandard, expensive private rented accommodation. All this would have been at a cost to the taxpayer and would have been avoidable with the proper regulation of loan companies.

I am afraid that this case also highlights the crucial role of debt advice in starting to resolve people’s problems. Community Links tells me that it has lost all legal aid funding for welfare benefits and debt advice as a result of Government cuts, amounting to more than 700 cases a year, each of which would be more likely to lead to ongoing costs for the taxpayer, rather than individual, one-off payments and interventions.

Community Links also tells me that the loss of funding for advice services means that struggling families are finding it much harder to access support when they need it and are getting deeper into crisis. The solutions—eviction and homelessness—cost the taxpayer money and we must not forget that.

I welcome the Bill’s provision that lenders should signpost customers to free, impartial advice when they are turned down or miss a payment. I also welcome the potential levy on lenders, specifically to pay for additional debt advice through the Money Advice Service. I hope that the Financial Conduct Authority takes note of that when it assumes responsibility for the sector in April 2014.

[Mr Robin Walker]

I agree with the hon. Lady about the importance of free financial advice—she gave a good example of that from her constituency—but would she not agree that, potentially, this should be extended beyond the Money Advice Service to other voluntary bodies that provide free financial advice and do so much for our constituents?

[Lyn Brown]

I absolutely agree. Community Links is not a money advice service, per se; it is a general advice service, and a good one at that.

The second case that Community Links told me about also illustrates why the Bill is needed. The case is that of a single woman with three dependent school-age children—nine, 12 and 16—living in council accommodation. She lives with slight learning difficulties and experiences problems with literacy. She currently has a part-time job, receiving a salary of £557 a month, with working tax credits of £240, plus child tax credit and child benefit. When she visited Community Links, she reported council rent arrears and difficulty meeting regular utility bills, and was finding it difficult to live on her income. She also began to use easily available payday loans to supplement her income.

At the time of her initial visit, the total value of the loans was £977, which was renewed—rolled over—each month, to supplement her income. She also had unsecured credit of £14,000. Payday loans were used for regular living expenses; for example, child minding, school meals, household bills and travel to work. The client did not fully understand the long-term implications of interest payments at all, or of using payday loans for family expenditure. There was simply no understanding. Community Links is currently assisting this woman by applying for a debt relief order. The proposal in the Bill to determine and regularly review the number of roll-overs and a limit on the number of loans per year would help people such as this woman.

It is certainly no help to allow—indeed, to encourage, through attractive advertising and inadequate regulation—almost unrestricted access to expensive credit, when advice and support to manage debt is so much more appropriate. An existing alternative has already been spoken about in this Chamber: the credit union movement. I have direct experience, from my time working in Waltham Forest, of establishing a credit union. I am delighted that Justin Welby, the Archbishop of Canterbury, has called on church parishioners to lend a hand to credit unions, so that they can provide an alternative to payday loans. The Waltham Forest community credit union was ahead of its time, because it was set up by a confederation of churches in the borough. With the skills, financial experience and premises and halls at the heart of communities that it offers, the Church is exceptionally well placed to help the credit union sector to grow and thrive.

Credit unions often have difficulty in establishing themselves because they do not have the basic seed funding that they need to grow to the level at which the membership of the union makes it sustainable. It would be good if my hon. Friend the Member for Sheffield Central could find a way in which the Bill could be amended to nurture credit unions so that they become an alternative to the payday loans system. There would be a just logic in imposing a levy on payday lenders to support the development of credit unions, because the problem would be funding the solution.

I commend the principles and provisions of the Bill. It would make the market fairer by regulating the advertising of payday loan providers, requiring clear information on the cost of loans and introducing a range of measures to protect borrowers in difficulty. In particular, I commend the Bill because it would give the FCA the ability to prohibit

“specific features of high-cost credit”,

including the amount of credit that can be advanced, the level of default charges, charges related to the use of a continuous payment authority, roll-over and repeat lending, and obligations on loan guarantees.

Those are the issues that are most often brought to me by the advice services in my area and I am sure that they are the types of problems that hon. Members on both sides of the House encounter at their surgeries. Those issues are at the heart of the irresponsible lending and repeated rolling over of unpaid loans that cause so much harm and misery to borrowers and families. The provisions of the Bill are greatly needed. They would help people in our communities who are vulnerable to exploitation, and who need and deserve our support.

Opportunities for the Next Generation

Debate between Robin Walker and Lyn Brown

Tuesday 13th September 2011 Commons Chamber

[Mr Robin Walker (Worcester) (Con)]

Today’s debate is on a vital subject, and I have no doubt that opportunities for the next generation are dear to the hearts of every Member. I am sure that we all come to this place motivated to ensure that opportunity is as great as possible, and I have no doubt that Members of all parties are passionate about delivering for the next generation. It is tragic, therefore, that Labour Members can only talk down the opportunities for the next generation, given that their party in government did so much to blight them with debt and economic uncertainty.

[Lyn Brown (West Ham) (Lab)]

Is the hon. Gentleman trying to convince the House that no young person in his constituency has talked to him about the withdrawal of the EMA and its impact on their life?

[Mr Walker]

Absolutely not. I have met young people in my constituency and I have been to my local technical college and explained to my constituents what we are doing to replace it. The people to whom I have spoken have been satisfied with that, however, because they have understood that there will be support in the future.

It is important to consider how to create opportunities. In my maiden speech I noted that some of the steps set out in the Gracious Speech aimed to increase opportunities for young people by supporting businesses that wanted to hire, by increasing the number of apprenticeships and by pursuing vital education reforms. Since then, all three of those themes have been strengthened. In answer to a recent parliamentary question, I discovered that 38 businesses in Worcester—a significantly higher proportion than the average—have successfully registered and benefited from the national insurance holiday scheme to allow them to hire new employees, and earlier this year another parliamentary question revealed that 400 apprenticeships were started between May 2010 and the end of last year. Following the huge success of the 100 in 100 campaign, championed by my excellent local newspaper, the Worcester News, I have no doubt that there will be even more this year.

Apprenticeships are a fantastic pathway to opportunities for young people. I have no compunction about saying that the previous Government were right to start the process of building them up, and I will not pretend that all Conservative Governments in the past have given them the priority that they deserve. However, it is churlish for this Opposition motion to decry the achievements of the Government and the Minister for Further Education, Skills and Lifelong Learning in delivering more. As the Minister for Universities and Science pointed out earlier, the statistics in the motion are based on spin. I welcome the Government’s commitment to fund 360,000 apprenticeships in this financial year alone, and we should all welcome the announcement in this year’s budget of a further 50,000 apprenticeship places and the more recent announcement that the Government are beating their own ambitious targets for apprenticeship starts.