Debt Advice and Debt Management

Andrew Bingham Excerpts

Thursday 1st December 2011 Commons Chamber

[Justin Tomlinson (North Swindon) (Con)]

It is a pleasure to follow my hon. Friend the Member for Solihull (Lorely Burt), who has been a long-standing champion for this issue. I congratulate the hon. Member for Stockton North (Alex Cunningham) on securing this important debate on a subject in which I take a particular interest—I supported the ten-minute rule Bill introduced by the hon. Member for Makerfield (Yvonne Fovargue) and have spoken in several connected debates.

This issue is important because 91% of people in financial difficulty feel that with better information and advice they would have made different decisions. Members of Parliament know through their casework of the distress in which individuals find themselves, and in times of financial difficulties their needs are even more urgent. These people do not necessarily have the time to shop around and make informed decisions, and many people get into financial distress following a significant change in their circumstances, whether it is a job loss, bereavement, illness or family breakdown. At such moments, they are not necessarily in the strongest position to address the challenges that they face.

I wish to highlight a number of issues. First, I have been a long-standing champion for the improvement of financial education, and I shall take this opportunity to plug my ongoing campaign. We need to equip people of all ages in this country with the key skills that enable them to make these important decisions, and I shall continue to press for that at every opportunity. The total costs of the decisions that people make are not necessarily displayed in a format that they understand—in plain, good old-fashioned cash terms.

[Andrew Bingham (High Peak) (Con)]

With his usual modesty, my hon. Friend just briefly mentioned the campaign for financial education in schools, on which he has led the way in the House—I think that the all-party group on financial education for young people, which he set up, is the largest in the House. Does he agree that financial education is very important to tackling the problem in the long run, particularly given that there are now so many different ways in which people can purchase things and borrow money? This education is crucial for future generations.

[Justin Tomlinson]

I thank my hon. Friend for that intervention. He has been extremely supportive of our ongoing campaign. One of the driving forces behind our desire for compulsory financial education is the fact that we live in a challenging, complex world, where individual consumers are all too often bombarded by unhelpful marketing messages. Equipping consumers to enable them to pick their way through that minefield would make a big difference.

We are also seeing products becoming available that have complex terms and conditions—again preventing consumers from making informed decisions—and for which the consequences of defaulting are not clearly set out. The up-front and administration fees are not clearly shown, and too many consumers are making monthly payments to such companies without clearing the original debt for which they turned to them to get help. We have also seen misleading company names and advertisements. People in financial distress are under pressure from the companies to which they owe money. They feel obliged to make a quick decision, so when companies contact them to say, “We can sort this out. You just need to say yes in this phone call and we’ll get these people off your back,” it can be very attractive. We have seen excessive amounts of cold calling and dishonest texting. I agree with the request that the hon. Member for Stockton North (Alex Cunningham) made to ban such practices—I am certainly someone who is sick and tired of receiving unwanted calls and text messages. A number of hon. Members also referred to Google rankings, whereby people innocently type in “free debt advice” and are bombarded with the complete opposite. I would recommend that the Minister look at that.

I welcome the OFT’s revised guidelines, which set out the standards and expectations of debt management companies, making it clear that they must be transparent about the service on offer and the fees charged, to ensure that the advice provided is in the best interests of the consumer. It is clear that the Government—especially the Minister, who has shown a great interest in this subject—and the OFT are seeking to make a difference. However, I have a number of questions for the Minister, which I hope he will respond to when he wraps up. Some 129 businesses have already been warned, 69 of which have now exited the debt management market. Does he consider that a success?

Secondly, the process can take up to two years. What can be done to speed it up? As the hon. Member for Makerfield pointed out, not only can those businesses inflict huge damage to the most vulnerable consumers in two years, but for some of them, their whole business plan is geared towards being around for only two years and making as much money in that time as they can. I have spoken to the Consumer Credit Counselling Service, which told me that many such companies are also fleet of foot. As soon as we knock them off in one form, they reappear in another. My final question on the issue is this: how easy is it to identify some of the online operators? If they are on the high street, with nice big shiny signs above their shop doors, it is obviously easy to identify and tackle them. However, many such companies operate online, making it difficult to track them down. Is that stopping the clock ticking in terms of action being delivered?

All those who have spoken today have promoted making available free, independent debt advice—which I, too, support. I welcome the increased content available online, but we must remember that a significant number of the most vulnerable consumers—the people we will see coming into our surgeries—still rely on individually tailored, face-to-face or telephone sessions to help. I pay tribute to organisations such as Citizens Advice and the CCCS, which provide fantastic, individually tailored, free advice sessions. Those sessions are essential, because vulnerable consumers, with their individual circumstances, need somebody with the patience to go through things with them. All too often they are people who, through fear of what they are encountering, have not opened their post. They need someone to sit down with them, because online advice relies on people to know their own situation, which all too often is not the case.

People might also feel the need to make a quick decision because the people to whom they owe the money are chasing them. A debt management company might say, “Just say yes on the phone and I’ll sort all those problems out.” When confronted with a bag of unopened post, people need somebody to help by saying, “We’ll sit down with you and get to a position where you can make a quick response.” Also, advice sessions will always take account of people’s individual circumstances, because every person is different—every person has different priorities and different amounts of debt—and will help them take the best possible course of action for their circumstances.

I welcome the Government’s commitment to secure the £27 million-worth of additional funding for the next year, but we need a long-term commitment, which is what the Money Advice Service is exploring. I urge it to continue and find what it is looking for, as this is so important. In these difficult and constrained financial times, this is an absolute priority, which I shall continue to support.

I would go further than some other speakers who talked about the need to provide access for free and independent advice. Just as we insist on having a Government health warning on all packets of cigarettes, I would like to see information published about how to access the free independent advice so that people can take a few moments out and contact those who can assist them. Too often, we have seen some of these debt management companies create spurious charities, whose people then provide the “independent advice” when they are, in fact, just subsidiaries of the company that is going after the business in the first place. Some have said that they did not want to get rid of this market completely, but wanted to be confident that every single consumer has easy access to the free and independent advice that we all believe is so important.

Finally, I want to explain how we can make a difference as individual Members of Parliament. Organisations such as Citizens Advice are under a lot of pressure: only a limited amount of funding is available and only so much time can be given to consumers who are in financial distress—effectively in a last-chance saloon—and need a quick response. When approached by R3, Citizens Advice and Nationwide, we carried out a training day, involving me as MP and all the staff in my constituency office. We were trained on how best to deal with people in financial distress. We were able to phone up the local citizens advice bureau and arrange an emergency appointment the following day, where people could benefit from a one-hour session. It provided an opportunity to sit down with the individual in advance and say, “This is what you need to bring to your session tomorrow”. The maximum help possible was provided in that one-hour session. All too often, consumers turn up at the last chance saloon without having all the information they need, which makes it difficult to give them the practical advice they need. I have been assured by both Citizens Advice and the Consumer Credit Counselling Service that they will happily provide similar training for all MPs. That shows how we can take this up to make a positive difference.