Creditworthiness Assessment Bill [HL]

Baroness Gardner of Parkes Excerpts

Committee: 1st sitting (Hansard): House of Lords
Friday 11th May 2018 Lords Chamber

[Lord Desai (Lab)]

My Lords, I did not speak in the Second Reading debate but I add my support to the Bill sponsored by the noble Lord, Lord Bird, and speak against the amendment. The Second Reading debate showed that several things were being put together and confused. The Bill’s purpose is simple. Obviously the problem is that the poor do not get access to credit, or they do at very high interest rates. That is not the problem that would be solved here. There is also the problem that lots of people are in arrears. If they are they will have a low credit rating. That is often as true for owners. That is not a problem.

The virtue of the Bill is to say that if people are behaving like regular, honest payers of their debt on time they ought to get some sort of compensation or reward for that. If people are paying rent regularly they should be treated on par with those who pay their mortgage regularly. It is such a simple idea that I do not know why people are upset about it. For one thing, the cost of recording payments is much lower than it used to be because they are completely automatic. If we can tell the FCA to persuade people to get into a blockchain system that would be a very efficient way of recording payments, both on the part of the landlord who receives it and the tenant who pays it. It would be very easy to build up a databank of regular payments. From there we could easily get on to some sort of financial app that will give them the credit they deserve.

If we keep the Bill to this particularly narrow but very useful aim we should be very happy to support it. It is required that we do not treat two groups of virtuous people unequally. Those who pay their mortgage on time and those who pay their rent on time should be treated equally because they are both behaving honestly.

[Baroness Gardner of Parkes (Con)]

My Lords, I listened very carefully to what my noble friend said in introducing the amendment, but I really think it is a very bad amendment. It throws out the whole value of the Bill completely. It would just reinstate the current position. That is not what we are aiming to do. We are aiming to make this possible for people who really have no knowledge or awareness of finance or how to do things. These people would be the very ones to be overlooked with a “may”, because they do not push themselves forward in the same way, yet they need the information and the help, certainly if they have been good payers of rent. I remember when I was looking to get a mortgage for the first house I ever bought—I did not succeed in getting one at the time. The whole house cost £7,500, which in those days was a lot of money. A dental chair-side assistant was paid two pounds 10 shillings a week; a highly skilled receptionist was paid £7. We are talking about a long time ago. Although those were times when I knew nothing whatever about mortgages, these are times when you need help and you want to have your case considered. The more modest you are or willing to be squashed the more you were squashed. It is not a good amendment and I am sorry to say that I cannot support my noble friend on it. I want to retain the status quo in the original wording of the Bill, which would be very much more helpful to those who need help.

[Baroness Tyler of Enfield (LD)]

My Lords, I also support the Bill in its original unamended form. I will explain briefly why. I apologise that I was unable to be present at Secon I fundamentally believe that there should be parity of treatment between tenants and homeowners d Reading. as others have already said.

I had the privilege of chairing the Lords Select Committee on Financial Exclusion last year, which explored the connection between consumer credit and financial exclusion. We heard that for the many low-income households without financial safeguards, credit, including high-cost, short-term loans, was the only way of keeping on top of family finances for regular or emergency expenditure. As we all know, this phenomenon is particularly prevalent owing to increasingly precarious work and the casualised forms of employment around, meaning that both income and expenditure needs for individuals and families can easily spike without warning.

It was clear to us—the committee heard this very strongly indeed from the evidence—that consumer credit is increasingly the de facto safety net for many people on low incomes to meet essential needs. But we also heard that many credit agencies do not take rent into account. Most social and private renters therefore often have thin credit histories and do not have access to the lower-cost mainstream lending options. What we heard most of all—this is why I feel so strongly on the issue—is that those people are too often forced to turn to high-cost and predatory sources of credit, such as payday lenders or rent-to-own companies.

Frankly, I was shocked when I heard some of the eye-wateringly high forms of interest on credit and how much it can cost for someone who goes to somewhere such as BrightHouse to buy white goods or something like them. They are paying so much over the odds. This directly contributes to the poverty premium, established to be at around £1,000 per year per person, which is paid by poorer people for products and services because of a lack of consumer credit or creditworthiness. As my noble friend Lady Grender said, this particularly affects young people. On Tuesday this week we heard excellent work from the Intergenerational Commission of the Resolution Foundation that showed that one-third of millennials can now expect to be renting for their entire lives. We have to make sure that policy is in line with the reality of how people live their lives.

The chief executive of BrightHouse gave evidence to our committee in 2016 and made the point that its customers had very few options. It is time to give those people some other options and to bring them back into the mainstream. This Bill does that. It can help redress some of the damage of exclusion and insecurity that plagues those struggling to make ends meet and prevent an already disadvantaged Generation Rent falling into further cycles of debt and despair. It really is time that we make rent count and it is long overdue that we do.