High Cost Credit Bill
Debate between Christopher Chope and Paul Blomfield
Paul Blomfield
It is indeed, and the Bill seeks to promote responsible capitalism of a better kind. It would also require the Financial Conduct Authority to determine a limit on roll-overs. We are not specifying at this stage what that limit should be, but looking for a solid, evidence-based decision.
The Bill also includes measures on debt collection, particularly with regard to continuous payment authorities. One case brought to me in Sheffield was of a single jobseeker’s allowance claimant who had obtained while working a payday loan from The Money Shop. Once out of work, he was unable to cover the £250 due from his bank account, but his bank told him that he could not stop the payment being made, which had deeply difficult consequences for him. Another case shared with me was of someone whose account was drained by a payday lender using a CPA, leaving him with no money for rent and facing eviction.
These are common problems, as other Members will be aware, so the Bill requires lenders to give customers three days’ notice of every CPA withdrawal and to ensure that customers are clear on their right to cancel CPAs. The Bill also has measures to ensure that lenders are not allowed to make charges for the administration of CPAs—a practice used by some—and includes a more general provision to allow the FCA to determine the circumstances under which CPAs should not be used, which might include cases where that would lead to essential bills going unpaid, which is an approach adopted in other countries.
As has been said, those who turn to payday lenders are often desperate. Before getting deeper into debt, they would benefit from advice, so the Bill seeks to promote debt support more effectively. It includes a number of triggers that would require lenders to signpost customers to free and impartial debt advice and, where a debt adviser is engaged, to require lenders to freeze charges and put in place an agreed payment plan. Some credit unions—including Birmingham’s Citysave credit union, which has launched a product to help people to pay off their payday loan debts over a 12-month period with a credit union loan—have found some payday lenders to be obstructive. The Bill therefore includes a provision for lenders to accept offers from third parties, specified by the FCA, to settle outstanding debts. The Bill also provides for the FCA to have the power to establish a new levy to support debt advice, about which I know the hon. Member for Worcester (Mr Walker) will speak in more detail. Finally, the Bill requires the FCA to determine enforcement powers to be used in the case of breaches of the Bill.
I would like to conclude—and to give other Members the opportunity to contribute to the debate—with an example from Sheffield of someone caught by the problems that the Bill aims to tackle.
Mr Christopher Chope (Christchurch) (Con)
Before the hon. Gentleman gives his last example, can he say what he thinks the impact of his Bill would be on the number of people seeking payday loans if it were to become law?
Paul Blomfield
As I said at the outset, the Bill does not seek to close down the sector, but I hope it would reduce the number of payday loans by signposting people towards debt advice, thereby opening them up to the kind of support that might lead them in other directions and prevent them from being caught in the spiral of debt. More importantly—others have made this point—by tackling roll-overs and other ways in which the industry makes unreasonable profits from unacceptable practices, the Bill will prevent those who turn to payday loans from being ripped off in the way that, frankly, they are at the moment.