Consumer Credit and Debt Management

Craig Whittaker Excerpts

Thursday 3rd February 2011 Commons Chamber

[Craig Whittaker (Calder Valley) (Con)]

I assure the hon. Member for Walthamstow (Stella Creasy) that although my grandmother was called Crook, neither she nor I are related to the person whom she named earlier. I thought I should put the record straight on that one.

In Calder Valley, we have the fantastic Calderdale credit union of which I must declare I am a member. It does some great work in combating doorstep lending and has achieved much in the local community of Todmorden to offset those lenders’ high interest rates. It has done so through a great education programme and, of course, through providing small loans at a much lower rate, in line with that of most banks and reputable high street lenders.

Last week, I attended our local Sure Start centre in Todmorden, at which Barclays bank held a money skills training programme for a group of young people and young parents. It explained the many aspects of finance and, importantly, the value of saving, and it became clear that the majority of the group of about a dozen young people had already come into contact with doorstep lenders.

Some of the stories that we heard around the table were absolutely horrendous, and three key points came out of the discussion. First, young people are dealing with incredibly high interest rates from doorstep lenders. Secondly, those lenders’ tactics are horrendous, with some of them knocking on the door at 4 am or 5 am to collect overdue money. Thirdly, as has been mentioned today, the most vulnerable sometimes enter a vicious cycle in which they are encouraged to extend loans time and again, or to add a television or washing machine.

As has been mentioned several times, many Members attended the launch of the all-party group on financial education, which was set up by my hon. Friend the Member for North Swindon (Justin Tomlinson) and attended just last Monday by Martin Lewis. There is a real desire among all MPs to bring back financial education for our young people at school. Gone are the days when banks promoted bank accounts and the concept of saving to our young people at an early age through schools. We need to bring back a robust system in which our children are educated in finance in a consistent way.

The education programmes of our high street banks, to which many of the banks’ staff dedicate their own time, such as the Barclays money skills programme, are having an impact where they are targeted. The great results provided by credit unions such as Calderdale credit union in tackling doorstep lenders are leading to progress, albeit with very limited funds, through high levels of dedication from their staff. Sadly, however, there is not enough progress and far too many doorstep lenders continue to target the most vulnerable with well advertised, huge APRs, often in the thousands. That is not only obscene but immoral, and we need to take steps to introduce measures to increase access to affordable credit. We must also urge regulators to consider putting in place a range of caps in parts of the market in which immoral and often unscrupulous operators target the most vulnerable people.

[Ben Gummer (Ipswich) (Con)]

My hon. Friend talks about some of the positive things that the banks are trying to do, but the vast majority of debt cases that I have seen in my surgeries have originated in appalling lending decisions by high street banks. It is important to stress that now while we are hitting everyone else.

[Craig Whittaker]

My hon. Friend highlights a serious problem, but it is important to appreciate that some of our high street lenders have recognised, in the light of what has happened, that they must do more to target the most vulnerable to highlight financial issues, as they are doing.

I support the amendment because it is important to have a widespread review and not just a prescriptive briefing, particularly given that unscrupulous companies currently get around advertising the high cost of credit by massively increasing the base price of goods on offer, examples of which were given by my hon. Friend the Member for Thurrock (Jackie Doyle-Price) and the hon. Member for Glasgow North East (Mr Bain). I urge hon. Members to support the amendment.

--- Later in debate ---

[Sheila Gilmore]

The hon. Lady has been told on several occasions by various Members that the proposal in the motion is different from some of the proposals that were not taken up by the previous Government. If I had been in this place then, I would have been pushing my Government to do exactly what the motion proposes. It is not good enough to say, “If your Government did not do this, you should not propose it now.” For how long does she think should we be disbarred from making such proposals? One year, two years, 13 years? On that basis, we might as well not be here at all, but perhaps some Members on the Government Benches would prefer that.

[Craig Whittaker]

I understand the party politics involved, but does the hon. Lady acknowledge that we have already heard a lot of evidence today about how these unscrupulous companies get around the process anyway simply by increasing the base price? We need to take time out to have a look at this in a proper, regulated manner.

[Sheila Gilmore]

I am not convinced that we have heard assertions or evidence that that could happen. If we always decided not to legislate because someone could get around the law, there might be a case for not legislating.

I should declare an interest as a solicitor, and one of the things that drew me to the law as much as to politics was my belief that the law is a valuable tool to help those who are more vulnerable. The law is a lever to create a better balance of power between those who have power and assets and those who do not.

I am not saying that we should regulate on absolutely everything, but regulation is necessary if we are to deal with a problem that has expanded greatly, partly but not entirely because of the recession. The industry is incredibly seductive for people; it offers them attractive places to go and produces attractive adverts that make everything seem very easy. There is widespread agreement on the need to help people and to make changes, provided that that is not done through regulation, but we must will the means, not just the end. It is not enough to have warm words and to keep talking about how important it is to have measures to deal with financial exclusion and vulnerable people. We have to will the means to do that.

There was a recent Westminster Hall debate on basic bank accounts, in the course of which it became clear that, for all the espousal of financial inclusion, there is a growing inability to will the means that are needed. The measure before us is one of them, and there are several more. In my earlier intervention I referred to the growth fund. Every Member wants there to be more sources of affordable credit. We are all great supporters of credit unions—indeed, I am a member of my local credit union—and we want their lending to be expanded.

One practical recent measure that led to that expansion was the growth fund. As a result of it, lending by credit unions and other community-based financial institutions was able to expand greatly. That will end in March this year, however. Some people might say, “Well, that’s the date your Government set for it to end.” I must say yet again, however, that had my party been re-elected last May, I would have been pressing them to extend the growth fund because it has built up many credit unions and other community-based financial institutions to provide an alternative for people. Without that lending capacity however, many such organisations will have to reduce their lending activities substantially; that is what they are telling me. The alternatives that people often say should be in place before we legislate will therefore not be in place if we do not go on expanding through the growth fund.

I was also concerned to hear that the financial inclusion taskforce within the Treasury, which the previous Government set up, is, in effect, being wound up. Several of the people who were working in this field have already been redeployed to other activities.

If we want to put our money where our mouth is, we need to put in the financial resource and the legislation. Even at this stage in the debate, I hope that Members are willing to decide to vote for the motion and not support the amendment, and to put pressure on the Government to continue the work that the previous Government did in a variety of fields. This is part of the big jigsaw puzzle that we have to address when dealing with financial inclusion and the problems some people face. We need all the following measures: we need credit unions, but we need the resource to go with them; and we also need community-based financial institutions and other sorts of credit unions.

There is one further small provision that the Minister might want to consider: reforming and extending community investment tax relief. Many community development financial institutions—community-based lending institutions that lend to individuals and businesses—would like that, and I hope that the Government are prepared to consider this further measure that is part of the wider jigsaw puzzle.

I commend the motion, and I hope the consensus that has been apparent will translate into support for it.