Consumer Rights Bill

Debate between Damian Hinds and Stella Creasy

Tuesday 13th May 2014 Commons Chamber

[Damian Hinds (East Hampshire) (Con)]

I want to talk briefly about new clause 3 and new schedule 1, particularly because they relate to the private sector and one of the three sectors named under the Enterprise and Regulatory Reform Act 2013.

As the hon. Member for Walthamstow (Stella Creasy) has said, this country, like the rest of the world, is undergoing a revolution in data in terms of their volume, richness and accessibility, and, in some ways, their associated risks. There is also a rapidly changing market in price comparison, and the hon. Lady has referred to some of the benefits that can accrue from that. The development of that market is not entirely benign and is certainly not without cost. There are two opposing forces: consumers’ ability to compare prices and services side by side tends to bring prices down, but the nature of the marketing—the branding land grab, the cost of advertising and particularly the pay-per-click auction model on the internet—tends to drive costs and therefore prices up. It is certainly true, however, that price comparison has great potential to make markets work better. I am very proud of everything the Government are doing with midata to help make that a reality.

One market that does not work at all is one of the three mentioned in the 2013 Act: retail banking current accounts. The actual cost to consumers of having a current account is, on average, £152 a year, but nobody we talk to, including informed consumers and even Members of this House, knows that. Whenever we talk about “free” banking, we should use inverted commas, because, of course, there is no such thing as free banking. If consumers could see how much they are actually paying, both explicitly in behavioural charges and implicitly through forgone interest, the retail banking market would work better because there would be more diversity and competition.

Critically and perhaps even more importantly—this touches on some of the new clauses and amendments we will debate later—the fact that people do not know how much their banking is costing them inhibits the development of new retail banking products. Such products include budgeting bank accounts—so-called jam jar accounts—for which people have to pay a fee, but through which they are much less likely to tip into debt, because they make it easier to budget money and also that tiny bit easier to save a small amount.

New clause 3 is not necessary because progress is already being made. The powers already exist.

[Stella Creasy]

indicated dissent.

[Damian Hinds]

The hon. Lady shakes her head, but the powers already exist under the 2013 Act. The Government are looking for voluntary progress, which I think is the right way to proceed on reforming markets. A review of progress is due about now, and I hope the Government will continue to do what they are doing. They have the reserve right to push for more and have said explicitly that if not enough is being done, they will consult on the wording of regulations in order to make those markets work better compulsorily. That is the right approach, as opposed to jumping the gun.

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[Damian Hinds]

It is always a pleasure and an honour to follow the hon. Member for Makerfield (Yvonne Fovargue) who talks not only with passion but with a great deal of knowledge and expertise about these matters. I wish to speak briefly about new clauses 11 and 6. Before I do, may I say that it was a little unfortunate that the remarks of the hon. Member for Walthamstow (Stella Creasy) took the turn that they did at the end? What she said is simply not true, and everybody in this House who takes an interest in these issues, which she certainly does, knows that the sub-prime high-cost credit market has been around for donkey’s years. It has not started—[Interruption.] No, it has not started, or even in its totality dramatically shifted, in the past three years.

The hon. Lady mentioned statistics for payday lending and logbook lending, but, if she was being complete in her analysis, she might have talked about when the big growth spurt came in home credit. She might even have talked about when the growth spurt came in rent to own. Perhaps she would like to take the opportunity to talk briefly about those things now. I would happily take an intervention.

[Stella Creasy]

Will the hon. Gentleman clarify whether he voted three times in the House over the past three years against capping the cost of credit and therefore tackling some of these problems? If he recognises that there are problems, is he saying that he will support the new clauses today?

[Damian Hinds]

Clearly, I was not saying that. I was asking the hon. Lady whether she wanted to comment on the growth of home credit and rent to own. We have had many opportunities in this House to discuss a cap on the cost of credit, and she and I—and she and many other Members—have had an opportunity to discuss some of the practical aspects. There will now be a cap on the total cost of credit, but that is not to say that the definition of that is without difficulties. It remains a tricky thing to do. All of us, including her, who take a close interest in these issues know that there is no single silver bullet solution that solves any of these market problems. We need regulation, empowerment for consumers, financial education and sensible alternatives. This House is at its best when we are discussing what those practical approaches might be, and I welcome the new clauses, which allow us to talk about those very things. I have an awful lot of sympathy for the sentiment behind new clause 11, which was put forward by the hon. Member for Makerfield, and for what is behind new clauses 7 and 9, but we must be wary about seemingly straightforward legislative solutions that may not deliver all they purport to.

We always talk in the plural when we refer to rent-to-own companies, but in reality there is one really big company. There is a problem with the pricing and marketing of these companies. I have recently been added to the BrightHouse e-mail marketing list. I do not know what I have done to deserve that honour—I am not sure whether I should take it as a compliment—but I am now bombarded with messages saying how easy it is to pay weekly, and it is those messages that go to the heart of the problem. To be fair, the slightly misleading approach that we are talking about does not necessarily apply just to rent-to-own companies. We could say that it applies to every pay-monthly mobile phone contract, through which we not only pay for our calls but finance the phone, but it is never advertised how much is for the phone and how much for the calls. We always see it as one all-together monthly amount.

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[Stella Creasy]

It is not simply an assumption; it is based on the evidence we have seen from Scotland, which is that this money would be incorporated in the centre of the tenancy and so that the landlord would pay the fee. We would expect the tenant to pay one fee—the credit referencing fee—but once the tenancy was secure and the landlord could therefore be confident that the person was back in the place, we would expect it to be refunded. We are very clear that the practice of charging fees to both parties at the same time is a conflict of interest and therefore needs to be addressed, which is what our proposal would do. It would spread the fee over the course of the tenancy.

[Damian Hinds]

Just to complete the point, is it also the hon. Lady’s assumption, and that of the Opposition, that were landlords to face greater fees, they would not seek to recoup that extra cost in some other way?

[Stella Creasy]

One issue is what landlords are charging for. I see landlords who are charging twice for credit referencing, because they are charging the landlord and the tenant that fee. [Interruption.] The presumption the hon. Gentleman makes is that all the fees are for different activities—

[Damian Hinds]

I am asking what your presumption is.

[Stella Creasy]

Our presumption is that the fees would then be taken on by the landlord and taken as part of the tenancy agreement. Our approach would resolve the problems we are seeing for tenants and the conflict of interest over whom the agent would act for. Our proposal is about making sure we deal with that conflict, particularly how for landlords and for tenants it creates a series of perverse incentives whereby both can be charged for the same service.

Financial Services Bill

Debate between Damian Hinds and Stella Creasy

Monday 10th December 2012 Commons Chamber

[Stella Creasy]

My hon. Friend is right. I pay tribute to the work that she has done in this regard, and also in regard to debt management plans.

Bad practice is widespread in this industry. The Financial Conduct Authority will have an opportunity to set the tone when it comes to the sort of consumer credit industry that we want in the future, but let us use the opportunity presented by the OFT to do something about the problems now, and to prevent 2013 from being boom time for the legal loan sharks.

The Minister must be aware that three quarters of consumers are looking towards Christmas with severe financial concerns, and that 10 million of us in Britain feel financially squeezed. Will he state explicitly whether he will support my proposals and take them to the OFT, so that we can be certain that 2013 will be a time for legal loan sharks rather than consumers to be worried? I urge him to read the Bristol research findings—which are already in the pocket of the Department for Business, Innovation and Skills—in order to understand how measures such as this, and total cost-capping, can work, so that we can finally say that Britain is a legal loan shark-free zone.

[Damian Hinds (East Hampshire) (Con)]

It is an honour to follow the hon. Member for Walthamstow (Stella Creasy), and to speak in favour of the spirit of Lords amendment 78.

The problems of high-cost sub-prime debt are widely acknowledged. Although they have come much more to the fore through opinion-formers of late because of payday lenders, they are not, of course, new, and by extension—this is somewhat at variance with what the hon. Lady said—it is not new that Government are not capping the cost of problem credit. It worries me slightly that we use the term “payday” as a catch-all shorthand for all these problems, and I hope that the Minister will reassure us that we are not just talking about payday lenders.

Dealing with problems of this kind requires an integrated approach involving financial capability and the provision of alternatives for people who need access to credit, but it also requires regulation. Disclosure is not enough in this market, especially as it often involves very vulnerable consumers and the ready, easy availability of credit. It could be said that supply sometimes creates its own demand. Some people tend to opt not for the solution that best suits their needs, but for the most recent that they have seen. In seeking to address these costs, however, we need to look at costs in the broadest sense. This is not just about interest rate charges.

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[Stella Creasy]

It is wonderful to hear the hon. Gentleman talking about the positive aspects of capping. I suggest he look at total cost capping, because arrangement fees are not the only issue; there are also issues to do with late payment fees and the incentive they give lenders to push people to keep rolling loans over. Like the hon. Gentleman, I want this to be a future-proof—that is a dreadful term—proposal. We must also ensure lenders cannot get around it, however, which is why we need to cover all the costs involved.

[Damian Hinds]

The hon. Lady is entirely right, and I alluded to that point when I talked about behavioural charges. It is wrong to think we can legislate perfectly for all eventualities in advance, however. This market has an amazing ability to shapeshift and find its way around any regulation we might put in place, as has been seen in the United States.

I would like to hear an assurance from the Minister that under the new regime it will be possible to have a flexible capping regime that allows for all parts of the market to operate while also insisting that they do so in a responsible way. I also seek an assurance that we will not just address “payday” loans, which are a relatively new phenomenon in this country. Home credit is massive, and it has been with us since Victorian times, and has been a problem for quite a long time. There is also pawnbroking, which my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) mentioned. Logbook loans are a big market in the United States; they have not appeared in a major way here, but we can bet our bottom dollar that they would get a big boost if other parts of the market were capped. Rent-to-own is another area.

On the basis of the Minister’s conversations across Government, can he assure us that the Government will continue with an integrated approach that addresses not just regulation but boosting financial capability, starting with children’s capability with mathematics in school? Will they also continue to support operators that provide responsible credit, in particular credit unions? I pay tribute to the work the Government are doing in supporting that sector, and would like them to go further in modernising it and making credit union services more widely available, such as through the post office network.

Education Performance

Debate between Damian Hinds and Stella Creasy

Thursday 12th May 2011 Westminster Hall

[Stella Creasy (Walthamstow) (Lab/Co-op)]

Can the hon. Gentleman enlighten us on what the pass rate among private schools was for the English baccalaureate? One of the problems with a retrospectively applied mechanism is that many schools were not doing the courses and subjects involved, so the figures that he mentioned are not really equivalent. Perhaps this is a debate and a point that he might want to make in two or three years’ time, when everyone has been forced to do them by this policy.

[Damian Hinds]

As the hon. Lady should know—her colleagues may help her—we are not talking about the national curriculum, but a measure of how many children take one particular subset of subjects. The measure is not to be compulsory. The fact that it was revealed that some private schools were not offering those subjects tells us other interesting things. We have not got time, sadly, to debate them all now, but I would love to on a separate occasion.

Conversations with colleagues from all parts of the House on the subject have been interesting. I am sure that there will be exceptions to this, but most colleagues to whom I talk, whether they went to a comprehensive, grammar or secondary modern school, all studied the English baccalaureate. We did not necessarily pass all those exams, but that was pretty much considered the obvious set of exams that kids would take. The fact that that happened in the past does not make it perfect or right, but it does raise the question of why that has changed. As I say, we are not talking about a perfect measure. In fact, I would suggest that any single measure of performance of any particular age group will promote gaming behaviour. A particular issue with the English baccalaureate—I fully accept this—is that not every child is ever going to be in contention, as it were, for making that benchmark. There needs to be a balanced basket of measures. Alongside the English baccalaureate, I would hope that we might see a technical baccalaureate, and perhaps others, too.

Ministers are going down that exact track. We had the opportunity to talk to the Minister about that in the Education Committee the other day. There are more, rather than fewer, measures coming through, but that memo does not seem to have arrived in a lot of staff rooms, where the assumption seems to be that the English baccalaureate will be the sole or primary measure. In fact, in that basket of measures—this was alluded to earlier—the most important measure or measures should be things that track not a snapshot of achievement, but progress over time. That is what school is all about: developing the individual and helping them to fulfil their potential. If we lead on measures of progress, we get rid of any incentive there might be to select only those children who will be, as it were, easiest.

Contextual value added is not that measure. I have now sat on the Education Committee for a year; I am still waiting for the first teacher, head teacher, union leader, educational psychologist, education professional or anyone else to mention contextual value added as a measure of the achievement of any school, local authority or anything else. That has not happened, because it is an impenetrable measure—it is impossible to figure out what it means. When I have asked people to explain, I have quickly wished that I had not.

The Government are working on a specific measure or measures of the progress of children at the most challenging end of the scale. In our recent Select Committee report, “The role and performance of Ofsted”, we recommended something in which I firmly believe: a metric system tracking the performance of all the different ability groups—by quintile, for example—and measuring the progress of those not only in the middle and bottom of the range, but in the gifted and talented category at the top. We recommended Ofsted as probably being in the best position to interpret the accompanying complex data and to convert them into the English language in a way that contextual value added struggles to do.

There is a real danger of drowning in a sea of measures—uncapped GCSE scores, five or more A* to C grades, five or more A* to C grades with mathematics, contextual value added, raw value added and the English baccalaureate—or, potentially, a technical baccalaureate, the new measure of progress among the most challenging and challenged students. Ultimately, we need one or two lead measures to hold schools to account so that parents know what the key things to look at are.

I am keen to hear the Minister’s comments, but I suggest that the five or more A* to C grades is not that measure for a couple of reasons: first, because of its tendency to focus on the average and on that borderline between C and D grades; and, secondly, because it is a cliff-edge binary measure, which therefore does not take into account enough of the richness going on in that cohort.

I suggest that the best lead way in which to measure school performance is a combination of some sort of average point score measure—perhaps the average point score towards the English baccalaureate subjects, or something else—and a progress measure, whether a simplified version of value added or something more like the progress by quintile that I was outlining.

I still managed to speak for more than the five or six minutes that I thought I was going to, for which I apologise profusely.

Consumer Credit Regulation

Debate between Damian Hinds and Stella Creasy

Tuesday 9th November 2010 Westminster Hall

[Damian Hinds]

My hon. Friend makes a fine point, which I do not disagree with at all. I should say, for the avoidance of doubt, that my own savings account is with the United Savings & Loans credit union in Bordon. That fantastic institution has a high-street presence, but because of the rents in my part of the world, it is not the most prominent high-street presence. The established network of the Post Office could make a big difference to that. Of course, this is not just a matter of saying, “We’ll work with the Post Office.” It is also about the infrastructure that goes behind that—the electronics and the systems. That is why it is necessary to build a robust back-office system and interface. That takes money, but it does not necessarily have to come entirely from the Government, and it would be a mistake to think so. Such activities do of course carry with them a future income stream, and as everyone knows one can borrow against a future income stream. There is certainly a role for the Government in financing such a thing, but not just grant funding is needed.

Overall, the provision of alternatives is the surest and most important initiative that can be taken in this area. Whatever the regulation, people will always find ways to get around it, and we must strive to make things better.

[Stella Creasy]

I take the hon. Gentleman’s point, and I understand and recognise his experience in the credit union movement. Does he agree that these are the very issues on which the credit review should be formally consulting? It should be looking not just at store and credit cards but at access to credit, and also the home credit market, pay-day lending and the many other products that may well be expanded, to try to tackle once and for all the needs of the poorest consumers.

[Damian Hinds]

I am supremely relaxed about the names that are given to reviews, discussions and discussion documents. The important thing is that members of the coalition Government take a keen interest in this area and are interested in making progress, and I know that they are. The name or title is of secondary concern.

The surest thing we can do is to provide a good, robust alternative, and thereby revolutionise affordable credit. We can also improve the savings culture in this country and provide a real alternative to the doorstep lenders about which we are all so concerned.