Consumer Credit and Debt Management

David Rutley Excerpts

Thursday 3rd February 2011 Commons Chamber

[Lorely Burt (Solihull) (LD)]

Let me begin by congratulating the hon. Member for Walthamstow (Stella Creasy) and the excellent way in which she has promoted her cause today. Everyone here wants to see a fair and accessible system of credit provision. No one in the Chamber today wants to see loan sharks or other unscrupulous lenders continue.

The coalition Government have begun a consultation on the best ways of achieving that. Personally, I am absolutely in favour of some form of regulation. There is no question about that. However, the problem is that calling on the Government to adopt caps now would prejudge the outcome of the consultation, and I should know, because I withdrew my private Member’s Bill on unfair charging for unauthorised overdrafts, as, although the Government were minded perhaps to support it, continuing with it would have prejudiced the outcomes. Therefore, although caps would ostensibly seem to be a reasonable way to stop excessive charging, we should examine them in the light of the evidence brought forward by the charities that support vulnerable people.

I have spoken to debt advice agencies and charities that do not think that caps will work. Some warn that the imposition of caps would remove many lenders from the market and drive people who are desperate for cash into the arms of illegal loan sharks. The chairman of the Consumer Credit Counselling Service has said:

“Interest…caps can harm people seeking this type of credit more than they help them.”

Another organisation, the Centre for Responsible Credit—one that I had not heard of before—has written to me to say that it disagrees, bringing to light a new European study. All those points must be looked at objectively. We have to think with our heads, not our hearts.

[David Rutley (Macclesfield) (Con)]

My hon. Friend makes some important points, and I completely understand the strength of opinion and the aim of trying to ensure that we have affordable credit. However, when I questioned Martin Lewis during his appearance before the Treasury Select Committee, he said:

“The main thing we could do to improve your regulations—to stop mis-selling, to have better informed consumers, to have more responsible borrowing, to penalise irresponsible lenders—would be to teach every child in school how finances work.”

We need to get the balance right in this debate when it comes to education, not just about credit, but about the importance of savings. Does she agree with those sentiments?

[Lorely Burt]

Yes, I totally agree with my hon. Friend.

Many Opposition Members who have spoken in this debate are new, so I wonder whether I could gently remind them that the previous Government launched three inquiries into the problem, all of which cautioned against using caps.