Consumer Rights Bill

Debate between Edward Leigh and Fiona O'Donnell

Tuesday 13th May 2014 Commons Chamber

[Fiona O'Donnell]

The two issues I am confusing are what people say and what people do.

I want to be helpful to the hon. Member for East Hampshire on the e-mails that he is receiving from BrightHouse. I suggest that he follow up the matter with the Financial Conduct Authority. The last time we debated high-cost loans, I spoke about my experience with Wonga. I had received an e-mail offering me another loan when I was not aware that I had ever had a loan. I was told that the e-mail had not come from Wonga, that it was some kind of fraud and not to worry about it. I have recently taken this up with the FCA, which now has some authority to deal with the issue. I think that the authority will be asking the Government for more powers to get to grips with this. It suggested to me that a fraudulent application for a loan had been made in my name; my contact details were supplied, but Wonga failed to notify me of that and has retained my data on its files, and that is why it has been marketing products to me. He may wish to take up his case with the FCA and perhaps check out his credit rating—as I immediately did, to see whether the application had affected me. I admire his restraint in not rushing from the Chamber at this very moment to do that.

The exploitation that we have seen is plain and simple. Payday loan companies are not called legal loan sharks for no reason. They are predatory. They sniff out hunger, home in on and exploit the difficult situations in which so many of our constituents find themselves. The figures from one of my citizens advice bureaux in Haddington showed that debt-related cases accounted for 51% of its total inquiries from April to June 2013, a rise in East Lothian of more than 40% from the same quarter the previous year. That is why Opposition Members have been urging the Government to do something as quickly as possible. It is why we are saying that the cap needs to be introduced. It is welcome that the Government have changed their mind, but we would like to see that brought forward to 2014. People in my constituency and all our constituencies who are struggling with debt need help now.

While not everyone who borrows using a payday loan gets into difficulties, enough do as a result of the terms of the loan that the industry is now making billions of pounds. When one in three such loans are being used to pay off another payday loan, we need to call time on these lenders breaking their own codes of conduct and step in to reform the industry. It is time to have a levy on the industry so that companies have to give something back to the communities who are swelling their coffers but suffering at the same time. The hon. Member for East Hampshire said that the money suddenly injected into credit unions would not have the impact that we hoped. My constituency is served by a credit union, but it does not have a presence on the high street; it lacks visibility. It works through employers such as East Lothian council encouraging their employees to save with them, but it does not reach the people who wander off the high street into The Cash Store or BrightHouse. A cash injection to the credit union in my constituency to give it a high street presence would tackle the exploitation that I see among the poorest and most vulnerable people.

I understand that Members have worked on a cross-party basis—I will now try to take back some of the earlier sour remarks—but let us not be limited in our ambition today. I hope that they will get behind the new clause and make a difference to the people who are suffering in our constituencies.

[Sir Edward Leigh (Gainsborough) (Con)]

This is a useful debate. The trouble with the new clause is that, unless we are careful, if we legislate in haste on complex legal matters, we may be subject to the law of unintended consequences and make things worse. No one denies that a lot of people are under tremendous financial stress, and we all want more transparency. I agree that on many occasions the law needs to be updated.

The hon. Member for Walthamstow (Stella Creasy) talked about bills of sale and described them as a Victorian product. In fact, bills of sale have been around for centuries. The Bills of Sale Act dates from 1878, and was amended in 1882. That does not necessarily mean that bills of sale are wrong in themselves. I looked up the definition of “bill of sale”, which is

“a legal document made by the seller to a purchaser…that on a specific date at a specific locality and for a particular sum of money or other value received, the seller sold to the purchaser a specific item of personal property, or parcel of real property, of which he had lawful possession.”

It is a written instrument which evidences the transfer of title to personal property from the vendor or seller to the vendee or sellee. For instance, a typical bill of sale would be something very simple: “for the sum of X pounds I hereby sell to Larry Smith full ownership of a green John Deere harvester.”

A bill of sale is a simple, historic or traditional way of ensuring the transfer of title. I agree with the hon. Member for Walthamstow that things can become complicated, and that is evidenced in legal sources when a bill of sale is attached to a loan, as it can be used as evidence of a loan and security for a loan; so someone’s car, for instance, may be used as security for a loan.

Just because some bills of sale are misused and some people suffer as a result of the process or are under legal stress, that does not mean that we have to throw a century of careful legal practice and growth out of the window, as we might make things worse. If we over-regulate legal loan providers, we may well force people into the clutches of unregulated loan sharks. My suggestion to the Minister—and I agree that this is a serious problem—is that rather than attack bills of sale, which have been around for a long time and have been used in an entirely reputable and correct way and entirely transparently to transfer ownership, or just throw them out of the window by accepting a new clause that has not been thought through, the issue should go to the Law Commission, which can study all the evidence and practice and ensure that we protect consumers, achieve full transparency, and modernise the law. We should not rush through Acts of Parliament that can make things worse for people under stress and force them into the hands of loan sharks.