Gareth Thomas
Main Page: Gareth Thomas (Labour (Co-op) - Harrow West)
Paul Blomfield
I thank the hon. Gentleman for his contribution. That is precisely the point that the Office of Fair Trading made recently. The suggestion is that the ideal customer for many companies is one who can afford to pay back the interest, but not the original loan. The debt is then rolled over and over. There is limited outlay for the company, which turns into a significant profit.
If I could make some progress, I want to address how the sector has grown in the UK. Back in 2004, it was worth only £100 million. By 2009, that had increased to £900 million and it is now estimated to be more than £2.2 billion. Between 7.4 million and 8.2 million new loans are estimated to have been taken out in 2011-12, causing serious debt problems across the UK. According to the OFT, approximately 2.7 million payday loans were given to people who could not afford to pay back on time, confirming many of the points that have been made. They make up a staggering one third of the total number.
The number of people needing debt support has exploded in the past year. The debt charity StepChange this week reported that during the first six months of 2013 it was contacted by 30,762 people—almost the same number as for the whole of 2012. The increase in average individual debt from payday loans has risen from £400 to £1,665 since 2011.
A series of damning reports in May underlined the urgent need for action. A survey by Citizens Advice found that payday lenders had broken 12 of their own 14 promises to reform the industry. Which? called for regulation to redress what it described as
“the imbalance of power between lenders and borrowers”
in a report that highlighted
“sky high fees and irresponsible lending practices”.
The Public Accounts Committee strongly criticised the OFT for failing to stop lenders targeting vulnerable people, highlighting its failure to hand out a single fine to any of the 72,000 firms in the market, and for only rarely revoking companies’ licences.
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
I commend my hon. Friend on how he is introducing the Bill. Does he share my view that a priority for the Government should be the creation of more alternatives to payday lenders, particularly through measures to accelerate the expansion of the credit union sector in the UK?
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)
I very much thank the hon. Member for Sheffield Central (Paul Blomfield) for introducing his Bill and giving the House the opportunity to discuss this matter. We have heard some excellent speeches from hon. Members on both sides of the House, and it is clear that this important issue affects people in every one of our constituencies. Although it is true that some people can take out a payday loan and have no problem with it, finding it a useful product, it is also true that many others have a very different experience indeed. We have heard some of the case studies; we heard about the experiences of individuals and the misery they have found themselves in as a result of a spiral of debt, much of which is not always helped by the payday loans and the behaviour of those in the industry.
Jo Swinson
I can certainly let the hon. Gentleman know that my intention is to make a speech of a reasonable length, and I am happy to take interventions and ensure that the House has the opportunity to question the Minister on these issues. I have to say that Friday is not my favourite day to be in the House because of some of the behaviour that is often on display.
I shall certainly address the points raised by the hon. Member for Sheffield Central. I appreciate the work that he has—
Proceedings interrupted (Standing Order No. 11(4)).