Financial Services Bill

Helen Goodman Excerpts

Monday 10th December 2012 Commons Chamber

[Greg Clark]

My hon. Friend is a real campaigner—anyone who suffers poor treatment in Chatham can count on her vigorous support in defending themselves against people who have more power. My understanding is that the research being conducted by the university of Bristol is pretty close to completion. I am not certain whether it will be published just before or just after Christmas, but I will ensure that my hon. Friend is alerted as soon as it is laid before the House.

Lords amendment 78 clarifies that the FCA will have the power to impose restrictions on the cost and duration of a regulated credit agreement. It ensures that potential loopholes that could be exploited by unscrupulous firms are addressed—for example, by ensuring that the FCA’s rules under the power cover linked charges and connected agreements. The amendment provides for the agreement to be unenforceable by the lender, for any money or property secured against the loan to be returned to the borrower, and for compensation arrangements to be put in place.

[Helen Goodman (Bishop Auckland) (Lab)]

Will the Minister clarify for the House whether the rules apply to organisations such as BrightHouse, which sells furniture and white goods at very high interest rates as well as via straightforward money transactions?

[Greg Clark]

The hon. Lady would not expect me to comment on a particular firm when I do not know the details, but she makes a perfectly reasonable general point. If a firm is a regulated provider of credit, the provisions apply to it in the same way.

[Helen Goodman]

But it sounds as if people selling goods at exceptionally high interest rates on hire purchase agreements are not regulated credit providers. Therefore, is there not a bit of a loophole in what the Minister offers?

--- Later in debate ---

[Chris Leslie]

That is correct. The Minister ought to be meeting the FCA regularly, and clearly those are the questions the House expects Treasury Ministers to put to the new regulators.

Lords amendment 78 was another concession that had to be dragged from the Government at great effort. I do not expect too much sympathy from you, Madam Deputy Speaker, but it is quite difficult for the Opposition to win votes in this House. Occasionally we have the odd success, such as on the EU budget—I do not want to talk about these things too much, as I know the Minister is a bit raw on that point—but by and large we try our best, we make our suggestions and we do not get very far. However, on this issue the Government were faced not just with the weight of argument by many hon. Members—including, of course, my hon. Friend the Member for Walthamstow (Stella Creasy)—but with the spiritual hand of assistance from the new Archbishop of Canterbury-designate in the other place, the Cross-Bench Bishop of Durham, as is. The Government had no choice but to make that historic concession when faced with the overwhelming moral and political case and the breadth of cross-party agreement.

The Commercial Secretary to the Treasury admitted that amendment 78 would not be a silver bullet for the problem of high-cost credit—payday lending or however we characterise these things. Although we are slightly disappointed that the new expanded Lords amendment 78 does not refer to “consumer detriment”, we hope that some of the provisions will open the door to enabling the Financial Conduct Authority to take urgent action to clamp down on some of the high costs involved, as well as the duration and rolling over of some payday loans or high-cost credit arrangements again and again, getting people into a spiral of dependency with massive credit costs, which are severely damaging to very many people.

My questions for the Minister are these. If the legislation no longer contains the “consumer detriment” litmus test, what will trigger intervention by the regulator? What will be the test? We are keen on many of the ideas in the amendment. The power to recover funds for consumers, the power to strike down enforcement action by an unreasonable lender and the power to insist on compensation for customers are all good, but we need the Minister to explain in slightly more detail how the Financial Conduct Authority will trigger those powers. Will individual complainants ring up the FCA hotline? Will litigation or a set of class-action cases be needed to get the FCA to take note, or might it send mystery shoppers around the country to undertake proactive investigations and say, “This is not good enough; we will see action”?

We are glad that Lords amendment 78 also makes changes on unlawful communications. That is welcome. Hon. Members will be looking at the clock and thinking, “Well, usually about now”—some time between 7.30 pm and 8 o’clock—“we get text messages from companies trying to convince us that all our debts can be written off in a voluntary arrangement under new Government legislation.” We might get spam or a cold caller saying, “Did you realise you’ve got £2,500 overdue, if only you put in your PPI claim before Christmas?” It is around this time in the evening that people will be getting these sorts of automated calls. There are all sorts of advertising, text and cold-call arrangements proliferating across the country.

Many of our constituents are totally baffled about what is being done and what can be done by the relevant authorities to stop such exploitative behaviour. Apparently, some of the companies trying to exploit vulnerable individuals use mechanised arrangement to poll thousands and thousands of people, and even if only 1% pick up the phone and say, “Oh well, I’d like more information”, the volume of calls means that they can make significant profits. A lot of these automated telephone arrangements are routed through foreign jurisdictions—often not even in the European Union—as a way of skating around advertising regulations.

We want amendment 78 to get a grip on some of those questions. I know that financial services companies are not always the ones directly involved—it could be what are known as claims management companies. There are also organisations peddling debt management plans that have high fees associated with them. People are sold a product by a company that says, “Let’s consolidate all your expensive loans and we’ll take a single payment instead.” People think, “That sounds rather good,” and they start making payments. Perhaps months go by, during which they pay, thinking that they are defraying their debts, but when the company goes bust, they find that they have paid down absolutely none of their debts. All they have been doing is paying for the profits taken by a fee-charging DMP provider. Those are the sorts of services we want the Financial Conduct Authority to tackle.

We have had a lot of shilly-shallying on these issues. Quite frankly, it should not have taken nine months of hard effort to extract this concession from the Government since we first tabled an equivalent amendment in Committee back in March. We are glad for small mercies—this is a step in the right direction—but it is now for the Minister to explain how Lords amendments 25 and 78 will bite and how they will help people in their daily lives. I look forward to hearing his response.

[Helen Goodman]

I want to speak to Lords amendment 25. The Minister was not terribly clear in his opening remarks about whether it concerned consumers as individuals or whether it would be interpreted more widely, to address the branch networks that the main clearing banks operate. When he winds up, I urge him to say something about the significance of having a nationwide branch network to ensure that all communities can be financially included.

This issue came to my attention in July, when I received a letter from HSBC, which wanted to close its branch in Shildon in my constituency. Shildon is a town of slightly more than 10,000 people, many of whom have been banking with HSBC for a long time. Many local businesses—600 of them—bank at the Shildon branch. It is much cheaper for everybody to have a local branch than to get on the bus, go down to Bishop Auckland, put money into the bank or take it out, and then come back again. The round trip on the bus costs £4. It is absolutely ridiculous that people should face such barriers. We mounted a great campaign and a huge petition, but of course HSBC has paid no attention whatever to the needs of the people of Shildon. I happened to come across a man at the Labour party conference who revelled in the title of “Director for wealth management”, and who was apparently the person responsible for the branch network. It is true that there is not a lot of wealth to manage in Shildon; none the less, people in Shildon need a proper banking service, just like those in other parts of the country.

As well as thinking about that need, we need to think about the impact on the rest of us. Let us suppose that somebody who lives in a perfectly well-banked part of Durham wishes to make payments in Shildon, belong to an organisation there or make transactions with people there. It is far easier and better for everybody if they know that there is a proper national network of bank branches. I urge the Minister to comment on the branch network in his closing speech.

I remind the Minister that over the last four years taxpayers have given the major banks a considerable amount of support through subsidies and guarantees, yet although they are too big to fail, they are not too big to fail their customers, which is exactly what they are doing. HSBC claims in its slogan to be “the world’s local bank”, but it is not very local in my constituency.

--- Later in debate ---

[Mr Gareth Thomas]

I am grateful for this opportunity to take part in the debate tonight. I echo some of the concerns that have been expressed by my hon. Friends the Members for Bishop Auckland (Helen Goodman) and for Nottingham East (Chris Leslie). I hope that the Minister will see his response to the debate as an opportunity to convince the House that Lords amendments 25 and 78 are not part of an attempt to put off action on payday lenders or on lending deserts.

I want to offer the House the example of the community of Thamesmead and Abbey Wood. It is a community of about 55,000 people in south-east London. The houses there were built in the 1960s in response to what was then seen as London’s housing crisis. There is no bank branch in the whole of that community. Not one of the big five banks has a branch there. The nearest branch is 30 to 45 minutes away by public transport. This is not for want of trying by a whole series of people to convince the big five banks to establish themselves in the area. An excellent organisation, the Thamesmead Trust, has tried to persuade the banks to set up there. The former Member of Parliament for Erith and Thamesmead, John Austin, has also tried many times, and the present Member, my hon. Friend the Member for Erith and Thamesmead (Teresa Pearce), has made a number of efforts as well, but there is still no bank in the area.

The community of Thamesmead and Abbey Wood is clearly not the only area without a bank, as my hon. Friend the Member for Bishop Auckland illustrated, but I worry that many of the lending deserts in this country are not yet out of the closet, if I can use that term. We do not have the necessary information to chronicle by postcode the lending that is taking place to businesses and to individual consumers. As my hon. Friend the Member for Nottingham East said, many of the banks in question are established in the United States, where they have to provide those data. As I said in an earlier intervention, President Obama supported calls for business lending to be publicised, on a postcode basis, so that people could see where lending was taking place and where it was not. That provision has now been written into American law.

We have called not only for the publication of lending data by postcode but for an obligation to be placed on banks to lend into every community. If they are not prepared to do that themselves, there should be an expectation that they will do so through community development finance institutions, through charity banks or through credit unions, but the obligation should be on the banks to demonstrate that they were providing lending into communities through those alternative sources if they were not prepared to do so directly themselves.

[Helen Goodman]

My hon. Friend reminds me that I asked HSBC, when it was closing its branch in my constituency, if it would instead put £10,000 into the local credit union. I received a letter from the bank today saying that it would not.

[Mr Thomas]

My hon. Friend gives a good example of the lack of joined-up thinking in our financial services markets. It would be good to see the big beasts of the financial services jungle supporting the newer players that want to address the problem of lending deserts.

Numerous websites offer comparisons between banking products, but the Centre for Responsible Credit has highlighted how, in practice, the banks release very little information about their lending at community level, either for businesses or for personal customers. Data on lending to and deposits from small businesses and third sector organisations, by postcode or at neighbourhood level, are not routinely available in the UK, even though much of that information is held by the banks and could be released.

The last time I spoke to representatives of the British Bankers Association, they told me that they were looking at this issue. It would be good to hear what the Financial Secretary thinks about it. My hon. Friend the Member for Nottingham East clearly thinks that the Minister will be a new broom sweeping through the fusty ways of the Treasury, and I hope that he will use his considerable influence to maintain the pressure on the British Bankers Association to step up the release of those data. I also hope that he will use his meetings with the chief executive and board members of the Financial Conduct Authority to require them to initiate similar pressure, in private before the FCA is properly established, and in public thereafter.