Consumer Credit and Debt Management

Jackie Doyle-Price Excerpts

Thursday 3rd February 2011 Commons Chamber

[Jackie Doyle-Price (Thurrock) (Con)]

It is a great pleasure to speak in this debate and to follow the hon. Member for Walthamstow (Stella Creasy), who made her case with great passion, as I think all Members would agree. It is important that we consider the whole issue of indebtedness, which has become a plague on our country and will only get worse as time moves on. We all want appropriate measures in place to protect those who rely on credit from the activities of unscrupulous lenders. I bring some knowledge to this subject, having worked in a previous life as an adviser to the Financial Services Consumer Panel. We have long been concerned about the inadequacy of the current framework of consumer credit regulation, so now is clearly the appropriate time for change.

Although I fully support the objective behind the hon. Lady’s motion—ensuring that there is adequate regulatory protection for consumers and that regulators have adequate powers to intervene as appropriate—I am not sure whether the caps that she describes are necessarily the answer. However, it is appropriate that we consider the whole breadth of how credit is regulated as part of the credit review. We should leave no stone unturned in ensuring that the regulator has the appropriate tools and, more importantly, the appetite to take enforcement action where poor practice is identified. I was therefore happy to put my name to the amendment.

[John Pugh]

I assume that as the amendment has been tabled by Back Benchers to another Back Bencher’s motion, the Whips will take no part whatever in persuading people to vote for or against it. Am I right in making that assumption?

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[Jackie Doyle-Price]

What the Whips choose to do is entirely a matter for them, but I wish to support the amendment rather than the motion because the motion is too prescriptive. We have seen credit providers be very innovative in finding their way around regulatory obligations, so we should not be too prescriptive. If we introduce obligations on providers to treat their customers fairly and lend responsibly, and obligations on the regulators to be prepared to use their judgment to intervene, we will not need to rely on price-prescriptive caps, which might impede our ability to take action against bad providers.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

Does the hon. Lady agree that the nature of the problem means that urgent action is needed? Her point that providers are good at getting around obligations means that a very strong signal from Government is needed, which suggests that we should support more prescriptive measures.

[Jackie Doyle-Price]

I believe that that actually makes the case for the early introduction of the consumer protection and markets authority proposed as part of our reforms to the tripartite regulation system. At the moment, we have a consumer credit system regulated by the OFT, in which the tools available are not very effective. With the reforms to the tripartite system, we have a great opportunity to state that we expect the new authority to take real action. In the past there has been a lot of, “Oh dear, isn’t this terrible?” and a lot of wringing of hands from regulators, but they have had no real ability to stop poor providers doing business or to give them appropriate penalties. That is what we want to see from the reform of the regulatory system.

One reason why many consumers find themselves in punitive agreements is that deals are often marketed in terms of the cost per week, so they do not necessarily understand exactly how much they will pay for their credit. That practice is not just restricted to doorstep lenders and loan sharks, because all too often we see it on our high streets, as the hon. Member for Walthamstow mentioned.

I wish to draw attention to one particular organisation, a company called BrightHouse. There is a branch on High street in Grays, and I thought I would do a bit of price comparison. At the moment, it is advertising a nice, attractive 46-inch LED television that currently retails at £849 in Currys. BrightHouse is retailing it at £1,478.11, but it quotes a weekly payment of £13.64. On the face of it that sounds affordable, but ultimately the customer will pay a total of £2,127.84 for the product—two and a half times the price that they would pay in a normal high street store. That is why we need to consider extending affordable credit provisions more widely, so that consumers are not ripped off by such companies.

[Damian Hinds (East Hampshire) (Con)]

Does my hon. Friend agree that in such rent-to-own cases, the annual percentage rate advertised may well be shown as 29.9%, which is in fact the cost of the credit, but the grey pricing means that the sticker price is elevated? That highlights exactly how companies try to get around whatever measures are put in place, even if they are very sophisticated.

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[Jackie Doyle-Price]

That is why we must avoid being prescriptive about how we tackle the problem. We can make rules, but firms will find ways of getting around them. We could put in place an overarching obligation for the regulator to say, “We will take action when we think something is not fair”, and we will be able to point out that such practice is not fair by any stretch of the imagination. However, we need to set that expectation for the regulator—that it will take action when unfair activities take place.

The hon. Member for Walthamstow mentioned affordable credit. Ultimately, we will not tackle the problems until more affordable credit is available. With that in mind, I should like to ask what more the Government can do to establish and foster the growth of credit unions and to think in a big society way.

[Sheila Gilmore (Edinburgh East) (Lab)]

In the light of the hon. Lady’s support for affordable credit, will she put pressure on the Government to extend the life of the growth fund?

[Jackie Doyle-Price]

I was about to say that I am asking the Government to think in a big society way about what they can do to encourage the growth of credit unions. It would be nice if Opposition Members allowed Government Members to make our case, because we have as much to advance on this subject as they have.

I pay tribute to my local borough council, which has welcomed Essex Savers credit union into its civic offices and other properties that it owns and manages. I encourage the Government to consider what facilities it could offer to credit unions—post offices were mentioned, but we could also use jobcentres. That would give credit unions access to more savings, and they would therefore be able to make more loans. I have now run out of time, but I hope the Minister takes that on board.