Jo Swinson
Main Page: Jo Swinson (Liberal Democrat - East Dunbartonshire)
Jo Swinson
It is delightful to be able to return to the issue of high-cost credit and payday lending after that short interlude for the urgent question on tobacco packaging.
Before we were interrupted, I was saying that I really appreciate the particularly constructive way in which the hon. Member for Sheffield Central has brought forward this Bill, working with not only the wide range of campaigners outside this House but MPs across the House, including me. I am delighted to accept his request to have further meetings with him and campaign groups to continue to discuss the issue and how we solve the problems that he raises. I would also be happy to extend an invitation for him to meet the chief executive of the Financial Conduct Authority, which will obviously play a crucial role in the industry as it moves to become the regulator. I am sure that the hon. Gentleman would find that useful, as would the FCA.
It is important to say from the outset that the hon. Gentleman is spot on about the problems in the industry and I agree with him on roll-overs and affordability assessments. We know from the evidence that my Department has commissioned, the Bristol report and ongoing Citizens Advice surveys that all those issues are causing difficulty. I think there is a huge amount of agreement on the issues we are trying to tackle, but we disagree slightly on the solutions and on whether legislation is necessary at this point or whether the Government’s tough action, which was announced in March and has been taken up by the FCA since April, is a better way of tackling the problems. I believe the latter to be the case and the hon. Gentleman disagrees, but it is important to recognise that there is a huge amount of agreement on what the problems are and that they need to be tackled.
Jo Swinson
I will confirm that we do not believe that this Bill is the best way to tackle the significant problems in the industry. Obviously, it is up to the House to decide, as is always the case with such matters, whether the Bill should go into Committee, but I and my Government colleagues will not support it if it goes to a vote.
Mark Durkan
A few moments ago another Minister, the Under-Secretary of State for Health, the hon. Member for Broxtowe (Anna Soubry), said that policy should be made on the basis of evidence from elsewhere. There is clear evidence from many other jurisdictions—not least at least 13 states in the United States of America—that competent legislation and regulation exactly such as those proposed by this Bill can be effective and telling. Why are the Government rejecting moving on the basis of evidence and examples from elsewhere?
Jo Swinson
We absolutely are moving ahead on the basis of evidence. We have legislated on this issue. We are transferring the issue of consumer credit to a new regulator. It is not as if there is no legislation. We agree that tough regulation is needed to deal with the significant problems in this market, and that regulation is happening. I have confidence in it and in what has happened already, which I will set out. This is about whether further legislation is needed at this juncture and I think that that is the only issue about which there is slight disagreement.
Jo Swinson
I will give way to the hon. Member for Birmingham, Northfield (Richard Burden) and then to the hon. Member for Worsley and Eccles South (Barbara Keeley), and then I will make some progress.
Richard Burden
I am grateful to the Minister for giving way. She has said that the objectives are shared throughout the House but that there is slight disagreement on some aspects. If the disagreement is slight, would it not make more sense to let the Bill have its Second Reading and go into Committee, and then any amendments that she might want to table could be debated? What is wrong with that?
Jo Swinson
The disagreement may be slight, but it is on the basic principle of whether the FCA is best placed to regulate these matters or whether the Government should mandate it to do so through legislation. That is a significant difference in principle.
Jo Swinson
I said that I would give way to the hon. Member for Worsley and Eccles South and then make some progress, but I will be happy to take further interventions later.
Barbara Keeley
I thank the Minister for giving way; she is being generous with her time. As somebody who had a private Member’s Bill that was blocked last year by the guys on the Government back row, I have to say that this is unfortunate. My Bill was a valuable Bill which would have really helped carers and the identification of carers. This is also a valuable Bill which would help people who are in debt. It would be very helpful if the Minister would support its going into Committee, because that could help build a really good public campaign, which is what I intended to happen with my private Member’s Bill. It would be an absolute waste if she let her colleagues on the Government back row talk this Bill out.
Jo Swinson
I share the hon. Lady’s frustrations, having supported private Members’ Bills on Fridays in the past, such as the Climate Change and Sustainable Energy Bill proposed by the hon. Member for Edinburgh North and Leith (Mark Lazarowicz). Ultimately, it got through and was enacted, but getting there was a painful process.
I hope that I will be able to reassure the House on the issue of protecting vulnerable people and taking action on their behalf. Significant action is already being taken. Today’s debate is helpful in raising the issue’s profile, so I thank the hon. Member for Sheffield Central for promoting the Bill, but there is a sticking point with regard to the independence of the FCA and its role as a regulator with real teeth that is able to set its own rules.
Jo Swinson
I want to make some progress, but I will mention the FCA later, so I will take more interventions shortly.
Across Government we share the concerns that have been voiced about payday lending. There is widespread poor practice within the industry and harm to vulnerable consumers. Since the Bristol report on high-cost credit and the Office of Fair Trading’s review of payday lending compliance were published in March, there have, unfortunately, been no signs of the problems going away, as backed up by data from Citizens Advice and StepChange.
The hon. Member for Sheffield Central said that his preference would not be to ban payday loans. It is important to be clear that there is a place for high-cost short-term lending and that emergency cash or managing a short-term cash-flow problem can be useful. However, it is not right for many consumers, many of whom get lured into taking out loans that they cannot afford to repay and that they should not be given in the first place. Too many people are not getting a fair deal, which is why action is needed and why it is indeed being taken.
The Government are making this a high priority and I am personally very keen to make progress in changing the industry. It is important to recognise, however, that the solutions are not easy or simple. This is a complex market. A wide range of factors drive consumer behaviour toward financial management and debt. I will set out the action the Government are taking to achieve better, faster and more responsive results than legislation.
It is also worth mentioning that we have tried very hard to work with the industry on these matters. Indeed, last November the industry produced a payday and short-term loans code of practice. I would argue that if everything in the code was being complied with, there would not be anything like the number of problems that are being experienced, such as three days’ notice from a continuous payment authority—that is mentioned in the hon. Gentleman’s Bill, but it is already in the code of practice—or affordability assessments or better information on constraints and roll-overs. The vast majority of the industry has already signed up to that and I think that the real issue is delivering it, which is why we recognise that further regulation is needed through the FCA.
We need to assess the progress that is being made with codes of practice so that the FCA has information on how the industry is complying with what it has signed up to. If the industry itself has signed up to something, I am sure the FCA will consider whether it is worth turning it into a firm rule when it publishes its rules. The Department has launched a survey to encourage customers who have used payday loans to undertake a quick online survey of their experiences, so that we can better assess the extent to which lenders are complying with their codes. I tweeted a link to that survey earlier today, if anyone listening is keen to take part in it.
Jo Swinson
I will take a few interventions. My hon. Friend the Member for Portsmouth North (Penny Mordaunt) asked first and then I will take an intervention from the hon. Member for Glasgow North (Ann McKechin), who has not yet intervened.
Penny Mordaunt
I thank the Minister for giving way. I want to respond to the accusation that some of my colleagues and the Minister herself are seeking to talk out the Bill. Although my hon. Friends the Members for Shipley (Philip Davies) and for Christchurch (Mr Chope) are a dynamic duo, I would point out, as someone who is sympathetic to the Bill, that they could not possibly do a better job today than the Labour Front Benchers.
Jo Swinson
I thank my hon. Friend for her description of my hon. Friends the Members for Shipley and for Christchurch as the Batman and Robin of Fridays in the House. We will obviously have to wait to hear what Members want to say.
Ann McKechin
I am grateful to the Minister for giving way. Does she agree that the basic problem is that self-regulation, as in other jurisdictions across the world, has completely failed, and that time is of the essence and that we need to get on with regulation now, not in another two years?
Jo Swinson
I absolutely agree with the hon. Lady: that is exactly the point I was making. We have tried to work with the industry and it has produced its voluntary codes, but the Citizens Advice survey suggests that it is not sticking to them. The industry also committed at the time to monitor the compliance with those codes by this summer. Only one of the four main trade associations in the industry has said that it will do that monitoring; the others have not even agreed to comply with that. That is why we are transferring consumer credit regulation to a new independent regulator, the Financial Conduct Authority, which will have real teeth to clamp down on the problems in this market.
Jo Swinson
I will give way to my hon. Friend the Member for Shipley and to the hon. Member for Foyle (Mark Durkan), and then I will make a little more progress.
Philip Davies
I am not sure whether I am Batman or Robin in the Minister’s mind, but perhaps she can expand on that in a moment.
My understanding is that, a week or so ago, the Government and Ministers held a summit on this issue with interested parties. Will the Minister give us an update on any results of that summit?
Jo Swinson
Absolutely. I will mention the summit; my hon. Friend anticipates my remarks. If he has a little patience, I am sure that he will have the information that he is looking for. I will not comment on whether he is Batman or Robin. Hon. Members can make up their own minds.
Mark Durkan
Perhaps the Joker.
A few minutes ago, the Minister made the point that the problems are complex and that the solutions will not be simple. Why, then, is she adopting a position of leaving it to the untested, unproven role of the FCA? Simples. That seems to be the Minister’s position and seems to contradict the very arguments that she is making about the nature of this problem. I hope that the role of the FCA will work, but it will be one role among its many other competing responsibilities. We as a Parliament have responsibilities, too. The hon. Gentleman’s Bill is giving us the chance to meet those responsibilities.
Jo Swinson
I understand the hon. Gentleman’s point, but, first, the Financial Conduct Authority is not the only thing that is happening; and secondly, because of the complexity, it is better to have a regulator that is able to make rules and to change them quickly, because markets change quickly. That is the whole point of having a regulator that can be responsive. Otherwise, if primary legislation sets out everything prescriptively, it is much more difficult to respond to changes in the market. Indeed, the Financial Conduct Authority has also made it clear that this is a priority for it. I hope that that provides some reassurance.
Paul Blomfield
I want to restate, as the Minister will know from discussions that we have had, that the Bill does not seek to limit the opportunities for the Financial Conduct Authority to respond to a changing market. It specifically does not include detail; it provides a direction of travel and empowers the Financial Conduct Authority. In that context, would not it be better if we could talk about the detail in Committee?
Jo Swinson
I welcome the hon. Gentleman’s contribution and his constructive approach to this matter, but I would say that his Bill limits the independence of the Financial Conduct Authority. It is not helpful for us to set that out or to mandate exactly what it should do. The FCA is producing a draft rule book for September, which is only two months away—we are not talking about this going into the long grass—and it will be consulted on. I am sure that the hon. Gentleman and other hon. Members will want to contribute to that consultation. That rule book will then be finalised in advance of the transfer of consumer credit regulation, which, of course, happens in April, so it will be in place then.
Of course, the Financial Conduct Authority will have really tough new powers. The Office of Fair Trading, the current regulator, was mentioned earlier and I will come to its action shortly. We have recognised that stronger powers are needed. The FCA will have new powers to make binding rules on firms, including to ban certain products if necessary. It will have tougher sanctions—for example, the ability to impose unlimited fines and to order redress for consumers who have been ripped off. It will also be setting a higher bar for entry in the first place, so when it is granting a consumer credit licence, the applicant will have to prove that its business model is not based on ripping off consumers. We had the discussion earlier about roll-overs and whether, if some companies are making significant proportions of their profit from roll-overs, their business model in fact depends on people’s not repaying in time, and whether that is an acceptable business model. The FCA will be able to look into these issues before people get a consumer credit licence.
The FCA has made it clear that it is committed to plugging gaps in payday regulation and has outlined four specific areas that it wants to target: first, affordability checks; secondly, continuous payment authority; thirdly, advertising; and fourthly, roll-over loans—all of which hon. Members have rightly raised today as issues of deep concern, and which the FCA has said it is keen to tackle as a priority. Indeed, the chief executive of the FCA, Martin Wheatley, has written to me to outline its work on that, and I will place a copy of that letter in the Library so that Members can have a look.
The Office of Fair Trading, the current regulator, recently announced a crackdown on payday lenders and has been delivering real results. It has also referred the market to the Competition Commission, to investigate the root causes of problems with payday lending and it can, of course, use its powers to fix that. An investigation by the Competition Commission is a serious thing. It takes a bit of time, which is why we are ensuring that we take other action at the moment—it is important to do that at the same time. However, it is important that fundamental problems within the payday lending market are looked at, and the Competition Commission is well placed to do that.
The National Audit Office report into the OFT was mentioned. Of course, one of our responses to that has been to ensure that the OFT has further powers. For example, in February, we gave the OFT further powers to suspend a credit licence immediately, if it had reason to believe that that was necessary to protect consumers, rather than waiting to go through the whole process of revoking a licence. We are also transferring the regulation to the FCA, which will have more powers. It is important, in the spirit of balance, to recognise that the NAO also said in its report that it was encouraged by the action that the OFT had been taking on this issue since March. I should like to share with the House a little bit more about where that has got to, because the situation is changing every week owing to the action that is being taken.
In March, the OFT completed its review into compliance in the payday lending industry. It identified the top 50 firms, which between them make up more than 90% of the market, and did a significant investigation into the practices of each of those. Those 50 lenders were sent a detailed dossier of where their practices were not up to scratch, with a 12-week deadline to sort out the problems that they were causing or face losing their licence. That has brought real results. Those 12-week periods, which are on a rolling basis to enable the OFT to process the responses, have been coming to an end and will all be finished by the end of this month.
So far, 28 of those 50 have responded to the OFT. I am sure that hon. Members will be interested to hear that 10 of those 28—more than a third—have left the payday lending market altogether as a result of that action, either by giving up their consumer credit licence entirely or by continuing to operate in other areas of consumer credit but no longer in payday lending. In addition, a further three licences have been revoked from lenders outwith the 50 largest and one further licence has been handed in. So since March, 14 payday lenders, including 10 of the biggest 50, have left the payday lending market. That shows that the tough action is starting to work. Market exit can be a good thing in a market where there are significant concerns about unscrupulous behaviour.
To respond to my hon. Friend the Member for Shipley, last week I called the payday lending summit to take stock of the progress that we had made since March and to look ahead to the new FCA regime. We delivered a strong message to the payday industry that it must get its house in order in preparation for the transfer next April. The meeting included regulators from the OFT, the FCA and the Advertising Standards Authority, which has a role in advertising that I will come to. It also involved charities and campaign groups such as Citizens Advice, Which? and those who provide debt advice to individual consumers. It was a successful summit. It was helpful to have that kind of event as the FCA produces its rule book that is due in September. I was very encouraged by the responses from the regulators.
I will turn to the various issues that are raised in the Bill. First, advertising is something that I feel strongly about. People should not be lured into taking out a payday loan when it is not the right thing for them to do. [Interruption.] I am not sure whether the hon. Member for Harrow West (Mr Thomas) wants to intervene. I am happy to be generous if he does.
Philip Davies
Will the Minister give way to me as she is in such a generous mood?
Philip Davies
I am surprised that the Minister glossed over so quickly the summit that she held on 1 July. According to the statement from the Department for Business, Innovation and Skills, the summit included a “frank exchange of views”, which slightly flies in the face of the picture that she is trying to paint. One of the trade association representatives who attended the summit and highlighted information from a report called “Credit, debt and financial difficulty in Britain” said that those present did not appear to have read the report and were not interested in its findings. Would the Minister like to comment on that part of the summit?
Jo Swinson
I know exactly who my hon. Friend is referring to. I would merely point out that they were very selective in their use of statistics. For example, they ignored the fact that the payday lending market has doubled in recent years. The fact that there was a frank exchange of views in no way contradicts what I said about our delivering a clear message to the payday lenders about what they have to do to get their house in order.
My hon. Friend the Member for East Hampshire (Damian Hinds) spoke well about how adverts pretend that such loans will solve problems that they will not solve. The adverts suggest that a payday loan is the answer to problems such as not having enough money towards the end of the month. If people find themselves in that position, the answer is not to take out a payday loan, but to get some good financial and debt advice.
When legislating on advertising, the evidence base for what should be brought in and what will work needs to be strong. The FCA will have powers to ban misleading financial promotions and to create rules on advertising payday loans. At the press Q and A after the summit, the chief executive of the FCA made it very clear that he would consider all sorts of rules that could be made with regard to advertising, including on the timing of adverts and the content that needs to be included. The FCA is very clear that it is looking at that issue.
It is important to proceed on the basis of research and evidence. BIS has commissioned Ipsos MORI to conduct qualitative research into the impact of advertising on consumer behaviour because we want to know what changes would be most effective in helping consumers. It would be easy to pull something out of the air and say, “This is what we should do on advertising,” but we want to know what works.
My hon. Friend the Member for East Hampshire talked about the wallpaper of life: the little annotations that we hear and see in adverts all the time, such as “terms and conditions apply” and “shares may go down as well as up”. Do we actually respond to all those things or would other things be more effective? The research will look at what health warnings or wealth warnings might work on such adverts, whether signposting debt advice might be more effective, and what is the best way of simply explaining the cost to people. There is a range of reasons why APR is not the most relevant figure in the context of payday and short-term credit advertising, not least of which is that many people do not understand what APR is. Is there an easier way to get that information to the consumers? That research will provide evidence to inform the FCA as it develops its rule book. We will publish the findings in the autumn.
The next issue is roll-overs. The hon. Member for West Ham (Lyn Brown), who is no longer in her place, made an interesting intervention in response to my hon. Friend the Member for Shipley. She was right to say that people are often not lending £150 at a high interest rate for just two weeks. If it was just for—[Interruption.] I do apologise. The hon. Lady is in her place but I could not quite see her behind the Table. She was right to highlight this issue. If somebody is lending money over a very short period at a high interest rate that basically covers the administration cost of setting up the loan arrangement, that is not necessarily problematic. The problem arises when that short-term loan is no longer short term, but becomes medium or long term because it is rolled over from one month to the next. That is when the APR is much more relevant, because people are taking out a much longer-term form of credit. Roll-overs are therefore problematic. In some cases, even one roll-over is too many.
Mr Kevan Jones
Why are the Government and the hon. Lady opposed to legislation such as that common in Canada, for example, which bans roll-overs in some places or limits the length of a loan?
Jo Swinson
I am not opposed to regulation or rules on that, but the issue is whether it is best for the Financial Conduct Authority or the House to put the rules in place. We have given responsibility for regulation to an independent agency that has tough powers and the ability and expertise to look at specific evidence on what will be most effective, and that is where rules will best be made. The FCA has said it will look carefully at what needs to be included in the rules on things such as roll-overs, and the voluntary code to which lenders have signed up states that they too believe that some restrictions on roll-overs are appropriate within the industry.
Mr Jones
Would it be sensible to let the Bill go to Committee rather than vote against it today so that some of those issues could be explored, or is the hon. Lady doing the dirty work of the Conservative party and clearing the decks for the European Union (Referendum) Bill?
Jo Swinson
That intervention hardly merits a response. I am here because I am the Minister responsible for issues that affect consumers and consumer credit. We have significant problems in the payday lending industry, and my priority is finding the best way to solve them. I do not believe that the House prescribing these measures is necessarily better than it being done by the FCA. The FCA can put rules in place and, importantly, can change them whenever the market changes. We know that the market is fluid and that it changes regularly. If rules are put in place and practices change to get round them, the FCA can act swiftly to ensure that loopholes and gaps are plugged. That is a better way of protecting consumers, although the hon. Member for North Durham (Mr Jones) is entitled to disagree.
Jo Swinson
I will make a little progress and then I will give way to my hon. Friend. Existing guidance from the Office of Fair Trading includes provisions on roll-overs. It is cracking down on non-compliant lenders, and earlier I mentioned some of the firms that have already left the market as a result of such action. The FCA has power to cap the duration of credit, and could take action to limit roll-overs. The hon. Member for Sheffield Central mentioned the deliberate strategy of rolling over loans, and if there is a flawed business model that relies on such behaviour, the FCA could decide not to grant a licence in the first place. The Competition Commission will also consider that issue in its wider market investigation.
Jo Swinson
I would like to make a little progress, and then I will let the hon. Gentleman make his point.
Affordability checks are vital. One of the most shocking facts is that nearly half of those who take out a payday loan already show signs of financial stress. We must have proper affordability checks so that people are not given loans when they cannot afford to repay them; all that does is embed them in a further spiral of debt.
Existing OFT guidance clarifies how lenders should check the ability of borrowers to repay, and it is cracking down on that issue. The FCA will also have powers to tackle consumer harm. It has prioritised affordability assessments as an area for potential intervention, and that will be included in the consultation.
Jo Swinson
It depends on the specific circumstances. Current guidance does not necessarily suggest a ban on roll-overs, but there is evidence that some practices mean that borrowers, including those who are not necessarily unable to repay the loan, are proactively offered a roll-over—for example, by text message. That gets them into more debt and incurs more charges, even though they may have been able to repay the loan. There is a suggestion—more than a suggestion: evidence—that there are problems with roll-overs, but that does not mean that every roll-over is wrong. We also want to encourage lenders to recognise and show leniency when borrowers get into difficultly. That is also important. There is sharp practice with roll-overs, whereby the lender perhaps appears to be helpful in offering extra time when that might not be the right thing for the consumer. We are discussing a short-term product. If a proper affordability assessment is performed, the number of occasions when a borrower is unable to repay a short time after it was granted should be relatively low, and such occasions really should be the result of unexpected emergencies or circumstances that could not have been predicted weeks earlier.
There is also concern regarding the use of continuous payment authority. This tool allows lenders to dip into a borrower’s bank account to see whether they have enough money in their account to make a repayment, and to do that multiple times—sometimes hundreds—a day. Many card issuers and others in the financial services market are concerned about how that is being done. The Bill suggests three days’ notice of CPA and an awareness of the right to cancel. Those measures are already in the voluntary code. If they were stuck to and ended up in the FCA rules, that would be helpful.
It is important to clarify that people have the right to cancel continuous payment authority. Indeed, the FCA has recently made it clear to banks that if their customers wish to cancel CPA they have a responsibility to ensure to that that happens. Further, if customers have paid erroneously through CPA after they have asked for it to stop, the banks should refund the consumer. Banks will also have to undertake a review of such cases in the past few years.
It is important to respond to an issue raised by the Bill, although I accept that it is not something that the hon. Member for Sheffield Central was prescribing. A cap on the cost of credit sounds like a neat and simple solution to the concerns in the market but it is not, as my hon. Friend the Member for East Hampshire eloquently set out. This is a complex market and clumsy interventions could have unintended consequences. The Bristol report findings indicate that a total cost of credit cap could risk harm to consumers, reduce access to credit and lead to less tolerance by lenders of customers with repayment problems.
The evidence from other countries shows that in some EU member states interest rate caps have resulted in reduced credit access for low-income consumers. In Australia, lenders have imposed charges outside the cap, or developed products outside regulation. Sometimes a cap results in a move to rent-to-own credit. I am sure Members will be aware of places on the high street where technological gadgets can be bought at a very high hire purchase fee. The expansion of this market occurred in Michigan in the US, where pawnbroking thrived following restrictions on payday lending. It is important to follow the evidence.
The Government have ensured that the FCA’s powers will allow it to impose a cap if it decides that that is the best way to protect consumers, and that doing so is consistent with its statutory objectives. The hon. Member for Sheffield Central talked about a report on the cap and I want to reassure him on what the FCA will have to do. It is already required to set out in guidance how it is achieving its objectives and to report against that in its annual report, which the Treasury will lay before Parliament so that it can be scrutinised by the Treasury Committee. The Public Accounts Committee also has the ability to scrutinise any National Audit Office reports on the FCA. The FCA is, therefore, already able to set out in its annual report what it is doing and why, and, importantly, Parliament is able to scrutinise it.
Before I conclude, I would like to touch on alternatives mentioned by the hon. Members for Harrow West (Mr Thomas) and for Birmingham, Northfield (Richard Burden). Credit unions are an important alternative, and the hon. Member for Birmingham, Northfield mentioned the role that post offices can play. They can help credit unions and it is important to note that they are piloting current accounts, in particular the control account, which is aimed at people who may not have had significant bank accounts before and may want a lot of control over managing their money. We hope to see that rolled out across the rest of the country. Furthermore, the Department for Communities and Local Government is running a competition to get post offices to play a greater role in their communities, some of the prize money from which they could use better to help those in financial difficulty. Financial education is key, however, hence the importance of the Government’s moves to have it provided in schools. Some people taking out payday loans have access to alternatives, but are not using them, partly because the advertising is so effective and partly because of the speed and convenience of payday lending compared with the discussions with a bank about an overdraft.
Martin Lewis, from Money Saving Expert, has produced an interesting guide on payday lending. Money Advice Service also has a lot of information on its website. Martin Lewis has made the excellent suggestion that if people are worried they might need emergency credit in the form of a payday loan, they could instead take out a credit card, stick it in an ice cream tub filled with water and keep it in the freezer, which might instil in them the discipline of not being tempted to use it for everyday spending. Should they need emergency credit, however, they could use the credit card in the short term and pay it off before the next bill, thereby not paying any interest. There are ways of getting around it, but I appreciate that not everybody will want to follow that advice.
As mentioned, on credit unions, the Government are increasing the monthly interest cap from 2% to 3%, which will help credit unions, and investing £38 million in helping them to improve their services and compete better with other forms of credit.
The Government absolutely share the concerns that the Bill is designed to address, but, working with the regulators, we already have a strong package of action in progress to tackle them. In the immediate term, the OFT is pursuing tough enforcement action, with its referral of the market to the Competition Commission, while in transferring consumer credit regulation to the FCA we have ensured a strategic solution to many problems in the high-cost credit market. The FCA’s tough new powers will enable it to take targeted action more flexibly and faster than the Government could. It will have the tools to make balanced judgments on potential interventions based on robust evidence, consultation and cost-benefit analysis.
I agree with the hon. Member for Sheffield Central about the problems and I have set out how the solutions we are pursuing are already starting to work. I appreciate his introducing the Bill and this useful debate—maintaining the profile of the issue helps to apply pressure on the industry to shape up—but I hope he will recognise that our actions and those of regulators are a better way of tackling the problems. I hope he will take that on board and decide to withdraw the Bill. On the off chance that he does not, and regardless of what happens to his Bill, I look forward to working with him, other hon. Members and campaigners outside the House to clamp down on unscrupulous and irresponsible payday lenders.