Consumer Credit Regulation

Justin Tomlinson Excerpts

Tuesday 9th November 2010 Westminster Hall

[Justin Tomlinson (North Swindon) (Con)]

I will be exceptionally brief. My huge notes have been cut back dramatically, and I will focus on one point. First, I quickly pay tribute to the hon. Member for Walthamstow (Stella Creasy) for both this crucial debate and the ten-minute rule Bill, the thrust of the arguments of which I support. So, there is cross-party support.

I want to concentrate on the important element of financial education. It is essential to provide financial education to equip people to make informed decisions. Working with the national financial education charity, the Personal Finance Education Group, and Martin Lewis of www.moneysavingexpert.com, I am launching an all-party group on financial education, with a focus on securing compulsory financial education in schools. It will launch on 31 January. This is a very brief plea to all Members who are still in this important debate to come and join the group, so that we can help future generations to make informed decisions.

[Andrew Percy (Brigg and Goole) (Con)]

It is really important to get financial education into our schools because one of the big problems with things such as credit unions is that people do not understand what they are. Banks come into schools, but we do not know about the whole range of the market.

[Justin Tomlinson]

My hon. Friend makes a really important point. According to a survey carried out by the Nationwide Building Society, 91% of people who got into financial difficulty said that if they had had better financial education, they might not have made the decisions they did. The number of people who think that a higher APR is better than a lower one is worrying, and reinforces the point that financial education is absolutely essential.

--- Later in debate ---

[Mr Thomas]

I trust that the Minister will clarify his intentions on that. The review should look at the three specific issues that my hon. Friend the Member for Walthamstow raised.

The hon. Member for East Hampshire (Damian Hinds) made an interesting speech extolling the importance of credit unions—as did my hon. Friend the Member for Walthamstow—as a crucial alternative to some of the most costly parts of the consumer credit industry. He said, rightly, that the issue is not new, but the market is continuing to change. He also raised the issue of the importance of education, as did the hon. Member for North Swindon (Justin Tomlinson), whose initiative in setting up the all-party group I commend.

The hon. Member for East Hampshire alluded, I think sympathetically, to considering how to regulate the worst excesses of the market. He made the important point that the consumer credit industry, as part of the financial services industry, plays a crucial role in helping our economy to function effectively; nevertheless, there is genuine concern about some activities of the most controversial part of the consumer credit industry, that which provides pay-day loans.

As others have touched on, it is crucial that we consider access to affordable credit beyond the consumer credit industry, such as through credit unions and community finance organisations. The issue is about not only financial education in schools but access to financial education and assistance outside the school environment through debt advice services, and about how we bear down on illegal activity such as loan sharking.

[Justin Tomlinson]

On giving access to debt advice, my constituency office is working with debt agencies to train our staff, and me, in how to give the right advice. We are also working with local media to communicate constructive advice ahead of the festive period, which is a particularly risky time for people making financial commitments.

[Mr Thomas]

I commend the hon. Gentleman’s work on that, and I hope he will bring his experiences to his all-party group so he can share that good practice with others.

There were important contributions from the hon. Members for North West Leicestershire (Andrew Bridgen) and for Crawley (Henry Smith), from my hon. Friends the Members for East Lothian (Fiona O’Donnell), for Clwyd South (Susan Elan Jones), for Halton (Derek Twigg), for Leeds West (Rachel Reeves) and for Darlington (Mrs Chapman), and from my right hon. Friend the Member for Tottenham (Mr Lammy). My hon. Friend the Member for North West Durham (Pat Glass) made an important speech focusing our attention, rightly, on concerns about illegal loan sharking, which I want to come back to in a second. The hon. Members for Gloucester (Richard Graham), for Solihull (Lorely Burt) and for North Swindon also contributed.

My hon. Friend the Member for Walthamstow and the hon. Member for East Hampshire drew attention to the work of the previous Government in reforming the Consumer Credit Act 1974 and introducing the Consumer Credit Act 2006. It is time to look again at the definition of “unfairness” that sits as the heart of the 2006 Act to see whether it addresses the concerns of those championing reform of the 1974 Act. We need further action to tackle loan sharks, who continue to operate despite the activity of teams across the UK dealing with illegal moneylending. We also need to look at how to expand access to credit unions.