Payday Loan Companies

Debate between Justin Tomlinson and Caroline Dinenage

Monday 20th January 2014 Commons Chamber

[Justin Tomlinson]

I thank the hon. Gentleman for that intervention. I will be moving on to the failings of mainstream banking shortly.

It is also a recognition of how consumer habits have changed. With 24/7 internet shopping becoming increasingly popular, if consumers see something online at 3 o’clock in the morning and want to purchase it, they would like to be able to access the funding right away. Society is geared up for consumers wanting something, and wanting it right away. That market adapted to consumer demand and stepped in where the mainstream banks were not looking. Clearly, value for money for the consumer is not paramount, and that needs to be addressed.

I welcome the positive steps that the Government have started to take, working with the FCA. I will comment briefly on the various things that I would like to see. The first one, and it is often the simplest, but the one on which I am not sure we are there yet, is that the total cost of a loan should always be displayed in cash terms. I suspect that not even Treasury Ministers can calculate an APR rate, which involves a hugely complex formula. Therefore, a customer should be able to say, “I want to borrow £100, and it will cost me £20.” Even those without a particularly good grasp of mathematics would then be able to make a reasonably informed decision on whether that represents good value for money.

To encourage competition, we need a standardised unit for comparison. In the energy market and in mobile phone contracts there are standard units, so consumers can visit price comparison websites to find the best product. That is very difficult with payday loan companies.

[Caroline Dinenage]

My hon. Friend is making an excellent speech. I know that he has worked hard to bring financial education into the school curriculum. Does he agree that to be able to fathom even the cost of these loans in numerical terms people need a certain level of literacy, so we really need to tackle the poor levels of adult numeracy and literacy, which are a big barrier in this case?

[Justin Tomlinson]

I thank my hon. Friend for that contribution. If she can just be patient, I will be heaping huge amounts of praise on her shortly.

The second thing I would like to see is real-time credit checking. The industry wants that because, despite a lot of the rumours, it relies on people being able to pay back the money they have borrowed. It would help to avoid somebody going into one shop and 15 minutes later going into another one. The credit checking agencies follow the traditional monthly banking system, so in theory somebody can wreak damage on themselves in the course of a month before the banks catch up. The industry says that it wants real-time credit checking; the credit agencies say they would like to offer it but that it is very complicated. One of the smaller operators, Call Credit, has got 10 operators signed up, but it will not be 100% participation. The Government will therefore have to empower the FCA to demand this. We are getting close to it, and it exists in some forms in America. It will make a huge difference because it will protect people from taking out multi-loans and allow the FCA to enforce affordability checks so that lenders who are lending to people who cannot afford it can be dealt with.

I would like to go one step further in ensuring that people can rebuild their credit rating. When someone has been turned down for a loan by one of the mainstream banks, the payday lending industry is often the only one that is prepared to take the risk with them. If they pay back the loan properly and on time, they should then have their credit rating repaired, allowing them to re-enter mainstream traditional lending.

There is a perception that the products, prices and requirements placed on people pushed them away from mainstream banking into a more modern, innovative industry that was responding to the situation. Mainstream banking has to take a long look at itself to see how it can adapt to a changing world. I fully support the fantastic work that my hon. Friend the Member for East Hampshire (Damian Hinds) has done on credit unions as an alternative for people. It might not be the total solution but it is certainly a very important part of the process.

On debt advice, which will be debated tomorrow in Westminster Hall, I fully support the levy, and I think the industry does as well. The Nationwide building society carried out a survey showing that 91% of people who get into financial difficulty say, “If only I had known better.” We see this in our casework. People who have got into difficulty come to see us with their carrier bags of unopened envelopes, and they need face-to-face, patient help. At the point where they go to get one of these loans, it would be helpful to have well-advertised information about how they can access free, independent debt advice, with a freephone telephone number.

Under the licence to operate, it costs lenders about £2,000 to get set up. A particularly bad, unscrupulous lender can wreak all sorts of damage before the FCA, or formerly the OFT, will have had time to do something about them. Unfortunately, some of these operators on the very fringes of the market will take advantage of the potential two-year window to do whatever they want before being taken down, and will then spend more money to get themselves back up the Google search engine listings.

The FCA needs to be extremely proactive in terms of mystery shoppers. Often the consumers who get themselves into the most difficulty are vulnerable people who are least equipped to raise it with us so that we can chase things up. This particularly applies to doorstep lending, as I have said in previous debates. With that lending model, the lender befriends someone, gains their trust, goes into their house every month, and could encourage them to borrow more. They might say over a cup of tea, “Have you sorted out your Christmas presents? If not, don’t worry, because we could provide the money for that, and why don’t you get your carpet sorted out if you’ve got your family coming round—that’s only another £3 a week.” We need to have mystery shoppers to check that the operators are sticking to the rules.

I championed the desire to get financial education on to the statute book, and I am delighted that the Government are implementing that in 2014. As my hon. Friend the Member for East Hampshire said, things will now change. This is about equipping the next generation of consumers with the skills to be able to make informed decisions—not moralising on those decisions but enabling them to make the mathematical calculations.

Police Reform and Social Responsibility Bill

Debate between Justin Tomlinson and Caroline Dinenage

Monday 13th December 2010 Commons Chamber

[Caroline Dinenage (Gosport) (Con)]

As we saw in the ugly scenes outside this building last Thursday, the police deal with people at their worst, when they are in states of anger, violence, grief, shock and fright, and frequently when they are unpredictable because of drug or alcohol use. Through all that, they have to retain their composure, sense of perspective and humanity. Many of us here today have had the opportunity to go on patrol with our constabularies better to understand the pressures that they routinely face on our behalf.

A Saturday night patrol gave me a unique insight into the diverse range of incidents that a two-man team can be called upon to deal with. As we went from one incident to the next, I was impressed by their patience and professionalism, and their ability to maintain a sense not only of perspective but of humour. I went home exhausted, with a feeling of achievement at just having survived the night, while they, of course, had to go and do it all again the following day. I have spoken at length to my local chief constable and other police officers about the Bill. Why? Because it is too important to get wrong. No one knows when they will need to call upon the police for assistance, but we do know that, at that point, we will expect them to be there.

Budget reductions are never desirable, but in the current economic climate they are necessary to get the country back on track. Some forward-thinking chief constables might see it as an opportunity to rethink traditional practices, restructure management hierarchies, get the best out of support infrastructure such as HR and procurement, see opportunities for cross-boundary collaboration and information sharing, and run things better and more effectively.

The scope of the Bill is vast, but there are three main parts that I want to talk about, beginning with the proposals on licensing. In a previous life, I sat on the licensing committee of the local council, and local residents would often cite their frustrations with the antisocial behaviour of people leaving bars and clubs late at night. At present, the responsibility of the landlord ends outside the bar or club, and short of ushering customers away from their premises with a plea to leave quietly, they are essentially free to make their money while others are left to clear up the undesirable after-effects.

What taxpayer in their right mind would prefer to see their money pay for police in yellow jackets spending all night dealing with teenagers who have drunk themselves stupid on alcopops, rather than catching burglars, rapists and murderers?

[Justin Tomlinson (North Swindon) (Con)]

Scenes such as those my hon. Friend has just described are all too typical and do much damage to the night-time economy. Does she agree that the late-night levy will help to deliver a safer night-time economy, which will be a boost to the vast majority of law-abiding customers who are all too often put off by the actions of the disgraceful minority?

[Caroline Dinenage]

My hon. Friend makes a good point. It is important that the levies are imposed only on venues that supply alcohol between midnight and 6 am. That means the responsible pubs and clubs that shut earlier and are managed well, are able to go about their business without any such levies. The funds generated by the levy will be payable to the police and crime commissioners to help to fund the necessary policing, as well as to other organs of local government that address the effects of alcohol-related crime and disorder.

Another positive outcome of the Bill is the reduction in centrally set targets and in bureaucracy. The mass data collection prescribed by the previous Government is one of the biggest frustrations for our police. In Hampshire, it amounts to 130 weeks’ worth of extra work per year—two full-time members of staff—just to satisfy the demands of the Home Office. And I have no idea who reads all that stuff. The plea from local police is that this great advance towards common-sense policing needs to be reflected in changes to the criminal justice system. At the moment, our police spend thousands of hours preparing court cases in which the perpetrator says nothing on arrest or at interview but pleads guilty in the Crown court. All the preparation work was therefore an utter bureaucratic waste of time. There has to be some way of mitigating that.

Hampshire has the sixth biggest force in the country, policing about 2 million people, and substantially more during the summer.