High Cost Credit Bill
Debate between Lord Beamish and Damian Hinds
Damian Hinds
Of course it is; no one would deny that—well, perhaps some would, but I certainly would not. There is a big issue about individual responsibility, but this market is a complex one, and it can be difficult for people to find their way around the jungle of credit that is available. People who take these loans are often in very vulnerable circumstances, and I am afraid that the purchase decision—people can blame whoever they like—often ends up being made not on the product that is “right for me”, but the one that the person has just seen on the television or the person who came to the door.
Mr Kevan Jones
Part of this Bill tackles the important issue of advertising, but does the hon. Gentleman agree that what is also needed, especially in schools and for young people, is education about APR and borrowing in general?
Damian Hinds
I agree, and I shall come on to the point, albeit briefly, later.
The second issue on which I think the vast majority of us could agree is that the loan should get paid down within a reasonable period and not be left hanging over people who never get the loan reduced in size—and it gets even bigger for some.
Damian Hinds
I apologise, but I had better not.
The second issue is alternatives and credit unions. I have already said I strongly support what the Government are doing, and with the 3%, rather than 2%, a month cap there is now the possibility of lending in the short-term market, but we also need to look at the costs credit unions face and make sure that in respect of loan initiation—particularly with credit checks and so on—it is possible for them to operate in that short-term market effectively.
Thirdly, on savings, if everyone had a small cushion of resilience against the car breaking down or the little things in life that go wrong and push us over the edge, there would be less likelihood of credit being needed. [Interruption.] The hon. Member for North Durham (Mr Jones) is shaking his head, and I wonder if he is saying to himself—or to me—that that was a naive thing to say.
Damian Hinds
I am grateful to the hon. Gentleman for that, but it is not a naive thing to say because we end up spending more, not less, by borrowing. I am not saying this is easy, but I am saying it is better to help people to build up that cushion, if at all possible. That is one of the things credit unions do; it is what the credit union movement is founded on.
Mr Jones
I agree with the hon. Gentleman’s point about credit unions, and I am actually a director of one. But the fact of the matter is that the people we are talking about are on low pay, intermittent pay or zero-hours contracts, which his party is in favour of, so they have no ability to save large sums. The Chancellor’s proposal on delaying the applications for jobseeker’s allowance for seven days will make it even worse for those people.
Damian Hinds
If the hon. Gentleman will forgive me, I must say that he makes political rather than helpful points on this subject. I did not say that these people had the facility to save large amounts of money. As a director of a credit union, he will know that the whole credit union movement is based, initially, on helping people to save. Many credit unions will have a “save as you pay back” process, whereby even where someone borrows from them they will find that at the conclusion of that loan they have a small savings pot, which will stand them in better stead for the future. If we move more towards budgeting-type banking—the so-called jam jar bank accounts—there will be the facility for small amounts of money to go, through payroll deduction, into a savings account. That has exactly the same effect, but at a cheaper rate, in terms of smoothing out the ups and downs of cost that people incur through the year.
In conclusion, I wish to congratulate, again, the hon. Member for Sheffield Central, who has done a great service in bringing all these issues to the House. We have a new regime and we have a lot going on from the Government, so we have to see how that beds down, but I am sure that today’s debate will push that forward.