Creditworthiness Assessment Bill [HL]

Lord Bird Excerpts

2nd reading (Hansard): House of Lords
Friday 24th November 2017 Lords Chamber

Moved by

[Lord Bird]

That the Bill be now read a second time.

[Lord Bird (CB)]

It is a great honour to be talking about poverty again in the House. Whenever I get to the House, I would love to jump up and say that we are not doing enough for the poor; we are not creating the escape ladders for people in poverty. If you look at the work that I have been doing over the last 26 years, it has nearly always been aimed at how we can dismantle poverty in the lives of the neediest. One escape route is obviously around education and housing and the opportunities that you get through work—but another thing, which is hidden, is how expensive it is to be poor. It is incredibly expensive. If you are poor, you pay more for your electricity, gas and credit. That is why this Bill is based on the work that the Big Issue has done over the last seven years, when we have been working with a credit agency called Experian. We have worked to find the records of 1.5 million social tenants and to look at ways we can reduce the cost of their credit and, we hope, move them incrementally towards democracy and justice. As we know, the poorer your life is, the less likely it is that you will be able to participate in democracy. Democracy is about choice and the poorer you are, the less choice you have.

The work that we have been doing with the Rental Exchange looks into the ways in which people’s rent can be used when they go forward to get themselves a credit rating. Interestingly, if you are a mortgage holder, and if you pay your mortgage on time and do not miss it too often, you will automatically have a higher credit rating, because the credit agencies will look at you and say that you are a jolly good chap, woman, student or whoever. But you might have been living in social housing, or in another form of rented accommodation, for one year, five years, or 10 years. There are the boxes to be ticked at the bottom of the form saying, “Are you a tenant?” or “Are you a householder?” and, if you are a householder, that box is ticked. If you are a tenant, the paper is normally thrown away, not even considered, or you will be given a very low credit rating, because they do not take into account the fact that you are paying your rent. You could be an incredibly good tenant, paying regularly for many years—or you could be a lousy mortgage holder.

There is this injustice, and the Creditworthiness Assessment Bill is an attempt to change the way the credit agencies look at this social morass, this social gap, this representation almost of a class line that is drawn between those who are in luck and those who are not in luck—the people we want to address. The Big Issue has done this work and is proposing to carry on with it. I am proposing that we change the legislation so that the credit service providers have to take into account the fact that people have paid their rent. There are, however, a number of problems, because some people’s credit score could go up, while others’ could go down. We need to make sure that those people whose credit is poor and will stay poor, or even get worse, are helped. What happens now is that nobody’s credit is taken into account if they are a renting tenant. We therefore do not know how we can put our arms around those people who need to be supported in credit and who do not have a credit record. These are some of the considerations that need to be made. We have to be very careful that we do not help only the low-hanging fruit, so to speak. We need to also socialise and engage with those people in need of support.

The other thing about having a credit record is that it means you also have a digital identity, which means that you exist. There are so many occasions in this world, and they will increase, where people do not have a digital profile. Without a digital profile, the real problem is that not only will you not be able to get credit, but there will be all sorts of other knock-on effects. The poorest among us often do not have a digital profile, and we need to address that as well.

I will not go on, because there are some very good speakers following me who can do all the numbers and so on. I am very pleased that we have a tidy little bunch of people. The Government have in some ways gone towards some of the things that we need to do. In the Budget the other day, there was a suggestion that there will be a £2 million competition to support fintech firms—which I think means finance technology firms—to look at a financial or technological solution to collecting this data. I should like to think that this is not a torpedo but an attempt to carefully negotiate our way through the body of knowledge that the Big Issue, Experian and others have built up, bearing in mind that we do not want to leave people behind. One of the worst problems with having a bad credit record is, if you are buried in it, that it closes down the whole of your life and stops you living. We need to address that. I beg to move.

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[Lord Bird]

I thank your Lordships very much for that interesting discussion about what we all agree is an irregularity that happens when you live in poverty. It is one of the many irregularities there. What I found quite interesting about the Minister’s response is that when it comes to a market-based solution, which the Conservative Government would obviously love to promote, there is a bar on operating in the market healthily. People say, “I have a mortgage, therefore I am much more reliable and bankable than if I am a tenant who pays rent”. What is so interesting is that there are probably millions of such people who the lenders would love to lend to, but they do not have the information. They do not have the key to the door. If it was a true market-based solution, it would be a matter of turning to tenants and saying, “Show us how reliable you are by showing us the data you’ve collected over the years by paying your rent”.

The Bill opens up the possibility of enfranchising a whole group of people who are disfranchised now. Fintech goes towards the idea that you can gather your own data and share it with a third party, which may or may not choose to lend you the money. There are ways towards a solution and the fintech will come along, irrespective of whether we see it in, but there is this entrenched idea. The work of the Big Issue has proved that the evidence is there that millions of people are being disfranchised, and that it is affecting the health of the market. If we really want to find a market-based solution let us look at a true one that includes those people, who are not able to participate in the market.

The Bill is also a bit broader in its base; it is not exclusively about people getting mortgages. I think there was a kind of wrong-footing—not intentional, because I trust the Government to be noble in all things—that we are talking about mortgaging and housing. We are actually talking about, for instance, people moving into social housing. When you go into the apartment, what have you got? You might have a gas oven or an electric oven, but where are the white goods? You move in, you are on universal credit and you have to wait until you can buy the goods that enable you to feed your family. What happens? You then have to turn to BrightHouse. You have to turn to BrightHouse because you are desperate to feed your children and therefore you have to go to a very narrow sector of the credit market, and that sector knows that you are hoist by your own petard when it comes to your poverty and it is going to charge you through the nose. That is a disreputable thing masquerading as a part of democracy. You take it or leave it. We need to recognise that somebody’s credit score should begin to liberate them and enable them to begin the process of their own reconstruction. It is about people reconstructing themselves, irrespective of how hard and tirelessly we work to extend the franchise that we need to extend around credit.

I thank noble Lords for taking part in this debate, which I enjoyed very much. I very much enjoyed the comments made by the noble Lord, Lord Davies. I can see he is not a pusillanimous man. He upped the game. I enjoyed the contributions of the noble Baronesses, Lady Thornton, Lady Grender and—unfortunately I did not get her name.

[Lord Taylor of Holbeach (Con)]

Lady Wilcox.

[Lord Bird]

God bless you. I am only a new boy. When, or if, we get this Bill through the House, it will benefit all political persuasions in the House because we will all be able to do our job around poverty a little better, but we will also have to make sure that in the detail, where we know the devil is, we do an awful lot of work for people who are left out and whose credit is damaged.

I was out last night talking to some homeless people. A big problem is that they have no credit references. One of them, a young woman, had been driven out because of problems around credit and her ability to respond to it. When you see those things, you know that we have an emergency on our hands and we need to do something very desperate. One of the ways we can do that is by helping people with their credit while making sure that people who are not the low-hanging fruit do not get left behind. We have to ensure that there are all the safeguards so that people can opt out and not be punished in the process. I thank all noble Lords.

Bill read a second time and committed to a Committee of the Whole House.

House adjourned at 3.43 pm.

Creditworthiness Assessment Bill [HL]

Lord Bird Excerpts

Committee: 1st sitting (Hansard): House of Lords
Friday 11th May 2018 Lords Chamber

[Lord Bates]

I hear what the noble Baroness says but, as other Members have pointed out in the debate, there is the risk of some unintended consequences as a result of taking this approach. I have also outlined that we are not dismissing the problem, but are seeking an alternative route to solving it which we believe will be more effective and fairer, and avoid some of those unintended consequences. If that turns out not to be the case, of course we are always open to review our position vis-à-vis proposals such as this, and we will continue to act in that way because our first priority is to protect the most vulnerable and help them make a better future for themselves and their families by getting access to home ownership.

[Lord Bird (CB)]

I really enjoyed that. That was a brilliant array of political parties coming together in the House. I am really glad. I am also glad that the noble Lord, Lord Blencathra, introduced the amendments in his name and that of the noble Lord, Lord Naseby, because they allow us to address the laws of unintended consequences. The noble Baroness, Lady Lister, also raised the question.

I come from a long line of people who did not pay credit. I am not likely in my dotage to be grassing up the people I come from. My mother used to go to a doorstep lender, who would direct her to a particular shop, where we paid through the nose over and again in the 1950s, 1960s and 1970s, until she died in absolute poverty in the late 1970s. I am not going to grass these people up, I assure your Lordships. Actually, I am much more interested in the 15% or 20% of people who are going to find it very difficult to get credit. They are finding it very difficult to get credit now.

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[Lord Bates]

My Lords, I think I can be brief on this group. I thank my noble friend for moving the amendment. This group of amendments concerns the proposal for the Financial Conduct Authority to conduct a review into the experience of rental tenants, with particular regard to their ability to demonstrate their creditworthiness under the existing rules.

I remind the Committee that the FCA recently consulted on proposed changes to its rules and guidance on assessing creditworthiness in consumer credit and has undertaken research on this subject, which carefully considered the factors that firms take into account when making lending decisions. This consultation made direct reference to the current limitations on sharing rental data and the potential for new technology to alleviate them. That is the purpose behind the rent recognition challenge.

Furthermore, in April 2018 the FCA announced that it will conduct a market study on credit information. A consumer’s credit information affects how likely they are to be able to access a range of financial services, including mortgages, loans and credit cards. Consumers may experience harm, such as restricted access to credit, if this information, such as rental payment history, is not shared effectively. The FCA’s aim is to ensure the credit information market works as well as possible to maximise the benefits that it can deliver for consumers. The FCA will also collect evidence to gain a better understanding of the potential for harm in this market and, if necessary, identify remedies. This study will be launched in quarter four of 2018. Finally, the FCA conducts a review of all new interventions as a matter of course and continues to monitor the market for consumer detriment on an ongoing basis.

In conclusion, I put it to the Committee that the need for a further review by the Financial Conduct Authority into this issue is unclear, as the regulator is already carrying out extensive work in this field. The Government’s position on the Creditworthiness Assessment Bill therefore remains unchanged.

[Lord Bird]

I am pleased that the noble Lord has withdrawn—I feel a great victory. We have to move on to the next stage, and I thank the noble Lord, Lord Bates, for this great opportunity to respond to what we said. I thank the noble Baronesses, Lady Grender and Lady Thornton. It seemed all a bit “spaghetti” just now, so forgive me my trespasses. I will sit down. Thank you very much indeed.