Consumer Rights Bill

Lord Higgins Excerpts

Wednesday 26th November 2014 Lords Chamber

[Lord Alton of Liverpool (CB)]

My Lords, in returning to this issue, which I spoke to at Second Reading and in Committee, I first thank the noble Baronesses, Lady Neville-Rolfe and Lady Jolly, for the time that they and their officials have given to it. The meeting that they held with me, the right reverend Prelate the Bishop of Birmingham and the noble Lord, Lord Mitchell, earlier today was certainly helpful.

As the right reverend Prelate just said, this issue has not just exercised Members on all sides of your Lordships’ House at all stages of the Bill but it has also engaged the public outside. I am glad to speak today to Amendment 47, to which I have added my name as a cosignatory. Our amendments are a composite of the amendments which the right reverend Prelate the Bishop of Truro and I moved in Committee and build on that momentum. I hope that they become part of the Bill. However, I recognise that although legislative moments come and are the most important point for parliamentarians to insist on provisions, it is not always possible to achieve legislative outcomes. If that is the case today, I hope that when the Minister comes to reply to the debate, she will be able to say, if the Government agree, as I think they do, with the principles contained in the amendments, how they will be rigorous in ensuring that the advertising industry, the licensing authorities and, above all, the payday loan industry will act in accordance with the amendments, and how we as a House will have the opportunity in due course to hold all those bodies to account.

[Lord Higgins (Con)]

I am looking in vain for some reference to the watershed to which the right reverend Prelate referred. I cannot see where it is in Amendment 47.

[Lord Alton of Liverpool]

The issue that the noble Lord rightly raises would be covered in the regulations to be laid before the House under proposed new subsection (1). There is a difference between being able to advertise to and target young people, which is the main thrust of the amendment, and the second part, which is about whether there can be regulation after the watershed. It is true that the advertising industry and payday loan lenders recognise that there is an issue about targeting young people, but up until this point, we have not heard enough from them about what they would do about advertising that might appear after the watershed. If I may, I shall return to that in a moment or two.

[Lord Higgins]

I am very much in favour of the amendment, but the right reverend Prelate referred to the watershed as if it were in the amendment. Am I right in thinking that in fact it does not appear in the amendment, only in a statutory instrument intended under the amendment?

--- Later in debate ---

[Lord Mitchell]

I absolutely agree, my Lords, but one step at a time. Not just Newcastle United but Blackpool have a kit with “Wonga” on the front. I am told that one can even buy babygros from Blackpool with “Wonga” on them. It is just awful.

I was about to say that I will resist the temptation to comment on the value of Wonga’s ethical stance on anything; noble Lords will know what I am alluding to.

Perhaps I may be so bold as to say that the Government have been totally been taken in by these payday lending companies’ public relations campaigns and lobbying efforts. These people are not stupid. They do not advertise on children’s TV programmes because they know that this is unacceptable, even for them. Instead, they advertise on TV when children just happen to be watching. The average British family watches more than four hours of television per day; some programmes are children’s programmes and some are not, but one thing we know for sure is that the kids all know the jingles. They laugh at the puppets and are well aware that money is easily available and fun. The children know this, yet the ASA has trivialised their exposure to this marketing. The payday lending companies are very sophisticated; their marketing is brilliant. They have spent tens of millions of pounds trying to persuade us all, very successfully, that payday lending is a good thing—that it is cool, fun and gives you a wonderful lifestyle, free from worry.

However, as we know, because we have seen it at first hand, unaffordable debt is a blight on our society. We have seen vulnerable and desperate people succumb to the seduction of payday lending advertising. As the noble Lord, Lord Alton, has said, “pester power” has now entered the lexicon of advertising—using children to nag and persuade their parents to take out payday loans. Who could resist their appeal, particularly with Christmas coming up?

The Children’s Society, in its excellent survey on the debt trap, has come up with a series of statistics that have already been mentioned in this debate and which I will not mention again. However, they are pretty damning and show that payday lending advertisements are seen by children. As I say, the payday lending companies at this very moment are spending millions of pounds on daytime advertising and are directing much of it at our children. In introducing the amendment, we aim to restrict this pernicious advertising.

[Lord Higgins]

My Lords—

[Lord Trefgarne (Con)]

I should say to the noble Lord that this is Report. He has spoken twice already. He needs the permission of the House if he wishes to make a further remark.

[Lord Higgins]

I understand the point that the noble Lord is making but hope that the House will agree that while I intervened to clarify a point that was confusing, I might reasonably make a speech on the substance of the issue.

[Noble Lords]

Hear, hear.

[Lord Higgins]

My Lords, I have not spoken previously on the Bill, but I spoke at considerable length on the banking Bill—now an Act. In the concluding stages we discussed payday loans at considerable length. I was anxious, right at the end of the proceedings, that we should not simply encourage the Government to impose a limit on the charges paid on payday loans but also on the rate of interest. This was resisted by the Government at the time. Therefore, I am as happy as the noble Lord who has just spoken that the Financial Conduct Authority has, in fact, come out with a series of proposals that considerably improve the environment in which we are discussing payday loans and this amendment. In particular, it has imposed an initial cost of 0.8% per day rate of interest, a fixed default fee which is capped at £15, and a total cost cap of 100%. All these are very welcome.

None the less, in the context of this amendment, the situation is far from satisfactory. I looked at the supporting papers, which the Financial Conduct Authority is putting forward. It calculates the APR equivalent to what I just said as 1,270%. I think we have to consider very carefully whether it is right in saying that the limits it has set will be in danger of eliminating short-term loans if one compares that APR with the cost of capital to the companies which we are discussing.

I will speak a little on the amendment because, as I indicated earlier, I am very sympathetic to some of the arguments that have been put forward. My problem is with the drafting of the amendment. As I sought to point out earlier, although the right reverend Prelate suggests that the amendment is to deal with the watershed, it does not refer—I think I am right in saying—to the watershed as such. My problem is that I suspect that the Government will be reluctant to accept the amendment in its present form. Perhaps my noble friend, in replying to the debate, will indicate whether that is so or whether they are sufficiently sympathetic to the objectives of the amendment that they will come back at Third Reading, or will encourage us to come back at Third Reading, with a more specific form of amendment than that which we are asked to debate, and that many Members have suggested we ought to vote on today. I think that there are some problems. It is not entirely clear, for example, how one is going to demonstrate that a particular advertisement is deliberately targeted at the people we are trying to protect by this amendment.

Overall, I hope my noble friend can reply sympathetically and that we can come back, if not today then at a later stage, with an amendment which is acceptable and which will achieve the objectives that I think are right. It is quite wrong that these adverts should be targeted—as I believe they are, but it is difficult to prove—at children. The Children’s Society rightly points out the extraordinary extent to which the adverts appear to be having an impact on young children, who in turn will be having an impact on the attitude of their parents. Therefore, I think that this is something on which clearly we need to take action—but it is not very simple, and we need to get the legislation right.

[Lord Stoneham of Droxford (LD)]

My Lords, I support what my noble friend Lord Higgins has been saying on the precise nature of this amendment, but I will also share the underlying feelings on this issue that have been expressed by the right reverend Prelate and by the noble Lord, Lord Mitchell, who has played such an important role in getting fundamental changes in the conduct of payday lending. I think it is also fair to say that the Government have listened. The Government also have worked through the Financial Conduct Authority to make sure that these payday loan companies are now in retreat.

As somebody who has worked in the media, I am always very cautious about structural intervention in advertising, because there are always arguments for restricting advertising in certain circumstances. I think that this issue is not just about young people but about all vulnerable people being taken in by this advertising. We have seen the complications. It is not just children’s television or even daytime television; it is the use of branding to appeal to a particular audience. It is a very complex issue. Two bodies deal in this area: the Advertising Standards Authority and the Financial Conduct Authority. Both those bodies should now look at this and come forward with their recommendations before we consider detailed legislation. I hope very much that the Minister will agree to initiate that.