Consumer Rights Bill

Lord Kennedy of Southwark Excerpts

Wednesday 5th November 2014 Grand Committee

[Lord Stoneham of Droxford]

My Lords, my noble friend Lady Bakewell is unable to be here today, but I am sure that she would like me to associate us with the right reverend Prelate’s amendment. There are two questions that we have to ask ourselves. First, if the selling of mortgages over the phone is banned, why should these loans not be banned as well? Secondly, there is a problem with existing debtors—principally, I suspect, because the company selling the loans has phone information. Given how vulnerable these people are, they are likely to be very mobile in terms of their telephone accounts, and therefore this is particularly dangerous for them. For that reason, the Government have to act. I accept the points that the noble Baroness, Lady Wilcox, very sensibly raised. This is something which seems to have been overlooked and needs action.

[Lord Kennedy of Southwark (Lab)]

My Lords, I support these amendments. I very much agree with the comments of the right reverend Prelate and the noble Lord, Lord Deben, in particular. There is a real problem here. People are at home, unemployed and quite vulnerable, and they are being harassed over the phone by these people who are offering them all sorts of deals to sort out their problems. We have to deal with that: it is a really serious problem.

I am a big supporter of the credit union movement. It is not the solution to payday lending but is part of a suite of measures to deal with it. We have to deal with this, and it is right that the Government should act. It is not right that we leave people in this situation, which is completely wrong and intolerable. People can be driven into the hands of very unpleasant organisations that lend them money and allow them to get into a mess. They then offer more deals to round it all up, with a “special offer this week”, and so on. We here are very lucky that we are not in that sort of mess. Some people are having a very terrible time and I think that the Government need to take action against the people responsible.

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Moved by

[Lord Kennedy of Southwark]

105D: After Clause 86, insert the following new Clause—
“Public communications by sellers in the high cost consumer credit market
Lenders in the high cost consumer credit market shall not target public communications about their services at people who are engaged in gambling.”

[Lord Kennedy of Southwark]

My Lords, I will not detain the Committee too long in moving my amendment today. There are a number of other excellent amendments on the Marshalled List. I am particular conscious that the next one is in the name of my noble friend Lady Kennedy of Cradley, who also happens to be my wife, so I will be very brief.

We have discussed many times in Grand Committee and your Lordships’ House the issue of payday lenders, and their practices have come under a lot of scrutiny. I am pleased that the Government finally took some action to curb some of the worst excesses, although they did not do that voluntarily; rather, they were forced to react to a wholly unacceptable situation. The most reverend Primate the Archbishop of Canterbury, other noble Lords, many Members of the other place and campaigners are to be congratulated on the work they did on this, forcing the Government to finally act.

However, my amendment seeks to deal with a particular problem. On some gambling websites there are adverts from payday lenders, which make it possible that while you are gambling you can log on to a payday lender and borrow more money when you may not be in the best frame of mind to do that. You could have lost money and think, “I can win it back in the next game. All I need is a hundred more pounds, but I’m still two weeks from pay day and I’m already overdrawn at the bank”. In front of you is a little thing flashing in the corner telling you to log on and get a payday loan. My amendment seeks to stop gambling websites from accepting payday lender adverts on their sites—it is as simple as that. That is a real problem. I look forward to hearing the Minister telling the Grand Committee what the Government will do to deal with this issue, which needs to be resolved.

Before I conclude, I should have mentioned in the previous amendment that I have a meeting with the Economic Secretary to the Treasury in a couple of weeks’ time. We all hear reports in the media about all these dreadful practices that financial companies get up to, and the Government keep fining them. That is very good; the Government fine them hundreds of millions of pounds. All the money goes to what is called the Consolidated Fund—it is tipped in, disappears, and is never seen again. I am trying to persuade the Government to use a small amount of that money to support the credit union sector, debt counselling, money advice, or maybe an advertising campaign to show that there are alternatives to payday lenders. We would need a tiny amount, perhaps £10 million, rather than it disappearing into that fund. I therefore hope that I will get some positive news from the Government in a couple of weeks’ time, and I will bring that back further on. I beg to move.

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[Baroness Jolly]

I am grateful to the noble Lord, Lord Kennedy, for raising the issue of payday lenders’ advertisements targeted at people engaged in gambling. The noble Lord, Lord Stevenson, asked how he knew about these things. The answer could be that he had inadvertently fallen into the debate on the gambling Bill, where this sort of thing was raised. We can therefore tell the noble Baroness that there was nothing untoward going on.

As I have outlined previously in this Committee, the Government are fundamentally reforming regulation of the payday market through the Financial Conduct Authority’s new, more robust regulatory system. In January, the FCA will introduce a cap on the cost of payday loans, to protect consumers from unfair costs. The Government are determined to tackle abuse in the payday market wherever it occurs, including in the marketing of these loans. We strongly agree with the noble Lord that it is unacceptable for payday lenders to deliberately target vulnerable consumers with their advertising material. However, it is clear that a robust set of measures is already in place to protect the vulnerable from such practices.

We have heard about the FCA, but payday loan adverts are also subject to the Advertising Standards Authority’s strict content rules. Those apply to broadcast, as well as online, advertising. The ASA enforces the rules set out by the UK code of broadcast advertising. The BCAP code requires that all adverts are socially responsible and that vulnerable people are protected from harm. The social responsibility requirement prohibits lenders from deliberately targeting vulnerable people such as problem gamblers. The ASA has powers to impose scheduling restrictions if it deems it necessary. It also has powers to ban adverts which do not meet its rules, and has a strong track record of doing so: since May 2014, the ASA has banned 12 payday loan adverts. Just today, the ASA banned a payday advert because it encouraged consumers to take out loans to fund frivolous spending. The FCA has introduced tough new rules for payday adverts, including the introduction of mandatory risk warnings and the requirement to signpost to free debt advice. The FCA also has power to ban misleading adverts that breach its rules.

To conclude, there is in place a tough package of measures to ensure that vulnerable consumers are protected from inappropriate advertising and communications from payday lenders. I hope that that gives the noble Lord some comfort. To pick up on a point made by the noble Baroness, Lady Wilcox, the consultation paper on the cap will be published next week, before Report. I hope that the noble Lord now feels able to withdraw his amendment.

[Lord Kennedy of Southwark]

I first raised the issue of payday lending in 2010, soon after I entered the House, in a Question to the noble Baroness, Lady Wilcox. I remember that when I left the Chamber after that, a Conservative Peer said to me, “That is outrageous. No one ever charged me 4,000% for a loan. How dare you say that in the House? It is wrong”. He had a right go at me. I said, “I’m sorry”. I then sent him the link to the advert, and he came back to apologise. He has since become a good friend. He was shocked that anyone would charge that sort of money. That is how I felt about gambling websites. I could not believe that you can play a lot on those sites and have a sign saying that the money is there. The problem is that the advert may not be misleading; it may just give the name of the company and say that it gives payday loans. That is a matter of fact.

We say that we are trying to protect problem gamblers. How do you know that the person on the computer is a problem gambler? You are sitting there getting desperate, losing money and needing more, and the offer is in front of you. The Government are not going far enough on this. There is a big issue here, which we should look at. Of course I will withdraw the amendment today, but I will probably bring it or a similar amendment back at Report.

On ring-fencing, these companies are being fined a tiny amount—£10 million or £11 million. Hundreds of millions of pounds are going to the Consolidated Fund. I hope that no Minister will be too worried about the amount I am talking about when I get to see them. With that, I beg leave to withdraw the amendment.

Amendment 105D withdrawn.