Consumer Rights Bill

Debate between Lord Kennedy of Southwark and Baroness Jolly

Wednesday 5th November 2014 Grand Committee

[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.

Armed Forces (Service Complaints and Financial Assistance) Bill [HL]

Debate between Lord Kennedy of Southwark and Baroness Jolly

Tuesday 29th July 2014 Lords Chamber

[Baroness Jolly (LD)]

My Lords, I feel that I should make a declaration at this stage as I have been a member of a credit union for many years. In order to become members of such a union we first had to set one up, so we set up a credit union in Cornwall; Cornwall is its common bond.

I thank the noble Lord, Lord Kennedy of Southwark, and the right reverend Prelate the Bishop of Sheffield for bringing forward the important issue of credit unions and congratulate them both on championing this cause. As the noble Lord, Lord Kennedy, has outlined, credit unions are not-for-profit financial co-operatives owned and controlled by their members and they must have a defined “common bond”. This could be a shared geography, such as Sheffield or my own county of Cornwall, or a shared job or employer, such as employees of BAE Systems, members of a police force, or even members of the clergy. Credit unions provide savings and loan products designed to meet the needs of their community. They are designed to instil a culture of regular saving, and thence access to affordable credit when needed. In effect they are ethically based, democratically controlled, community-owned financial institutions that offer an alternative to high-cost payday lenders and conventional banking.

As noble Lords will be aware, the Government actively support credit unions and have been working to increase access to affordable credit. We have invested £38 million in the Credit Union Expansion Project and are working with the Association of British Credit Unions to look at how credit unions might be expanded to benefit a broader section of the community. The Government’s commitment was underlined in a recent House of Commons adjournment debate. For the record, I would like to highlight some of the key points from that debate. Credit unions do have a role to play in supporting our Armed Forces communities. Financial pressures exist within service households just as they do in the wider community. But for too long there have been factors that exacerbate the problems faced by the Armed Forces community. Often this is nothing to do with people’s creditworthiness, but reflects the nature of a peripatetic career that prevents them developing a proper credit history.

The Ministry of Defence has recognised these difficulties and has undertaken a great deal of work, under the Armed Forces covenant, to address the disadvantages. We are working with the financial services industry to ensure that it understands the unique circumstances of the Armed Forces community and to ensure that it is not unfairly disadvantaged. As part of this we have introduced UK postcodes for overseas locations to help Armed Forces personnel serving overseas to maintain a UK credit history that is recognised by financial service providers and to allow improved access to financial products. In partnership with the Royal British Legion and the Standard Life Charitable Trust, we have developed the MoneyForce financial capability programme, which delivers training and briefings, and provides resources and online support to help the Armed Forces community manage its money and financial affairs better.

Despite this support, there are still those in the Armed Forces, as among the public at large, who end up requiring a loan but get into difficulty with debts at high interest rates owed to payday lenders. Members of the Armed Forces and their families can of course already, providing they meet the common bond for membership, apply to join an existing credit union to access the range of financial services offered. However, unlike in the US, as we have heard, and some EU states, coverage in the UK is not national and the services vary. Therefore, significant thought has been given to whether to create a dedicated Armed Forces community credit union.

UK credit unions traditionally grow organically from small beginnings which may take many years to cultivate their membership. Several thousand members are required for a credit union to achieve long-term self-sustainability to offer a tailored suite of products which meets the needs of its members. What makes credit unions unique and makes them work is their independent spirit. They are created by the people for the people and they offer products that their customers want, because their customers are also their members. Credit unions grow steadily and organically from small beginnings, and normally take many years to cultivate their membership. To give one example, the Glasgow Credit Union Limited was founded by two members in 1989 as the Glasgow District Council Employees Credit Union. I am sure that the noble Lord, Lord Kennedy, will recognise that type of model. Over its 25 years, it has grown to a membership of 32,000 and some £100 million in assets.

Unlike payday loan companies, credit unions are a positive force in the community around them. They benefit members and local economies alike. However, it would not be in anyone’s interests—the taxpayer, the UK financial services industry or members themselves—to try to shoehorn such an institution of this kind into a Whitehall department. The savings of our service personnel should be properly stewarded, managed and regulated. As noble Lords will appreciate, this is not core business for the Ministry of Defence and would involve financial, reputational and resource risk.

Out of the corner of my eye, I see my noble friend Lord Deben suggesting that this is an “I told you so” moment—but there is some light here. The Minister for Defence Personnel, Welfare and Veterans met interested members of the House, including the chair of the All-Party Parliamentary Group on Credit Unions, representatives of the Association of British Credit Unions Limited and the chief executive of the Plane Saver Credit Union, to discuss how the MoD might support access to credit unions by the Armed Forces. Officials are now actively exploring the support that the MoD could offer. A number of issues are being considered, including the criteria a credit union should achieve to receive MoD support and the education of the service community in order to facilitate informed choices. To add a personal note, when we set up our credit union, one of the most difficult things was to inform people what a credit union does and how it works. Further issues being considered are how credit unions can be accessed by service personnel and the potential for payroll deduction to reduce the administrative costs of running a credit union.

The organisation of credit unions has always been, and must continue to be, the remit of the private and the voluntary sectors. However, the Ministry of Defence will support organisations with the wherewithal to put in place a credit union to support the men and women who have served this country with such distinction.

I hope that this has provided noble Lords with some assurance on the Government’s position on credit unions. However, I think that including specific provision on credit unions is unnecessary in this Bill and would take us away from the primary purpose of Clause 4, which is to provide the legal basis for funding charitable, benevolent and philanthropic organisations that support members of the Armed Forces community throughout the United Kingdom. On that basis I ask the noble Lord to withdraw his amendment. However, we will take away the suggestion of the noble Lord, Lord Kennedy, of a meeting with Anna Soubry and see what can be done before Third Reading.

[Lord Kennedy of Southwark]

I thank all noble Lords who have spoken in the debate. I am not entirely pleased with the Government’s response. I do not understand the reputational risk to the MoD. It is the same reaction I got when I raised the issue of a credit union in Parliament a year or two ago. I was told by officers in both Houses that because of the reputational risk and all the problems I would have it would not happen. Finally, we got there and it now happily works in both Houses of Parliament, with no particular risk. I do not understand the risk in facilitating a voluntary body that provides affordable credit to our Armed Forces community. I think that is quite disappointing. I hope that we can have a meeting before Third Reading and I hope to be able to bring something back at Third Reading as I think this is an important issue.

I thank the right reverend Prelate the Bishop of Sheffield for his support. I very much agree with the comments he made about Navy Federal. It is the biggest credit union in the world. It happily serves the whole of the armed forces of the United States. There are no problems there at all. I am sure that it would give us some assistance and support in getting a credit union fully established in the UK for the military community. I thank the noble Lord, Lord Deben, for his comments. He made the case for supporting credit unions much more eloquently than I could make it. I was very hopeful when he spoke that maybe he knew something that I did not know and that we would be able to get a better answer from the Government. Clearly that was not the case. I was also pleased with the support of my noble friend Lord Rosser from my own Front Bench.

I am disappointed with the response. I think we should do more than this. I hope I can bring the amendment back at Third Reading. With that, I beg leave to withdraw the amendment.