Lord Stevenson of Balmacara
Main Page: Lord Stevenson of Balmacara (Labour - Life peer)Consumer Rights Bill
Lord Stevenson of Balmacara Excerpts
Baroness Crawley (Lab)
My Lords, I spoke on this subject in Committee. I will briefly speak to support the amendment before us and in particular acknowledge the work of my noble friend Lord Mitchell, who has done a tremendous amount in this vexed area of payday loans.
I said in Committee that I believe that the language of children’s protection has to be modernised. As the noble Baroness just said, we rightly rail against violence, pornography and other aspects of our society when there is abuse of its exposure to children and young people. However, the insidious manipulation of children, when it comes to payday lending and the payday lending industry, can no longer be overlooked or seen as a lesser evil than those of violence and pornography. We all know that the misuse of money can lead to terrible family misery. We harm children, often for the rest of their lives, if we make the notion popular for them that procuring money cheaply can be dressed up and sound like fun, or can be a solution to family pain.
When speaking about advertising rules, the Advertising Standards Authority states:
“The protection of young people is at the heart of the rules; they already prohibit payday loan ads from encouraging under-18s to either take out a loan or pester others to do so for them”.
It goes on:
“The rules also require that ads must be socially responsible, which we can apply to any ad that appears to target children directly”.
However, as other noble Lords have said, the ASA overstates its case. It is hard to see how anyone can recognise the term “socially responsible” when it comes to payday loans at, as the most reverend Primate the Archbishop of Canterbury said, “usurious rates”. The European Union directive on this—the audiovisual media services directive—states that content which might “seriously impair” minors should not be included in any programme. It goes on to state that content which is “likely to impair” minors must be restricted,
“by selecting the time of the broadcast or by any technical measure”
necessary. I suggest to the Minister, the noble Baroness, Lady Jolly, that including the amendment before us in the Bill would be an appropriate measure, as the European directive states.
I read recently that the world’s top 10 PR companies, including UK ones, have pledged not to represent clients that deny manmade climate change. That was a huge step for these companies to take. What a powerful signal it would send if those same PR companies and their advertisers took a similar course of action when it comes to their industry producing payday loan adverts.
Lord Stevenson of Balmacara (Lab)
My Lords, I thank all noble Lords for speaking in the debate, and give special thanks to the right reverend Prelate the Bishop of Birmingham for taking on the amendment tabled by the right reverend Prelate the Bishop of Truro. He spoke extremely well—in borrowed shoes, perhaps, but he obviously felt the same as the right reverend Prelate did in his introductory remarks earlier. I declare my interest as the retiring chair of StepChange, the debt charity, which has a lot of experience in this area.
As we found in Committee, there is clearly an all-party consensus for action. It all boils down to the question of why, if it is right to have advertising restrictions on certain items viewed as harmful or inappropriate for children such as violence, junk food, gambling and alcohol, it is not right to do the same to prevent the harm caused by payday loans. We have clear evidence that there is significant pressure from parents and many campaign groups to place payday loans in the same category as the items that are already restricted, and we need to listen to that.
It is up to the Government to defend their position and explain why on earth they feel that they can resist this amendment. When it was debated in Grand Committee the noble Baroness, Lady Jolly, said:
“The Government share the concerns of noble Lords that this market has caused serious problems for consumers, with unscrupulous lenders taking advantage of vulnerable consumers”.
I could not have put it better myself. She added that the Government were,
“committed to tackling abuse in the payday market wherever it occurs, including in the marketing of these loans. The Government strongly agree with noble Lords that it is unacceptable for payday lenders deliberately to target vulnerable consumers with their advertising material”.
Game over, it seems to me. So far, so good—but it went downhill from there. The Minister’s argument boiled down to the tired old saw that regulation, not legislation was the right answer, and that,
“a robust set of measures are now in place to protect the vulnerable from such practices”.—[Official Report, 3/11/14, col. GC 618.]
But they do not.
What do we want? We want legislation now. What are we being offered? Wishy-washy regulations that do not stop children seeing payday lenders’ advertisements, causing irreparable harm. The Government accept that these products, like alcohol and gambling, which I have already mentioned, are unsuitable for children. They agree that advertisements for those should not be targeted at children, but they are happy to let this go forward for payday lenders. This is not good policy-making.
The Government have a chance today to give the noble Lord, Lord Mitchell, an early Christmas present and allow him to say that the job on payday lenders has been well done. This is a good thing to do. The time for reviews and evidence gathering is surely over, and I hope that the right reverend Prelate will not be dissuaded from testing the opinion of the House at the end of this debate. The noble Lord, Lord Higgins, may be right that that wording of the amendment is not exact enough, but that, of course, can be tidied up at Third Reading. We should not desist from testing the principle here simply because of difficulties with the wording. Sometimes you just have to do the right thing—and I hope we will.
Baroness Jolly (LD)
My Lords, I am grateful to noble Lords for raising the important issue of the payday lending industry again. I repeat what I said in Committee—that the strong feeling in the House on this matter is clear, and the Government share the concern that payday lenders’ advertising can encourage irresponsible borrowing and cause consumers real harm.
The Government have worked hard on this issue to listen to as many views as possible, both within this House and beyond. As was noted earlier, I have met and spoken to the right reverend Prelate the Bishop of Truro several times, and just this morning the Minister and I met the right reverend Prelate the Bishop of Birmingham—who is an excellent understudy in this matter—and other noble Lords, to discuss their concerns.
It is worth reiterating all the action the Government have taken to protect consumers in this industry, because in Committee we were a very select bunch whereas on Report there is a wider audience. First, the Government have fundamentally reformed the regulation of the payday market. The Financial Conduct Authority’s new, more robust regulatory system is already having a significant impact: the FCA has found that the volume of payday loans has fallen by 35% since it took over regulation in April; that has happened in just seven months.
The Government have also legislated to require the FCA to introduce a cap on the cost of payday loans, to protect consumers from unfair costs. This cap, which will be in place from the turn of the year, will ensure that no customer ever has to pay back more than double the amount they have borrowed. The FCA has estimated that as a result of the cap, perhaps as few as three or four firms will be able to continue in the market. The Government remain committed to tackling abuse in the payday loan market wherever it occurs, including in the marketing of these loans.
Noble Lords raised specific concerns about the potential for payday loan advertising to target children. Members of the Consumer Finance Association, the main payday loan trade body, and Wonga, which is represented separately, all have explicit policies not to advertise on children’s TV. Ofcom has found that payday loan adverts comprise a relatively small 0.6% of TV adverts seen by children aged between four and 15, which is just over one a week. This is across all channels and time slots. Ofcom has also found that over a quarter of TV watched by four to 15 year-olds is after 9 pm, after the watershed. Therefore the key to protecting children must be to ensure that all adverts seen at any time of day—and this is the point that the noble Lord was making earlier—have appropriate content and are not targeted at children in any way.
Let me be clear. There are already robust content rules in place to protect children from payday loan advertisements. The Advertising Standards Authority enforces the rules set out in the UK Code of Broadcast Advertising, or the BCAP code. The BCAP code requires that all adverts are socially responsible and ensure that young people are protected from harm.
Lord Stoneham of Droxford
My Lords, I shall speak briefly in support of my noble friend Lord Clement-Jones. As I said in Committee, this is a very important change which is needed in this sector and follows what has already been done in banking and utilities. The current practice is anti-competitive because it reserves competitive offers for new and switching customers at the expense of existing customers. I accept that there are problems about how we can actually make the change. Ofcom clearly wants to do it. The complication arises because, as we know, the landline and broadband change applying to BT Openreach, which also affects Sky, TalkTalk, Post Office and EE broadband, is already in place, and now we want the final stage so that all the mobile operators are covered. There is also the issue of bundling as regards the connection with TV, satellite and so on. Ofcom is currently carrying out a consultation on that. We need to hear from the Government when that consultation is likely to be concluded, whether the Government fully support Ofcom in pushing that forward and whether Ofcom now has the power, in the Government’s view, to initiate it once the consultation is over.
Lord Stevenson of Balmacara
My Lords, Amendment 49, which we support, would amend Section 3 of the Communications Act 2003, requiring Ofcom to promote competition and consumers’ interests by introducing a gaining provider led—or GPL—switching regime to the communications market.
It is obviously clear from what we have already heard and what we heard in Grand Committee that simple switching processes are vital to the health and future of all markets. While banking and energy customers are able to switch by contacting their new provider of choice, in mobile, pay TV and broadband customers have to contact their original provider before switching. The current losing provider led process is complicated and slow, works against consumers and distorts fair and open competition.
What is this mystery all about? As outlined by previous speakers, we have a situation where the Minister assured noble Lords, when she responded to this debate in Committee, that the Government have considerable sympathy for GPL switching in the UK. She said:
“In the Connectivity, Content and Consumers paper published last year, we emphasised that we want that across the board”.—[Official Report, 5/11/14; col. GC 692.]
That seems to be a supportive statement. Given that GPL switching already operates for fixed-line voice and broadband services delivered over the BT Openreach network, it is incomprehensible that it does not yet operate for mobile services or for pay TV. In Grand Committee, the Minister said that Ofcom had the power to mandate GPL switching for all communications services. However, as we have just heard, that does not seem to be Ofcom’s view. Indeed, so much does it disagree with what the Minister has said, it had to write to correct her after the debate in Grand Committee. It is worth quoting:
“We have said consistently that legislative reform to support GPL switching would enable us to address switching issues more quickly and directly, and make it easier for consumers to take advantage of the competitive UK communications market. Therefore we were pleased both with the government’s full support for Gaining Provider Led switching”—
in the July 2013 paper—
“and with the subsequent amendment tabled by Lord Clement-Jones … which would give effect to this aspiration by giving Ofcom a clear duty to mandate GPL switching”.
It is clear that Ofcom not only feels it does not have the power, but would welcome the certainty provided by legislation in the Bill. I suspect that that has more to do with the fact that this is a very litigious market within which a number of providers will probably seek judicial review on other issues if there is any doubt at all over whether the powers exist. It seems not so much a Christmas present but a necessary condition for the improvement of our markets that we should go ahead with this. I do not understand why the Government are reluctant to do so. I hope that they will be able to clear this up by supporting the amendment.
Baroness Neville-Rolfe
My Lords, as someone who has switched provider recently, I have seen at first hand how important it is to make the switching process easier for consumers. I empathise with people who are troubled by this, but I believe that we are close to solving the issue. Obviously the consumer is at the heart of our efforts and I am as keen as other noble Lords to make progress. I hope that I have some good news.
I am aware that Ed Richards has written to support the principle behind the amendment and I have also heard what he said to the parliamentary committee. As a result of that correspondence, we have had subsequent discussions with Ofcom. It has confirmed that it already has sufficient powers to deal with mobile services, on the same basis as it already deals with fixed line and broadband, which I will mention. We will want to see the conclusions of Ofcom’s current call for inputs before deciding what legislation is required for pay TV and bundles, but pay TV is not the issue that we are debating.
While I understand the concerns behind my noble friend’s amendment, I believe that it is not necessary, given Ofcom’s existing functions under the Communications Act 2003. Ofcom announced in December that RPL switching would be mandated for all providers delivering broadband and fixed telephony over the existing copper network. Work has started and full implementation of it will be completed by June 2015. Because many consumers now subscribe to telephony as part of a bundle of services, it does not make sense to focus on telephony alone. In July, Ofcom published a call for inputs to understand better the processes used to switch providers of bundled voice, broadband and pay TV. It will also hold discussions with the industry and consumer organisations, and, to respond to my noble friend Lord Stoneham’s question about the timetable, it will publish a document setting out the results in the first half of 2015. Ofcom will consult further and as appropriate on mobile and bundled services with a view to mandating RPL switching.
I share my noble friend’s concerns about RPL switching, but a short-term partial solution is not the answer. I can assure him that we are fully engaged on this matter with Ofcom and we will continue to be so. Given that progress, and everything that Ofcom is achieving with its existing powers and the ongoing work to move towards a system of RPL switching across the board, I ask my noble friend to withdraw his amendment.
“Payday lenders levy
The Secretary of State shall produce an annual report on the level at which a levy on lenders in the high cost consumer credit market should be set and bring forward measures to ensure—(a) provision of free debt advice for vulnerable consumers; and(b) provision of affordable alternative credit through credit unions.”
Lord Stevenson of Balmacara
In moving this amendment, which stands in my name and that of my noble friend Lady Hayter, I repeat my declaration of interest as the retiring chair of StepChange, the debt charity. I make it clear at the start that some of the free debt advice available in the United Kingdom is funded directly by creditors and by charitable donations. For example, StepChange Debt Charity receives the funding for all the work it does through this mechanism. Most of the major creditors, including some payday lenders, pay this fair share contribution, as it is called. Although it is not fashionable to do so, I put on record our thanks to the major creditors, including the banks, for their philanthropic activity, which last year allowed StepChange Debt Charity to offer advice and debt solutions to more than 500,000 people with unmanageable unsecured debts.
Other mainly face-to-face free debt advice services, and some of the telephone advice services operated by six other organisations including Citizens Advice, receive funds from the Money Advice Service via a compulsory levy on FCA-authorised lenders and financial institutions. The FCA collects the levy, but the Money Advice Service determines its size. We understand that it is the Government’s intention that payday lenders should pay this levy, but only when they are fully authorised, which will not be until spring 2016. Our amendment asks why we should wait. Why not now? The amendment would bring into scope creditors that do not yet pay the FCA levy, allow the FCA to vary the impact of the levy in relation to the consumer detriment caused on a sort of “polluter pays” principle and, as a result, increase funding for free debt advice and provide funds for the credit union movement.
Payday lenders cause a disproportionate level of consumer harm relative to the amounts that they lend, so they should, as the amendment suggests, contribute to debt advice a higher amount, proportionate to the greater level of detriment they cause. As high-cost credit providers exist only because there is not enough low-cost credit available in society, it is surely right that payday lenders should also be required to make a contribution to the credit unions, which provide exactly the sort of low-cost credit required but lack the resources necessary to reach out to all who need it.
When the Minister responded to the debate in Grand Committee, she said that the Government already put £38 million into credit unions—but that is a drop in the ocean compared to what is required to transform radically credit unions’ ability to supply low-cost credit where it is needed. I think that most people would accept that there is a greatly increased need here to cover the whole country. Where will that funding come from? A payday lender levy would help, and the next Labour Government are committed to introducing one.
In replying to this amendment in Committee, the Minister also said:
“The Government believe in the importance of free debt advice”.
I am relieved to hear that, but she rather spoilt it by adding:
“Free debt advice is funded by a levy on lenders, once they are fully authorised by the FCA … The noble Lord’s proposal would duplicate the existing funding arrangements for debt advice”.—[Official Report, 3/11/2014; col. GC 619.]
I hope that I have explained that the situation is a little more complicated than the noble Baroness said. Our proposals would add to the current level of funding, not duplicate it. Our argument is that the payday lenders that are causing the most consumer detriment should be asked to pay more and to do so now, so as to increase the pot of money available, rather than waiting until spring 2016, when the FCA authorisation will finally take effect.
I will make one further point. When the Minister comes to respond, could she let us know when she expects the Farnish review of the Money Advice Service to be published? One of the problems that we are experiencing in the debt advice and solutions area is that, following a rather trenchant Treasury Select Committee report, the organisation has been dogged by criticism and, not unnaturally, that radiates uncertainty about its future. It is in everyone’s interests that we achieve clarity going forward.
The main issues facing debt advice and solution services at present are as follows. The Money Advice Service’s statutory objectives were put in place before the reconfiguration of the regulatory architecture, which, among other things, has put the FCA in the driving seat for debt advice and solutions. It is difficult to see what role the Money Advice Service should play in terms of quality advice and so on going forward, as it would clearly duplicate what the FCA is doing and, in some senses, confuse lines of accountability. That needs to be resolved.
How can we get more people to seek the best advice in a timely manner and to sign up to debt solutions that best suit their circumstances? Given that there is a problem with not enough people coming forward for the debt advice that they urgently need, how can we incentivise people to take action to resolve their debt problems? In Scotland, there is a system which gives legal protection to people who enter a statutory debt-free payment scheme. It is called the debt arrangement scheme and it protects them from further interest or other charges. It is a really good system and it works well. Could we not have something like this in the rest of the UK? It would provide an incentive for those with problem debt to take responsible action.
We need to get more people using telephone and online services, with the latter having the great advantage of being scalable at negligible additional cost. We estimate that the cost ratio of offering a face-to-face service compared to telephone and online services is of the order of 50:5:1—in other words, a very large factor if you go for face-to-face services as opposed to interaction through the internet. We do not believe that the need to channel change is being effectively addressed within the sector at present.
How do we make the best use of the limited funding available to support people dealing with personal debt problems? The Government need to come up with an overall strategy to ensure the optimum use of such funds and to incentivise collaboration between the agencies in the interests of reaching more people in need, making the optimum use of the available resources. This does not need overcomplicated regulatory structures or duplication of co-ordination.
In fact, funding for debt advice and solutions has dwindled under this Government and, indeed, may be cut further if rumours are to be believed. According to recent research on this, the level of personal debt across the economy amounts to £8.3 billion per annum, as mentioned in an earlier debate. Some debt solutions, such as the debt relief order, are run by government but the costs fall to the charity sector. For example, it costs StepChange Debt Charity more than £2 million a year to support clients through this process.
I believe that it is time for a root and branch review of how we deal with personal debt and to integrate the current arrangements better. We need to have statutory insolvency provision, and we need that to be linked to insolvency services so as to provide efficiency and to cut the cost of services to the sector and the public. It is important to help people back on to their feet. It is also important to make sure that it does not impact on our overall economy. If we had a long-term strategy for the delivery of debt advice and debt solutions, we would be in a better place. I look forward to the Farnish report setting out sustainable principles which will encourage the free debt advice sector to have responsibility and a strategy for the future. I beg to move.
Lord Stevenson of Balmacara
My Lords, I thank the Minister for her remarks, which were broadly in support of the approach I was taking. I understand her difficulty in accepting the amendment, although I am sad that she will not be able to do so. I also thank my noble friend Lady Drake for her very interesting and wide-ranging comments. I thought she was right to pick up on the possibility of more work being done at the point of transaction in relation to personal debt. The idea of conditionality is a good one and perhaps we should think again. She was right to warn us that things are going to get much worse, particularly in relation to those at the low-pay end of the labour market because of the interaction between welfare and tax and the need for some sort of savings vehicle to help with the problems we encounter there. The truth is that we are going to have problems with problem debt for a long time. I think that she, like me, is arguing that we need to think very hard not so much about having a financial capacity strategy, which is very often prayed in aid at this time on these issues, but actually focusing a bit more on debt.
Debt is a necessary component of growth in the economy and yet it is the one we understand least about and about which we have very little statutory or other measures in place. Most of it is done by the charitable sector and the Government’s arrangements are being reviewed by the Farnish review—which I mentioned, although unfortunately a coughing fit may have covered my best lines. I wonder if I might just sharpen them up at the end so noble Lords can get a sense of them. Perhaps the noble Baroness might write to me about some of them. It is really important that the Farnish review, if it is coming out by the end of the year, focuses on what the structural changes have been in this area because they are not helping at present. It is really important to find a role for the Money Advice Service. It needs to be a facilitator, not a service deliverer. When it tries to do service delivery it just bumps into the existing structures and is not working.
We need—as I think I managed to get out before I was caught by my coughing fit—a statutory backing for personal debt. The arrangements in Scotland work; they are very effective and we should learn from them. We need to tie any new statutory interventions here into a thoroughgoing review of the Insolvency Service which offers too many not very well organised and not cognate solutions. For instance, if you do the decent thing by your debts and go and see a free advice service and talk about what you can do to get your debts paid off, you come off worse in terms of what your credit rating will be at the end of that process than if you had gone bankrupt. In other words, if you try hard, save money every month, repay all your debts and after six years emerge cleansed of those debts, you cannot get credit for six years. If you go bankrupt, you immediately lose your debts—and you certainly lose your credit rating—but you are back in business in three years. If you do a debt relief order, it is four years. What logic is there behind that? I would have said all that earlier. I could not say it. I say it now and I would like a response to it. I beg leave to withdraw the amendment.