Margot James
Main Page: Margot James (Conservative - Stourbridge)
Margot James (Stourbridge) (Con)
Is my hon. Friend aware that the Select Committee on Business, Innovation and Skills is currently undertaking an inquiry into this issue? So far, we have heard from several experts that the regulation of debt management companies of the paid-for variety is not working at all. Like her, I do not relish more regulation, but I fear that in this area we have no alternative.
Tracey Crouch
I am aware that the BIS Committee is looking into this and I hope that its recommendations when it has finished the inquiry will help the Government to form an appropriate regulatory structure, because it is clear that the current structure simply is not good enough.
Currently, a clear bias exists in favour of pushing consumers into plans that are likely to yield more in fees, rather than focusing on paying down their debts steadily over time. That is in stark contrast to the advice provided by Citizens Advice and the Consumer Credit Counselling Service, which is free, impartial and in some cases anonymous. So the debt management plans are not always in consumers’ best interests. In many cases, they fail because the level of debt built up is already too great and the monthly payments are also too great.
Sadly, it is only when those DMPs fall apart that customers turn to the free services provided by Citizens Advice and the CCCS to help them to pick up the pieces. As a result, the advisers at those services see and hear some horror stories littered with shoddy advice and spiralling debt, so they are particularly well placed to comment on the sector. My local Citizens Advice recently had people with a record £3 million-worth of unsecured personal debt walk through its doors in a single week. It suffers from dealing with the impact of a dangerous cocktail—several high-cost credit shops on the local high street and the emergence of rogue debt management companies. It has campaigned heavily for the regulation of both those sectors, which I support and would welcome.
Earlier this year, I tabled an early-day motion calling for further regulation of debt management companies and for the Government to introduce a robust statutory regime under powers available in part 5 of the Tribunals, Courts and Enforcement Act 2007. That would limit what such companies could charge consumers and would require them to submit self-funded independent audits to a relevant authority. If such companies are found to have breached protocol, the company’s consumer credit licence can be revoked or sanctions brought to bear. That system relies on having an effective regulator, and I am pleased that the recent crackdown on rogue debt management companies by the Office of Fair Trading, which has resulted in the worst offenders having their licence stripped from them, is beginning to fulfil that role.
What we need is a standardised service under which vulnerable consumers looking for advice know exactly what they are getting and can rest assured that it will be in their best interests. Transparency is key to sanitising the debt management sector. Regulation and strict sanctions are necessary to rein in the sector, but it is equally vital that more be done to signpost those looking for help to the right services in the first place. The Government have taken welcome steps to improve the access and quality of debt advice, for which I commend them. The commitment of an extra £27 million for face-to-face debt advice to be delivered by Citizens Advice and others means that access to impartial advice can be assured. That will go some way towards encouraging those in debt to seek help.
Some 90% of MPs in the previous Parliament were contacted by constituents in financial difficulty. As a new Member of Parliament representing a constituency with pockets of deprivation, I know that I will make up part of a similar statistic at the end of this Parliament, as will many other hon. Members. We are in a position to signpost constituents who are in difficulty to free and impartial services such as those provided by the Money Advice Service, Citizens Advice and the CCCS, and to steer them away from costly alternatives. That is something I will continue to do.
In my opinion, debt and debt management should be taken as seriously as the provision of high-cost credit. As legislators, we have an opportunity to do what is necessary to control an industry that can, if misused, misdirected or mishandled, ruin someone’s life. There are a variety of reasons why people find themselves in debt and they should not be judged as a consequence. Instead, we should judge those who seek to help them out of debt and we should judge ourselves as legislators if we fail to do anything about this soon.