Consumer Credit and Debt Management

Mark Durkan Excerpts

Thursday 3rd February 2011 Commons Chamber

[Lorely Burt]

Back in the real world, we do not want to abstain. We—the Government—want to support her proposition, so I am disappointed that she is taking the view she has.

We cannot accuse the Government of doing nothing. This week the consumer credit directive came into force, enforcing a 14-day cooling-off period. We have also increased the money going into catching, prosecuting and imprisoning loan sharks—these pariahs who feast on the misery of the desperate. The illegal money-lending teams are doing a great job and have been very effective, and we have also launched the consultation—the one that the hon. Lady does not seem to be interested in acknowledging.

[Mark Durkan (Foyle) (SDLP)]

Will the hon. Lady give way?

[Lorely Burt]

I am sorry, but I cannot any more.

I, too, am impatient to see help for vulnerable indebted people, but there are other things that we could be doing. When the Financial Services Authority and the Office of Fair Trading merge into one regulator, one option could be to give that newly formed body the power to introduce caps if it felt them to be appropriate. Another option that I should like my hon. Friend the Minister to consider is the use of the post office network as a method of access for credit unions, especially as the Government have halted Labour’s closure programme.

The amendment, which I tabled along with the hon. Member for Worcester (Mr Walker) and other Back Benchers, retains all the good aspects of the motion without committing the Government to any course before the end of the consultation. I urge Opposition Members to support the amendment, so that we as a Parliament can work together to end this scourge, with our heads as well as our hearts.

--- Later in debate ---

[Richard Graham (Gloucester) (Con)]

Today we have gathered in all parts of the House as the champions of sensible consumer credit for the most vulnerable in our communities. It is interesting that so many of these champions are new Members of this House. Among our company, I pay tribute, as many others have done, to the hon. Member for Walthamstow (Stella Creasy) and to my hon. Friends the Members for North Swindon (Justin Tomlinson) and for East Hampshire (Damian Hinds) who have been leading the way in setting out our concerns about consumer credit.

The hon. Member for Erith and Thamesmead (Teresa Pearce) referred to snakes and ladders and concluded that the motion was all about increasing the ladders of opportunity for her constituents. In truth, it is about the other side of the equation: reducing the number of snakes, reducing the amount of credit that is made available through payday lending, and ultimately putting a squeeze on the loan sharks—the one species of fish which we might all agree we would not mind if the beastly EU fisheries legislation sorted out for ever.

The motion proposed by the hon. Member for Walthamstow calls on the Government to introduce caps on prices. Interestingly, when she introduced the motion, she called for the regulator to put these caps in place. All that is at stake in terms of whether we vote for the motion or for the amendment is the narrow issue of whether it is the place of the Government to impose caps on prices or whether it is the responsibility of the Government to encourage a regulator to do so. In that respect, it is relevant that the snappily named “son of OFT”—the consumer markets protection agency, if that is to be its final name—is the relevant body that should be putting caps on prices. The consultation is out there, and we should all be participating in it and encouraging the new agency to do so, as the motion and the amendment suggest.

The other side of the equation, which is all about the ladders of opportunity, comes back to the other issue dear to the hearts of many of those in the Chamber—how to provide sensible credit to vulnerable constituents. I declare an interest, as have many hon. Members, as a member of the Gloucester credit union. I pay tribute to the Government, specifically the Department for Work and Pensions, for funding a post to enable five small credit unions to form together into a Gloucestershire-wide credit union, which will be launched in March. It is through credit unions that we will make credit available to such constituents. I hope that it is part of the Minister’s plans—no doubt he will tell us more—for credit from credit unions to be available through the network of 11,500 post offices.

The final point I would like to make about the ladders of opportunity is on financial education. I pay tribute to my hon. Friend the Member for North Swindon on the new all-party parliamentary group on this matter. Although it is a less attractive game than bashing bankers, I urge all Members to work with the financial services institutions in their constituencies, many of which provide considerable free financial education.

[Mark Durkan]

The hon. Gentleman compared the motion and the amendment and suggested that the motion called on the Government to introduce caps. It actually calls on the Government to introduce regulatory powers that would allow the introduction of caps. The amendment calls on the regulators to consider introducing caps. Do the regulators currently have such powers? If they do not, the amendment is specious.

--- Later in debate ---

[Mark Durkan (Foyle) (SDLP)]

I join others in commending the hon. Members for Walthamstow (Stella Creasy) and for North Swindon (Justin Tomlinson) for securing this debate, even though they differ on the amendment.

Many hon. Members have described the problems in their constituencies. The problem is that firms in the credit market are able to exact credit terms that are lucrative for them but punitive for their customers. When we hear of some of the eye-watering interest rates that end up being charged, it is natural to think that there should be a law against it, and people look to this House to provide some sort of bulwark against open-sky exploitation. The motion asks the House to give the Government a mandate—although it is not a prescriptive mandate—to put regulatory powers in place that would provide caps that would be sensitive to the circumstances and needs of those who are in dire straits and otherwise financially excluded. Those caps would also be sensitive to the dynamics of different parts of the markets and sub-markets—

[Damian Hinds]

Will the hon. Gentleman give way?

[Mark Durkan]

No, because—

[Damian Hinds]

On the wording.

[Mark Durkan]

Well, I am addressing the wording. Many people are misrepresenting the motion and the amendment.

The motion would not put prescriptive caps in place or require the Government to do so immediately. The hon. Member for Solihull (Lorely Burt), who supports the amendment, said that a Government consultation is under way. But that consultation is not just asking the regulators what they think: it is rightly asking all of us what needs to happen to provide properly regulated financial services and proper protection to customers, both business and personal. Instead, the amendment says that we do not even want the Government to consider the question of regulatory powers that would protect those customers—we should ask the regulators to consider that question instead. Who are the regulators? The very consultation that the hon. Lady was talking about is about who the regulators will be in the future and what powers they will have. So the amendment is an evasion and dereliction of parliamentary responsibility, because it would simply ask the regulators to think about the issue—when we are still thinking about who the regulators should be and what powers they should have. It is a case of “There’s a hole in my bucket, dear Liza.” If people want an answer to this problem, they should not back the amendment.

[Damian Hinds]

Will the hon. Gentleman give way?

[Mark Durkan]

No, because I want to give other hon. Members a chance to speak. The hon. Gentleman is supporting the amendment and he ended up pleading with the Minister to consider what he called “twin caps”. I do not know why he did that when he is backing an amendment that says that the Minister should not consider anything to do with caps. So the hon. Gentleman does not want the Minister to have anything to do with this and instead it should be unspecified and unknown regulators.

There is even more uncertainty about who the regulators in Northern Ireland would be. If I, as a Member representing Northern Ireland, were to support the amendment, I would be asked by my constituents, “Well, who are the regulators in our country?” It is unclear who the regulators would be in Northern Ireland. That is why I cannot join others in sidestepping the main point of the motion by backing the amendment.

I would like to join my Celtic colleague, the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), in making a point about debt management and debt management plans. There are not only loan sharks out there, but debt sharks, who pose as debt dolphins coming up to help people who are deep in dire debt. We need clearer regulation. We know that an Office of Fair Trading report found that more than 129 companies were engaged in various questionable practices; and we know that there are models for statutory schemes, not just in other jurisdictions such as the south of Ireland and elsewhere across Europe, but even in Scotland, where there is a debt arrangement scheme that provides a good model for protecting consumers in dire need of credit but being exploited in the name of debt management plans.

The term “flipping” was used during the parliamentary expenses scandal to describe MPs changing houses. In the debt management plan arena, of course, we have flipping as well, with companies sucking customers in with unsustainable terms then flipping them on to more exorbitant terms in the future.