High-cost Credit

Mike Thornton Excerpts

Thursday 5th September 2013 Commons Chamber

[Chris Evans]

I join my hon. Friend in congratulating Bolton Wanderers. The first draft of my speech included a reference to the team turning down a sponsorship deal with QuickQuid, but I took it out for reasons of time. She raises an important point. The premiership is sold throughout the world. Anyone who watches “Match of the Day” or Sky Sports will see managers and players being interviewed after a match against the backdrop of their sponsors. There is nothing wrong with that, but seeing the names of loan companies such as QuickQuid or Wonga next to those of reputable companies such as Barclays sends the powerful message to the chap in the pub who has watched the game that those loan companies have the same legitimacy as blue-chip companies that follow the rules, work in a well-regulated market and look after their customers.

I have noticed the huge problem that payday and short-term loan lenders have recognised the absolute power of advertising. I do not say this often as an Opposition Member, but I feel sorry for the Government, because they are in a David and Goliath situation. They are investing £38 million over three years in credit unions, for which they should be applauded, yet the big five payday lenders have just spent £36.3 million on advertising in one year, and that will only continue.

As the treasurer of the all-party group on credit unions, a Co-operative Member of Parliament and a member of the Islwyn community credit union, I think that credit unions are the way forward. They offer vulnerable people with few safe options an alternative to get cash when they need it most. They are the remedy to predatory loan sharks and high-interest lenders. Aside from the more regulated industry that I would like to see, the alternative to high-cost credit is a financial services sector that contains a wider array of ethical and enlightened products and services.

[Mike Thornton (Eastleigh) (LD)]

I entirely agree with the tenets of the hon. Gentleman’s speech and thank him for securing the debate. My constituents say that while credit unions are all very well, a person needs to be saving with one before it will lend to them. My experience and that of my constituents is that problems often arise when people have not been able to save in the first place, meaning that credit unions are unable to lend to them under their rules, so could we consider dealing with that?

[Chris Evans]

As I have said, we need an innovative approach because the payday lenders have become huge and they are a first-stop shop for anyone who needs money. We need to examine how credit unions are funded and to let people borrow through the Post Office.

In addition, yesterday I spoke to the UK Cards Association and asked whether there was a way to get credit cards to impose a small limit and micro-manage them in some way. It was very receptive to the idea. My argument was that then the big banks could be involved and they could use their own account management techniques. It would be a win-win for everybody in many respects. A decent interest rate could be charged on a credit card and the banks could then manage people who need short-term loans into mainstream banking. That is the way forward. I have every sympathy for people who need this money, but the way forward is to find a way with the big banks to manage people into mainstream banking.