Payday Loan Companies

Debate between Neil Parish and Fiona O'Donnell

Monday 20th January 2014 Commons Chamber

[Fiona O’Donnell (East Lothian) (Lab)]

I was rather hoping that you would not be in your seat when I rose to speak, Mr Speaker—not because it is not always a pleasure to speak under your chairmanship, but because you will realise that I am being rather greedy this evening, having secured an Adjournment debate on pre-payment meters and fuel poverty. I think there is a link between the two topics of debate, and it is a pleasure to follow the hon. Member for Brigg and Goole (Andrew Percy), who I thought seemed to be arguing rather dangerously in respect of financial education: those who can’t should teach.

I congratulate my hon. Friend the Member for West Bromwich West (Mr Bailey) on the work he, his staff and members of the Select Committee did in bringing this report before us. At last, we are seeing some serious progress on regulation of the payday lending sector. I also congratulate, and express the gratitude of my constituents to, my hon. Friends the Members for Sheffield Central (Paul Blomfield) and for Walthamstow (Stella Creasy) on the work they have done, because it takes real courage to take on payday lenders, especially when a Member does not have the support of the whole Committee. To go out there alone to take on these payday loan companies can be a terrifying experience.

My first encounter with Wonga was very similar to that of the hon. Member for Belfast East (Naomi Long), so we must catch up later. I received an e-mail, saying that I had previously secured a loan from them and they wanted to be back in touch. I tried to contact the customer care service and then phoned. They told me it was a fraud, so I asked why I was being put through to customer care service when I replied to their e-mail, but I really got nowhere. My next encounter with Wonga was when a constituent had two loans fraudulently taken from her account. I put out a press release on my website, mentioning legal loan sharks. Within a few moments, Wonga was on the phone in my constituency office. It was presumably whoever it is who tries to promote the good name of Wonga. He said, “If you have a problem with Wonga, I really wish you had lifted the phone to us.” I explained that I had not found phoning to be the most fruitful way of dealing with Wonga in the past. He then said that my description of them as “legal loan sharks” was not helpful to Wonga. I responded that I had not waited 50 years to come to Parliament to be helpful to Wonga. The conversation pretty much ended at that stage!

We have definitely reached the stage where we need regulation and reform of this sector. The hon. Member for East Hampshire (Damian Hinds), who is unfortunately not in his place—I am sure he has something very pressing to attend elsewhere—spoke in praise of markets. I do not want to bury them, but I believe different markets work in different ways. In the food retail sector, for example, competition drives down prices. Generally, people in areas of larger population concentrations have access to other companies offering the same service. Other markets, however, do not operate in that way, and it almost seems that the different players are colluding to drive up the price rather than drive it down. I certainly think that that applies to payday lenders.

The hon. Member for Brigg and Goole spoke about walking down his local high street. I urge him not just to walk down it, but to stand in it and campaign against payday lenders. I did that in Musselburgh high street, in partnership with my Labour colleague in the Scottish Parliament, Kezia Dugdale, whom I must praise for her work on the Debtbusters campaign. I was goaded by the hon. Member for Edinburgh West (Mike Crockart) to put on a shark costume in the high street, which I duly did. I must add that, after I had positioned myself outside the premises of each of the four providers of expensive unregulated credit in Musselburgh, each one came out and challenged me about my right to be on the pavement.

I think that it is time for action, and that it cannot come soon enough. I had the strong impression that people in Musselburgh did not like the fact that those shops were in their high street. I agree with my hon. Friend the Member for Makerfield (Yvonne Fovargue) that we should look at other sectors as well, including pawnbrokers. One of them kept saying, “We do not lend money”, but there were signs all over his shop saying “cash loans”, which seemed to contradict that. The whole sector needs a thorough examination.

We need to look at the total cost of credit. I realise that that will be difficult, but we must find a way of doing it. We also need to deal with advertising as rigorously as we have dealt with it in the alcohol industry. Advertising should not just make the facts clear, but should not be able to glamorise credit.

[Neil Parish (Tiverton and Honiton) (Con)]

I think that we are now seeing a cross-party attack on payday loans, along with a wish to attract people to credit unions and create more of them. We should put pressure on payday loan companies not to charge huge interest rates and huge fees for late repayment, and try to give people access to credit at an affordable rate through credit unions.

[Fiona O’Donnell]

I want to finish what I was saying about advertising, but I shall then say something about possible alternatives.

I was very disturbed and disappointed to learn that Kerry Katona was advertising Cash Lady. I saw no reason for her to be involved in a project that was aimed specifically at women. Car insurance is a different matter, because, as we all know, we are better drivers than men, and a separate service may be appropriate in that context. I was pleased when many people complained and the advertisement was removed, but Kerry Katona then appeared in another one. Advertising in this sector must be rigorously controlled.

The hon. Member for Tiverton and Honiton (Neil Parish) mentioned alternatives, and I agree that we should think about them. My hon. Friend the Member for Edinburgh East (Sheila Gilmore) said that credit unions needed to have the same sort of presence as payday lenders. Unfortunately, the credit union shop in East Lothian closed, and credit unions have no high street presence in the area. That makes it far more difficult to reach out to people, and makes competition much more difficult. One Member said that the sector did not need support, but I think that that is unlikely. We do not want the cost of credit from credit unions to rise, because that would defeat the purpose.

The hon. Member for Dover (Charlie Elphicke) spoke of watching “It’s a Wonderful Life” at Christmas, with its talk of mutuals and building societies, and the Building and Loan company. This evening’s debate has been cordial, apart from, as ever, the contribution of the hon. Member for Stratford-on-Avon (Nadhim Zahawi), who also reminded me of “It’s a Wonderful Life”, because in his account of where we are today he seemed to be saying, “Imagine what it would have been like if the Conservatives had never been in government.” I think that the hon. Gentleman was the only Member who—as he often does—struck the wrong chord. There are links between increased poverty and welfare changes, and the fact that more and more people are having to turn to payday lenders.

The Select Committee report and the debate are welcome, and I hope that they will result in more protection for many of my constituents, such as those who came out of Loretto primary school to find people from the cash store in Musselburgh giving balloons to the children and providing fliers that did not contain any information about the cost of borrowing money. I hope that we shall see an end to practices of that kind, and an end to some of the poverty that is driving people to these lenders.