High-cost Credit

Nick Smith Excerpts

Thursday 5th September 2013 Commons Chamber

[Nick Smith (Blaenau Gwent) (Lab)]

I congratulate my neighbour, my hon. Friend the Member for Islwyn (Chris Evans), on showing leadership on this issue, and it is a pleasure to follow the hon. Member for Chatham and Aylesford (Tracey Crouch).

Each and every one of us has a responsibility to stop the emerging payday loan crisis. In my constituency of Blaenau Gwent, the number of payday loan applications shows no sign of slowing down. Data obtained from Wonga revealed that it gave out nearly 5,000 loans in 2012 to a population of 69,000. More than £1 million was predicted to have been borrowed. That is for one year, from one provider in one constituency. For a borough proud of its industrial heritage, proud of carving out its fortunes in the coal mines and steel, this is a desperate state of affairs. Blaenau Gwent can realise its potential in the years to come—it has done so time and time again. However, we cannot get back on our feet if we are hobbled by debt.

The High Cost Credit Bill goes a good way to stopping further damage to those trapped in a spiral of debt. We also have a duty to champion alternative providers such as credit unions, yet my constituency’s credit union has just 560 members, a number dwarfed by the thousands of payday loans. We must make a game-changing push to tell more people about these socially responsible services. We need credit unions that are fit for the 21st century. They need 24-hour access, whether through computer systems or smart phones; a walk-in, high street presence that is the equal of any bank; and a strong capital base supported by payroll saving from staff of local authorities and others. Only then can credit unions come close to offering a better deal for those most in need.

Another way forward could be for the Post Office, given its UK-wide presence and recent adoption of current accounts, to move into the market. It would be good to hear what the Minister thinks about that possibility. We also have a duty to support the next generation, with financial education in the classroom that will engage students with the real world and teach them about the consumer temptations that we have just heard so much about. How many of us here today understand our own mobile phone tariffs and payment systems? I do not see many Members nodding. For those already trapped by debt, we need to direct them towards the likes of Christians Against Poverty, services that can get people back on track rather than borrowing further.

It is easy to pass judgement on those who borrow beyond their means, but to do so ignores the fact that the demand for easy credit at a moment’s notice has never been greater. Our households are feeling the pinch, losing £1,500 a year in real terms. It is estimated that more than 1 million workers are living week to week on unpredictable zero-hours contracts. In short, this is a climate ripe for payday loan companies to step in and reap the benefits. A Bill and new regulators that do a much better job on high-cost credit arrangements and their providers would be a good step, but given all that has been said so far, we must do much more to address what is now becoming a massive problem.