Financial Services Bill

Paul Maynard Excerpts

Report stage & 3rd reading & 3rd reading: House of Commons & Report stage: House of Commons
Wednesday 13th January 2021 Commons Chamber

The Treasury Minister will also be aware that the Bank of England base rate is currently just 0.1%. That is not the rate for many consumers, who are paying 25% interest on credit card debt, or payday lenders, who can charge up to 0.8% a day, nearly 3,000 times the Bank of England base rate. It is time the Government brought forward legislation to curtail these appalling interest rates. When debt was a problem for the banks in the 2008 crisis, the Government intervened to lift the burden of bad debts. It was good enough for the banks, so I suggest that the Government examine the work of Johnna Montgomery, who is calling for a similar long-term refinancing scheme now to lift the debt burden from our hard-hit constituents. They need the Government to act to lift them out of potential poverty and penury now.

[Paul Maynard (Blackpool North and Cleveleys) (Con) [V]]

It is a pleasure to speak in this debate in support of new clause 7, which is in the name of the hon. Member for Walthamstow (Stella Creasy), who I gather will speak shortly. It is absolutely vital that we accelerate regulation of this newly emerging sector before we see the sort of problems that emerged in the rent-to-own sector in recent years.

I am glad to hear that the Government, the FCA and the sector recognise that regulation is necessary, but I also note that there is little consensus over what that regulation should consist of, nor what legislative vehicle it could be contained within. I further note that support from the sector is conditional on it being, in its view, in consumers’ interest. I am not sure it should be the judge of what is in consumers’ interest.

Clearly, it is far better for people who can afford to pay just once to do so, but I recognise that there is a legitimate market for a well-regulated “buy now, pay later” sector. However, it has to ensure that consumers are not taken advantage of. The sector likes to point out that the fastest rate of growth is in the over-40 market, thereby suggesting that its users are among the more financially responsible, but younger customers represent the majority of those missing payments and putting themselves at risk by having recourse to risky forms of lending. As innovative as “buy now, pay later” might be, that innovation is driven by competition—by a desire for market capture by the major players. So while one proposes a voluntary code of conduct, another chooses not to sign up to it. That makes me worried as to the willingness of the sector to co-operate with the regulators. What we do not want to see is regulatory capture by these major players.

I want to ensure that those who miss their payments are unable to make further purchases with not only one provider, but all providers of BNPL. If Klarna prevents a further purchase by a consumer because they have already missed a payment, they should not be able automatically to switch to Laybuy, Clearpay or one of the other providers. Moreover, these providers should not be a default purchasing option on a website when a consumer seeks to make a purchase; this is a clear example of the growing lockdown phenomenon of ‘emotional e-commerce’. I recognise that this Bill is not perhaps the right vehicle to manage how the websites are laid out, but this is a clear driver in the growing use of this form of payment.

I have already seen the problem debt my constituents have accrued in the rent-to-own sector, and those firms also sought to portray themselves as acting responsibly to protect consumer interests. I do not want to see those same constituents using BNPL schemes and getting into a similar situation, with a similar rhetoric from those providers. Regulation is now needed sooner rather than later, before these commercial models become ever more entrenched. With every week that passes, the influence of BNPL increases, the more we see the adverts on the TV and the more we see it appearing when we make online purchases. The lack of consumer protection in this regard puts more of those purchasing online at risk.

I very much welcome what the Minister has had to say to me, both in the House and privately. I look forward to seeing the Woolard review and hearing the next steps that will be taken to make practical progress on this very pressing matter.

[Yvonne Fovargue (Makerfield) (Lab) [V]]

It is a pleasure to follow the hon. Member for Blackpool North and Cleveleys (Paul Maynard). I, too, want to focus on new clause 7, but I also want to mention breathing space, which is addressed in new clauses 22 and 23, and the statutory debt repayment scheme, which is dealt with in clause 32. We all know that BNPL has exploded in the past year. More and more retail outlets, and even online gambling companies, are using it, and it is being sold to companies on the basis that, on average, customers spend 40% more. It is also being sold to customers as an easy way to spread the load, with the thought, “There are no credit checks so it is not debt.” But of course it is, because people are using someone else’s money to pay and it then has to be repaid. I looked into the business model for one company and found that 25% of its income is predicated on late fees and people being unable to pay on time. Surely that has to ring alarm bells, with the echoes of the high-cost lenders and their practices. The regulation is needed sooner rather than later and I look forward to a swift response to the Woolard review.

Breathing space is welcome, and I have long called for it; 60 days will often be enough, but there will be a need for flexibility in exceptional circumstances. The scheme was designed prior to the pandemic, where people are furloughed, have lost their job or have a period of illness, and 60 days is not long enough to give people time to recover from a temporary financial difficulty caused by the pandemic and set up a long-term solution. People affected by the pandemic simply need a bit more time to straighten themselves out. I also think that the midway review needs to be looked at again. It simply wastes time and resources, which are scarce in the debt field.

Breathing space alone is not enough, however, given the impact of coronavirus on household finances. Bailiffs’ visits should be suspended, as they were during the first national lockdown, and other enforcement action should be halted when a debt adviser alerts the creditor that a client has financial or other issues due to coronavirus. We should also be suspending the use of non-priority benefit deductions from universal credit and bringing forward plans to extend the repayments over a longer period.

Moving on to the statutory debt repayment plan, I am pleased that the intention is that people seeking debt advice should not be charged for any aspect of the plan. It has always seemed counterintuitive that people in debt should be charged to get out of the very same debt. However, there are areas that need to be tightened—for example, where creditors are objecting to the level of payments. That needs to be seen within the existing debt advice methodology and budget standards. We cannot have creditors objecting just because they do not like the level or they think that someone else has more. There is a common standard, and creditors need to accept that.

In general, the Bill is a welcome step forward in assisting people in debt, but the landscape of debt solutions is complicated and difficult to navigate. I believe that a full review of all debt solutions needs to be undertaken to clarify and simplify, and to ensure that people in debt are always able to access the solution that best suits their needs.