Rent-to-own Sector

Philip Hollobone Excerpts

Tuesday 14th July 2015 Westminster Hall

[Paul Maynard]

I am sure that the Minister heard that question. I am now trying to reach my conclusion rapidly, because I have been going on far too long.

Lord Freud has met with the debt-management charity, StepChange, but will the Minister agree to convene a cross-departmental working group consisting of the Departments for Business, Innovation and Skills, for Work and Pensions and for Education, and sector representatives? The issues stretch across Government and are not confined to the Treasury alone.

To finish, I want to make a point of principle with which I hope the Minister will agree. About four or five months ago I remortgaged my property, but it has never taken me so long to do so. I was locked in my bank for about six hours, or that is what it felt like, going through every last iteration. I understand why that is: we have to improve safeguards for borrowing, we have to reduce risky borrowing and we have to ensure that the banks are sustainable. Yes, my mortgage payments are a substantial element of my outgoings and part of my financial arrangements, but why are we not as careful about RTO-types of credit as we are about mortgages? If someone’s available disposable income is only £19 a week, even £12 a month is a sizeable payment. There ought to be a point of principle: it matters as much to those people how their consumer credit is regulated as it does to me how my mortgage is regulated.

We as a Government need to look much more closely at how we encourage financial resilience. We need multiple bulwarks for families against the unexpected—too often the unexpected leads us down a path to perdition financially. Proper and proportionate regulation, which does not seek to condemn the private sector simply for being the private sector, is the best way to allow people to fulfil their legitimate aspirations to own consumer goods.

I have asked a lot of questions and I have talked a lot today—I apologise to those present. I look forward to the Minister’s reply.

[Mr Philip Hollobone (in the Chair)]

We will also hear from Mr Maynard at the end of the debate, because he has three minutes to sum up the other contributions that he has heard.

--- Later in debate ---

[Several hon. Members]

rose—

[Mr Philip Hollobone (in the Chair)]

Order. Under the new arrangements, in which the third party can also contribute to the debate, the remaining Front-Bench time is meant to be split equally between the three Front-Bench spokesmen. I want to leave three minutes at the end for Mr Maynard to sum up the debate. Over to you, Ian Blackford.

--- Later in debate ---

[Stella Creasy]

The hon. Gentleman pre-empts my final point, which is that what we really want is an alternative, but for an alternative to exist, it has to be funded, because this is not a fair fight. What I have noticed, as we have exerted pressure on the Government to tackle the payday lending industry, is that it is retreating from our high streets but that it is being replaced by the rent-to-own industry. This industry and legal loan sharking have evolved because there is no reform. We need an industry that works, because we need people to be able to borrow in this way to make ends meet—because they are not earning enough—and we need to end legal loan sharking by reforming the way in which these companies operate. That requires alternatives. However, our credit unions, housing providers and alternative forms of financing are struggling in an environment in which these companies are making a great deal of money from exploiting people. That is why it is right that the Government not only step in and are much tougher about regulating—learning the lesson of capping the cost of credit by capping what these companies can charge—but look at how we support the alternatives to grow and how we can level the playing field.

My final point is about the particular case for mainstream credit providers. Will the Minister commit to talking to mainstream credit providers, particularly to our banks, to ask them to review how many of their customers have entered into these agreements? I think he would be surprised—just as we found with payday lending companies—that half a million customers from one bank alone, who could have gone to it for a personal loan, were going to payday lenders. We need to make the case that these forms of lending and problems with debt are now so mainstream in Britain and so much part of modern life that there is a case not to see this as separate, small industry but part and parcel of how we help people to make ends meet. The mainstream credit providers have a vested interest in working with credit unions and providers—the Hoot credit union, for example—who do alternative forms of white goods provision to help their customers, because the consequences for the mainstream providers will become apparent when people default on their mortgages and personal loans.

This is not an either/or any more. We have to end legal loan sharking in Britain in its many forms. I hope that the Minister will take in good faith those examples of things that he could do now and accept what the priorities are. I look forward to a positive response from him and hope he will join the Opposition, as the cuckoo in the nest, in saying: let us end predatory lending in Britain once and for all.

[Mr Philip Hollobone (in the Chair)]

Although the Minister can finish before 10.57 am, if he would be kind enough to finish no later than that, that will allow Mr Maynard two and a half minutes to wind up the debate.