Finance (No. 3) Bill

Robert Buckland Excerpts

Monday 4th July 2011 Commons Chamber

[Justin Tomlinson (North Swindon) (Con)]

I welcome the opportunity to debate this new clause. I have worked with the hon. Member for Walthamstow (Stella Creasy) on a number of occasions to highlight the need to protect the most vulnerable people in society, and we have been supported by hon. Members from both sides of the House. Let us be clear that a consensus is essential, as has been said by the hon. Member for Scunthorpe (Nic Dakin) and my hon. Friend the Member for Macclesfield (David Rutley). This is an extremely complex and challenging issue, and although we all agree that action must be taken, we need to be careful not to make the situation worse. I will set out a number of reasons why that could happen.

The new clause would require the Government to review how taxation could be used to penalise high-cost credit that is detrimental to consumers and competition. However, the current consumer credit review is examining all the options through which we can hope to secure a measured and effective response. I first wish to highlight the need to use credit reference companies, because it is unacceptable that so many of these loan companies do not even simply check whether the person borrowing the money can actually service the debt. We would all agree that we are not against people borrowing money if that is what they wish to do, but they should have the opportunity to be able to service that debt. Secondly, we need to limit the number of customer extensions and roll-overs, as a number of hon. Members have said. It is unacceptable that people can be trapped into a cycle of increasingly expensive debt. Thirdly, there needs to be a cut-off point, when fees and the interest stop being accumulated. Too often we have seen people borrow a relatively small sum that has built up over many years. Many horror stories have been related in previous debates.

[Mr Robert Buckland (South Swindon) (Con)]

Does my hon. Friend agree that there has been far too much of a rush to litigation by credit companies and that a far better approach would be to seek mediation before pressing the button to go to court? Such an approach would relieve a lot of the burden and pressure on the hard-pressed consumers.

[Justin Tomlinson]

My hon. Friend makes a very important point, with which I absolutely agree. Help should be provided at the point where we freeze that debt, and there should be an examination of the reasons why a consumer was unable to service the debt before that debt gets even further out of control.

Another crucial element is to make sure that those who can pay early are not penalised for doing so. That would mean that if circumstances change to benefit them, they would be able to break away from high-cost lending. A number of hon. Members have mentioned the need for there to be greater access to credit unions, and I know that my hon. Friend the Member for East Hampshire (Damian Hinds) has highlighted the issue on a number of occasions. Interestingly, and aptly, the hon. Member for Darlington (Mrs Chapman) made the point that we should be encouraging those organisations that will lend with the consumer’s interest at heart.

The particular issue I wish to discuss, which was mentioned by my hon. Friend the Member for Chippenham (Duncan Hames), is the need to examine the techniques that are being used. In previous debates, I have directed the majority of my anger at doorstep lenders and their nudge-nudge sales techniques. They build up personal relationships, face to face, in the homes of vulnerable consumers, suggesting ways in which people can borrow money. For example, in the run-up to Christmas the lender will ask people whether they have organised the Christmas presents for their children, the consumer will say that they are not sure whether they can afford them, and the lender then says, “It’s lucky I’m here. Just add another £3 a week and you can get the presents that your children want.” These lenders continuously build up people’s dependency on high-cost lending, so we really have to look at these techniques.