Financial Services (Banking Reform) Bill

Sheila Gilmore Excerpts

Wednesday 11th December 2013 Commons Chamber

[Cathy Jamieson]

My hon. Friend makes valuable points, which I will come on to address.

The Government opposed the proposals initially, but eventually gave in and passed their own amendments in the other place. The FCA has so far failed to use its powers to introduce a cap. There were concerns that unless pressure was applied it would not necessarily have been able to speed up new powers, and we could have seen a further delay in real-time monitoring across the high-cost loan sector. That is why, some months ago, the Leader of the Opposition promised to introduce a cap. He also suggested an extension to a levy on payday lenders’ profits, which would be used to double the level of Government funding for alternative low-cost providers, such as credit unions, for those struggling with the cost of living crisis.

[Sheila Gilmore (Edinburgh East) (Lab)]

I am sure my hon. Friend agrees that, had there been an agreement earlier, some of the people still waiting for protection that will not appear until early 2015 would be protected by now. I share the view of my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) that the sector’s visible expansion in recent years is remarkable. In many years of living in my city, I have never before seen such proliferation of this kind of lending, let alone the advertising on television.

[Cathy Jamieson]

My hon. Friend makes a valid point. Members in all parties will have seen the sector’s expansion on their high streets. I do not normally refer to the Daily Mail, but it published an article on the increase in payday loan advertising, which is a concern. I am cautious about the process of normalisation, particularly children and young people seeing these businesses on our high streets and in advertising.

We must remember the extent of the problem of payday lenders charging interest rates of up to 4,000%, for example, on temporary loans taken out by desperate families who often have nowhere else to turn. Someone commented earlier that so-called legal loan sharks did not break the legs of those who borrowed from them like illegal loan sharks perhaps would, but we have to understand that the many desperate families who turn to these services to borrow, sometimes for the basic necessities of life, often end up broken in different ways.

Up to 5 million families plan to borrow money from payday lenders in the next six months; as we have heard, between 2009 and 2012 the market more than doubled to about £2.2 billion; more than one third of those who take out a payday loan do so to pay household bills, such as gas and electricity; 1.5 million households spend more than 30% of their income on unsecured credit repayments; and personal debt is expected to rise to 175% of household income by 2015—that is the concern about what is happening to families in the real world.