Financial Services Bill

Debate between Stella Creasy and Neil Parish

Monday 23rd April 2012 Commons Chamber

[Stella Creasy]

Does the hon. Gentleman agree that, although limiting the number of roll-overs is certainly a step in the right direction, there is a risk that it could result in what has happened in America, where such a limit has led to firms paying off someone’s loan and starting a new one in order to circumvent the regulation? We need a regulation with clear, explicit powers to act in relation to these companies in a way that they cannot shrink away from.

[Neil Parish]

That is absolutely right. Many of the people taking out these loans earn less than £15,500 a year and therefore cannot afford the loan in the first place. I have sympathy for their position, but are we really helping them by allowing them to get into the hands of loan sharks, which results in their having to pay back huge amounts of money that they simply do not have?

I have made the point before that if financial companies and loan sharks are arguing that they need to charge huge amounts of interest because people are such a high security risk, they should not be lending them the money in the first place. Let us remember the old adage about finance: these companies will lend us an umbrella when the sun is shining, but they will take it away again as soon as it starts to rain. In the circumstances that we are describing, they should never have made the loans in the first place. Citizens Advice and financial advisers often tell us about people who have got themselves into huge amounts of debt, perhaps through no fault of their own.

It needs to be made absolutely clear to people what to expect. I am not a great believer in huge amounts of regulation, but I do believe that the consumer should be able to see exactly what they are signing up to at the outset, and be made fully aware of the consequences of their actions. They often do not understand the terms if they are hidden in the small print or expressed as complicated percentages, but if they were told, “You can borrow £100, but if you don’t pay it back on time, you could end up paying £2,000 back”, it might make them sit up and think about exactly what they were borrowing. They might then choose not to do it, or to go to someone who could lend them the money at a better rate.

The Government are doing a great deal to increase the use of credit unions, and we need to do much more work on that. Perhaps we should look into ways of financing them. I have a very successful one in my constituency, and we need to build on that. Only a small percentage of people here borrow money from credit unions, unlike in Ireland, where almost 50% of people have access to such loans.

Finance (No. 3) Bill

Debate between Stella Creasy and Neil Parish

Monday 4th July 2011 Commons Chamber

[Neil Parish]

I share that view entirely. At the start of my speech, I spoke about a financial health warning on a loan, including what the rate of interest will be. There should also be an example, perhaps showing what the principal amount would be to repay if one started with £100.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

I support the hon. Gentleman. Does he agree even when people know the rates, they have little choice because they cannot borrow from any other type of organisation? Research shows that a quarter of these companies’ customers cannot get credit elsewhere, so even when they know the rates they have no option.

[Neil Parish]

The hon. Lady is right that parts of the population cannot borrow elsewhere, which is a problem. That is another reason for clear warnings, if not restrictions, on the rates of interest charged.

The problem is not just that there is a population who cannot borrow from anywhere else but that many companies and loan sharks knock on people’s doors. Credit is often dished out in cash, which is very tempting. Some people could, if they went to a great deal more trouble, secure money from proper lending companies at a competitive rate.