Consumer Rights Bill

Debate between Stella Creasy and Yvonne Fovargue

Tuesday 13th May 2014 Commons Chamber

[Stella Creasy]

Indeed. “Take that” is the answer we would give on many of these things.

New schedule 1 looks at the cumulative impact of Government policy on households. Currently, among European nations only Estonia has a worse proportion of people struggling to pay their energy bills than the UK. Yet one of the issues that have been debated across the House is the impact of some of the long-term planning on the infrastructure building projects for our energy system in this country and the consequences for energy bills. Indeed, in November last year the National Audit Office published a damning report stating:

“Government and regulators do not know by how much overall expected new investment by the private sector in infrastructure will increase household utility bills and whether bills will be affordable.”

We know that the concept of affordability is contested by some, and we know from the evidence the Department for Environment, Food and Rural Affairs gave the Public Accounts Committee that it does not even have a target for affordability in relation to water bills. Yet many of us will have seen at first hand in our constituencies how people are struggling with those basic costs of living. We think that the Government should be able to publish an analysis of the impact of their own policies on the cost of living. Paragraph 7 of new schedule 1 asks for such a report to be provided by the Treasury. I am sure that Government Members who support transparency will want to support it.

I will say a little about new clause 2, which concerns implementation. After all, we think that with this framework we are offering the Government a way forward on information and advocacy, but we also recognise that it is no good having rights written on paper if they are not a reality in practice. One of the concerns that came up repeatedly in Committee—many of the Opposition amendments that the Government opposed related to this—is how consumers will actually access rights in practice. When will they know that they have a right to a repeat performance? At what point will the BBC tell us that we have a right to a price reduction because we did not like its commentary?

Those are all questions that the Minister said would be dealt with by the implementation group. It became a mythical beast in our minds, because it will cover so many issues, from point-of-sale information, information on remedies open to consumers, how businesses should be informed of these rights, the length of time before people can get a refund, the time limits people would get on a repair, replacement or repeat performance, or even testing consumers’ understanding of their rights.

Time and again the Minister said that we should leave it to a body of experts, which we believe—we are not entirely sure—includes organisations such as Citizens Advice, Which?, the Trading Standards Institute, the British Retail Consortium and even the Financial Conduct Authority. They are worthy bodies indeed to look at these issues, but we had some concerns in Committee, having seen some of the minutes of their meetings, which are not very frequent. Despite their good works, any recommendations they make would not be statutory guidance. Therefore, new clause 2 simply states that the recommendations they make about the rules on how the Bill should be implemented should have meaning, that they should have real teeth, that it is no good saying that it would be good for consumers to be informed of their rights if that does not actually happen at the coal face or at the shopping till.

In proposing this first group of new clauses, we are trying to make this Bill what it could be. We are trying to find the hope at the bottom of Pandora’s box. We are trying to ensure that consumers have access to the information and advice they need to make good choices the first time around. The old model of politics, in which progress depends on centralising these abilities, will no longer work with our communities. The task at hand, we believe, is to give the public more control and more power over their lives to enable them to make the choices that they want to make first time. As it stands, the Bill will leave citizens to navigate services alone, without the resources, either money or skill, to struggle to make them work.

We want to do something different. We want to reform the public sector by devolving power to people, investing in the prevention and co-operation they need to make services work for them, to stand shoulder to shoulder with every consumer and every citizen, not blunting the efforts of those who already fight for services, but enabling more people to give the feedback about the kinds of services we want in the public and private sectors. We believe that new clauses 1, 2, 3 and 5 and new schedule 1 will enable that framework to be put in place, and we hope that the Government will respond positively to the points that we have made as a result.

[Yvonne Fovargue (Makerfield) (Lab)]

I rise to speak to new clause 10, which stands in my name. Although I support paragraph 5 of new schedule 1, it is not just the lack of consent that I think is the problem with nuisance calls. My new clause has been promoted by the huge growth in nuisance calls and messages. In fact, on each occasion when I have been out on the streets recently, at least three people have come up to me to talk about the explosion in unsolicited contacts and said, “Can’t something be done?” There is a weak data protection regime and consumers feel that they have lost control of their personal information.

I am convinced that if I was on a desert island the first call I would receive would be someone offering me a loan to get off the island. For people in financial difficulties, in particular, nuisance calls and text messages offering high-cost credit, such as payday loans or fee-charging debt management services, can lead to the temptation to take out products or services that, if mis-sold—they often are—could substantially worsen their situation.

StepChange has done some research that shows that 1.2 million British adults have been tempted to take out high-interest credit as a result of an unsolicited marketing call or text. There is legislation to protect consumers against these practices. Unsolicited promotional electronic messages are banned, but the ban is widely flouted and inadequately enforced. My new clause would lower the threshold for firms breaching the Act. At the moment, the Information Commissioner’s Office can issue enforcement notices against these companies only if “damage or distress” can be demonstrated. It can also issue monetary penalties to firms misusing consumer data or breaking the laws on electronic communication under section 551 of the Data Protection Act, but only if

“substantial damage or substantial distress”

to the consumer can be demonstrated.

I believe that those thresholds are far too high. They should be lowered so that firms can be issued with enforcement notices or fined for breaching the Act without the Information Commissioner having to demonstrate “damage or distress” or

“substantial damage or substantial distress”.

The current thresholds have resulted in a situation where it is next to impossible for the Information Commissioner to enforce penalties against these firms. A recent tribunal decision went against the Information Commissioner when a £300,000 fine was overturned despite the defendant sending hundreds of thousands of illegal text messages.

High-cost Credit

Debate between Stella Creasy and Yvonne Fovargue

Thursday 5th September 2013 Commons Chamber

[Yvonne Fovargue (Makerfield) (Lab)]

It is indisputable that everybody needs access to credit, but it has always seemed perverse to me that the people who can least afford it pay the most and therefore need the most protection, because they are the most likely to be vulnerable to exaggerated claims and to be in need of a very quick solution to the immediate need for cash.

Payday loans are not always the illogical choice, despite the rate of interest. If someone’s washing machine breaks with two weeks to go until their payday and they know they will have an overtime payment in their next pay packet, it makes sense for them to shop around and buy another washer for £200 with a short-term loan—at a total cost of £267—than to go to BrightHouse, pay £600 for the same product, have a mandatory five-year guarantee for £400 and pay it back over five years at about 30% interest, which would result in a total cost of about £1,500. But—and it is a big but—although such loans provide a service, they cause detriment to tens of thousands of people each year and their providers have been, and still are, guilty of bad practices that cause much concern.

The Office of Fair Trading report highlighted bad practice by the vast majority of the industry and warned a number of them that either they clean up their act voluntarily or action would be taken, and they have been referred to the Competition Commission. I am pleased that some have had their licences revoked, but I hope that stricter enforcement will continue until the Financial Conduct Authority takes over in 2014. That transfer of responsibility gives us a golden opportunity to clean up the market and protect vulnerable consumers, but what are the payday lenders suggesting? A voluntary code of conduct devised by the industry.

There are two things wrong with that. First, it is voluntary. It is not even a requirement to be a member of a trade body. If consumers do not even research the cost of paying back a loan, they certainly do not research whether their lender is a member of a trade body—that is if they are aware of who the lender is, a point I will return to later. Secondly, the code has been devised by the industry and I am not totally convinced that it will put protection before profit. Statutory regulation and a constant review of the market are absolutely necessary.

I will outline the main issues that I think are causing problems. The market is ever changing and new practices emerge almost daily, so we need a flexible regulator. The first and most important issue—it is probably more important than headline-grabbing high interest rates—is the continuous payment authority. People who do not know what this is are not alone, because the banks, let alone the consumers, do not know, either. What it means is that the loan company can access someone’s bank account at any time, for any amount of money, as many times as it wishes. It is not just a blank cheque; it is a continuing, unending number of blank cheques. A constituent of mine had her account debited four times just before Christmas. Her account was cleared completely, leaving her with no money for Christmas, and she only became aware of this when she tried to pay for her Christmas food shopping and could not. It is clear in all the guidance that the customer should be able to cancel the CPA with either the lender or the bank, but Citizens Advice has numerous examples of the banks telling people that it cannot be cancelled by the customer because it is different from a standing order, and of the lender preventing people from cancelling.

Another practice I have recently become aware of—I am looking into this at the moment, because I heard about it only two days ago—is that of companies asking for a borrower’s online bank account details, including their PIN number and password, which makes the matter even more problematic. The lender can see when the individual is paid and when the rent and bills go out and take advantage of the gap, plunging the borrower into even more serious debt.

The other major problem with the continuous payment authority is that it reduces the incentive to perform a thorough and proper affordability check. After all, if a lender has unlimited access to someone’s bank account, why bother too much about checking whether they can afford it? The lender can dip into their bank account at any time, for any amount. Continuous payment authority has been described to me as the one thing that the payday lenders really want to keep. On that basis—as I used to say when disciplining my daughter—it is probably the one thing they should not have.

There is an issue with the industry writing its own code. Wonga has given 10 commitments and I have evidence—I do not have time to give it—that demonstrates how its code needs to be thoroughly examined. Even given the three extensions and the 60-day interest at 1% of the principal under commitments 6 and 7 of the code, the total repayment amount for a loan of £200 would be £588. That is a cause for concern.

Too many people delay the evil day when they have to sit down and face the difficult fact that they cannot afford their outgoings. As a result, they use payday lenders, because it is hard to admit to family or anyone that they cannot afford to keep going.

[Stella Creasy]

Is my hon. Friend, like me, worried about the evidence that a quarter of payday loans are taken out to pay off other forms of credit—not just other payday loans, but credit cards and other bills? People get caught in a trap and that becomes the only way for them to try to manage the situation.

[Yvonne Fovargue]

I agree with my hon. Friend. Citizens Advice and StepChange say that in the last quarter the number of people with six or seven payday loans has gone up tenfold.

This situation cannot continue. There must be an obligation on payday lenders to signpost customers to free sources of debt advice if they fail the affordability check, which should be thorough, or miss a loan repayment. Of those who responded to the Citizens Advice survey who had repayment problems, only 18% felt that the lender dealt with them sympathetically and only 8% were told that they could get free debt advice.

This is an industry that contributes to the debt problems of individuals, as my hon. Friend said. It is welcome that it pays a levy and I do not disagree with the very interesting suggestion that they should pay more. It is vital that that additional contribution represents an increase in the funding of the Money Advice Service to assist the rising number of people seeking help with their debts.

It is only right that the industry pays the levy, which is a drop in the ocean compared with the amount it spends on advertising. My two-year-old grandson can recognise the Wonga grannies; I have taught him to boo at them every time they appear—and they appear so often between children’s programmes. This blatantly targets young families, who can easily be vulnerable to sudden income pressures. As is the case with gambling, there should be a sector-specific code that limits such broadcasts until after 9pm, and companies should be expressly prohibited from advertising during any programme likely to appeal to anyone under the age of 18.

I mentioned new products and I want to raise a note of caution about a company that my hon. Friend the Member for Islwyn (Chris Evans) has mentioned, namely Amigo Loans. There are no credit checks for the borrower, but the friend might have to repay all the loan and end up with a damaged credit record. I wonder how many people remain friends after that happens. New products are emerging all the time—often they are old products with a new spin—so careful monitoring and transparency are key.

One of my constituents thought that they had borrowed money from Cash Lady, when that is actually a broker. We need to prevent more people from finding themselves in that situation. When my constituent wanted to contact the lender, they had great difficulty in finding out who it actually was.

The trade and exchange of consumer details have to be curbed. It cannot be right that when a friend of mine applied for a loan as a test, without completing the transaction, they had 24 unsolicited texts offering high-cost loans within the next 48 hours.

The cap on the total cost of credit has been ably and comprehensively covered by my hon. Friend the Member for Walthamstow (Stella Creasy). I support the decision of my hon. Friend the Member for Sheffield Central (Paul Blomfield) to choose this topic for his private Member’s Bill. The interest that his work is generating is helping to shine a light on the industry. Hopefully, that will assist the FCA in devising and enforcing a proportionate but firm regime to protect the consumer.

There are vast profits in this industry, as we have seen this week. Let us have commensurate protection.

Financial Services Bill

Debate between Stella Creasy and Yvonne Fovargue

Monday 10th December 2012 Commons Chamber

[Stella Creasy]

I pay tribute to the work that the hon. Gentleman has done in raising issues about debt and credit, and about the way in which companies such as this operate. We know that many of them use a get-out clause, arguing that they could not possibly have known that someone had eight or nine loans at the same time. That is partly because there is no register specifying rates of interest and the number of loans that people are taking out. The OFT should make it clear that that constitutes irresponsible lending, and that loans should be made on a real-time basis. It is no good for supposedly short-term credit to be provided on a monthly basis. I also agree with all those who have expressed concern about continuous payment authorities. I hope that, in the new year, the OFT will make it clear that we must end both the fraud and the debt that they cause.

[Yvonne Fovargue]

Continuous payment authorities also militate against affordability checks. As was established by the OFT’s last review, once companies know that they can dip into someone’s bank ad infinitum, they simply do not bother to carry out the checks .

[Stella Creasy]

My hon. Friend is right. I pay tribute to the work that she has done in this regard, and also in regard to debt management plans.

Bad practice is widespread in this industry. The Financial Conduct Authority will have an opportunity to set the tone when it comes to the sort of consumer credit industry that we want in the future, but let us use the opportunity presented by the OFT to do something about the problems now, and to prevent 2013 from being boom time for the legal loan sharks.

The Minister must be aware that three quarters of consumers are looking towards Christmas with severe financial concerns, and that 10 million of us in Britain feel financially squeezed. Will he state explicitly whether he will support my proposals and take them to the OFT, so that we can be certain that 2013 will be a time for legal loan sharks rather than consumers to be worried? I urge him to read the Bristol research findings—which are already in the pocket of the Department for Business, Innovation and Skills—in order to understand how measures such as this, and total cost-capping, can work, so that we can finally say that Britain is a legal loan shark-free zone.