Consumer Rights Bill

Yvonne Fovargue Excerpts

Monday 16th June 2014 Commons Chamber

[Yvonne Fovargue (Makerfield) (Lab)]

I add my congratulations to those of my hon. Friend the Member for Bishop Auckland (Helen Goodman) and those that I am sure you have received from Members across the House, Madam Deputy Speaker.

I want to concentrate on amendments 2 and 3. I think that there is cross-party agreement that logbook loans are an anachronism. If the Government do not remedy that anachronism, it will be a missed opportunity. To leave the Law Commission time to go through the outdated legislation would take too long for the vulnerable consumers who are affected. I know that because I have been a member of the Joint Committee on Consolidation Bills and in 2010 we repealed something to do with the dissolution of the monasteries.

We cannot wait that long for the bill of sale provision to come off the statute book. It was never intended to apply to loans on vehicles such as cars and it should be abolished now. If it is not abolished, consumers need to be able to challenge it in court. I am sure that they will be supported in that by the advice agencies that brought the attention of the House and the country to the anachronism that is the bill of sale legislation.

The Financial Conduct Authority said only two weeks ago that such loans are high risk. It is considering the issue already, but while it is doing so people are taking out the loans either because they are not aware of the pitfalls or because they are their last or only resort. They put their only asset, their vehicle, on the line, pay the companies, end up owing money and still have no vehicle. They are in a worse position than if they had not taken out the loan in the first place.

I also want to mention those whom we might call the innocent consumers—those who buy a vehicle that is subject to a bill of sale. It does not show up on the HPI register, as hire purchase does, and the first they know about it is when somebody comes round to repossess the car because they are not its legal owners. They can never be its legal owners while there is a bill of sale on it and they are left with no vehicle and no money. It is about time that we considered the bill of sale legislation. A law that was passed in the 1870s should not apply to today’s consumer market and should be allowed to be challenged in the courts if not repealed immediately.

I have long campaigned on debt management companies. It has always seemed particularly perverse to me that people in debt should pay to get out of it. There are usually two reasons given by the companies for why people turn to them. The first is the lack of knowledge about the availability of free advice. Frankly, I am not surprised. I regularly get texts telling me that there is new Government legislation, that my debts can be written off and that I am entitled to payment protection insurance compensation and various other things, and debt management companies are one of the worst offenders. The Information Commissioner needs more powers to stop that misleading advertising.

There is also a lack of provision for advice. I thank the Minister for her reply to my question on that point, which said that the Money Advice Service sets its own budget. Yes, it does, but as the Government rejected new clause 6, which would have meant the increased levy automatically going towards increasing the amount of debt advice, I hope that MAS will listen to the strength of feeling on both sides of the House and increase its budget to ensure that the introduction of payday lenders into the levy will increase the total amount raised and that it will not simply keep it at the same level with the other people paying less.

There needs to be more funding for free debt advice. As we know, some 2.5 million people are in fee-charging debt management plans. That is 2.5 million people who, if those plans were not available, would need free debt advice. There is obviously a need for that funding. If the interest rate were to rise by only 0.5%, which is quite likely, an extra half a million people would be pushed over the edge from just about coping. It is essential that the Money Advice Service looks at the trends and asks for an increased budget.

There is also a risk that those companies may go out of business and while doing so will not pay their creditors. A company in Manchester in my area of the north-west went out of business two weeks ago. About 2,500 people who had a plan with it were left with no money. People had been paying into that company, assuming that it was going to creditors, but the company has gone bankrupt. It is time that we challenge these debt management companies. They push people further into debt and can charge 50% of what somebody owes. Therefore, if someone owes £18,000, that is another £9,000 on the debt for something that an organisation such as StepChange or a citizens advice bureau can do just as competently for free. Indeed, in many ways they will do it better because such organisations have links with other companies and, for example, will know all the remedies for insolvency. They will put forward the remedy that is best for the consumer, not best for the company. To allow debt management companies to continue without being challenged on pushing people further into debt should not be allowable, and I fervently support the amendment to clause 3.

[Jenny Willott]

May I add my congratulations to you, Madam Deputy Speaker? You will get bored with it soon, but at the moment I am sure it is probably still quite a novel surprise.

I share the concerns of the hon. Member for Walthamstow (Stella Creasy) about the practice of double charging by estate agents. That issue has been raised in the House a number of times and in Committee. Under existing legislation—in particular consumer protection regulations and the unfair contract terms law—as well as their own industry codes, estate agents must already make fees and charges clear for consumers. I believe that there are risks in rushing into further legislative measures and applying them prematurely, which is why a better way of addressing the issue is through estate agent redress schemes.

As the hon. Member for Walthamstow mentioned, on 7 May I met the property ombudsman and ombudsman services: property, to draw their attention to my concerns on this issue, and those raised by hon. Members in Committee and the House. Both redress schemes have agreed to monitor any complaints they receive, and more is being done. The property ombudsman has committed to producing new guidance that will put in place strict controls on the practice of charging the buyer a fee, or charges being placed on both buyer and seller, and the potential for conflicts of interest. That guidance will ensure that agents recognise their obligations under the ombudsman’s code of practice for transparency, disclosure and avoidance of conflicts of interest. If the guidance is not complied with, agents will be in breach of that code.

Estate agents must belong to an ombudsman service, and ombudsmen have strong powers to tackle bad behaviour by estate agents. For example, they can give a financial award to the complainant or enforce obligations on the estate agent. As a last resort, estate agents can be struck off a redress scheme. Because it is a requirement on estate agents to belong to a redress scheme, if they have been struck off, they are effectively out of business and cannot continue to operate. If they continue to operate under those circumstances, it is a criminal offence.

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[Jenny Willott]

No I cannot, but I will write to the hon. Gentleman to give him more information on that.

The ombudsman has committed to calling an early meeting of all interested parties to discuss the need for stricter controls, and I assure hon. Members that new guidance is being worked up for the industry as a matter of priority. The hon. Member for Walthamstow raised concerns about estate agents discriminating against buyers who will not take services from them—for example, mortgages and so on. Discriminating against buyers for refusing services from an estate agent is already banned and covered by the regulations.

A number of hon. Members mentioned logbook lenders. We have discussed that issue a number of times and it is clearly a matter that concerns people across the House. Responsibility for consumer credit regulation, including logbook lenders, transferred from the Office of Fair Trading to the Financial Conduct Authority on 1 April.

[Yvonne Fovargue]

Will the Minister tell the House how many licences to logbook lenders have been revoked by the FCA? What has happened to the bills of sale for those who have borrowed from a company whose licence has been revoked, if indeed there are any?

[Jenny Willott]

That responsibility has only just been transferred to the FCA, and it is working with credit companies that must register with it. I believe that those companies start registering on 1 October, which gives them time to ensure that they comply with the regulations. From that date, therefore, the FCA will start to process licence applications. At the moment it is a little premature to answer the hon. Lady’s question, but the issue will be raised later in the year and I am sure she will ask Ministers at that point.

There are concerns about the way logbook loans operate and their impact on consumers. Consumers will be far better protected under the FCA regime than under the old system. Logbook loan providers are now required to meet the standards that the FCA expects of lenders, including making thorough affordability checks and providing adequate pre-contractual explanations to consumers. They are also subject to the FCA’s high-level principles, which include the overarching requirement to “treat customers fairly”.