Consumer Rights Bill

Debate between Yvonne Fovargue and Jenny Willott

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 To leave the Law Commission time to go through the outdated legislation would take too long for the vulnerable consumers who are affected. I know that because I have been a member of the Joint Committee on Consolidation Bills and in 2010 we repealed something to do with the dissolution of the monasteries.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in the 1870s should not apply to today’s consumer market and should be allowed to be challenged in the courts if not repealed immediately.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”.

Consumer Rights Bill

Debate between Yvonne Fovargue and Jenny Willott

Tuesday 13th May 2014 Commons Chamber

[Yvonne Fovargue]

Will the Minister elaborate on how that would affect customers of organisations such as BrightHouse and PerfectHome, where the cost of an extended warranty is included in the price of the goods and is compulsory? What rights do those customers have to cancel and get some money back, apart from giving back the goods?

[Jenny Willott]

The issue is whether extended warrantees provide anything over and above the statutory rights provided under the law. If companies charge more just to provide statutory protection, that would be prohibited under consumer protection regulations. A purchase that somebody would make, such as a hire purchase or whatever, would depend on the terms of their contract. If the contract contains terms that are unfair, they may well be on the grey list—we will come to that in future discussions on the Bill—and such terms may be challengeable in the courts on grounds of fairness. If the hon. Lady is concerned about specific terms in the Bill, she might raise them at that specific point in our debate to see whether they would be covered.

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[Jenny Willott]

The hon. Gentleman is absolutely correct. We only have anecdotal evidence at the moment, but it is clear that a significant number of lenders have already withdrawn from the market because they know they will not be able to comply with the rules, which are extremely tough. As he said, that is absolutely as it should be. People who cannot comply with the rules are withdrawing, and consumers are being protected as a result.

Free debt advice is currently funded by a levy on lenders channelled via the Money Advice Service. As payday lenders are now regulated by the FCA, they too will contribute to the levy. The new clause tabled by the hon. Member for Walthamstow would duplicate the existing funding arrangements for debt advice. It is important that we put on the record the fact that payday lenders will be contributing to money advice services via the levy.

It is also important to note that the FCA is taking steps to ensure that vulnerable consumers are aware of the free debt advice available to them. It requires all high-cost, short-term lenders to signpost their customers to free debt advice at the point at which a loan is rolled over, and all payday lending adverts must include a risk warning and information about where to get free debt advice.

[Yvonne Fovargue]

Will the Minister confirm that the amount raised by the levy will increase as the payday lenders are brought into it and that the amount paid will remain the same and will not simply be spread more thinly among the lenders?

[Jenny Willott]

To be totally honest, I do not know the answer to that question, but I will write to the hon. Lady to clarify that point.

Similarly, the levy will duplicate the Government’s existing support for credit unions. The Government are already investing £38 million to support the sustainable growth of credit unions to help them meet borrowers’ needs, as highlighted by the hon. Member for East Hampshire (Damian Hinds). Through that expansion, credit unions could save people on low incomes up to £1 billion in interest repayments, compared with going to a payday lender.

The Government therefore firmly believe that consumer choice and protection will be substantially strengthened by the new FCA regime and the ongoing Government support for credit unions. For the first time, payday lenders and other consumer credit firms will start paying their fair share towards funding free debt advice through the Money Advice Service, so the Government are already dealing with many of the issues that have been raised today.

Turning to debt management companies, the Government share the concerns about the potential for detriment to occur to consumers who take out debt management plans. There has been increasing media attention and people are becoming increasingly aware of the problems affecting some consumers. I also recognise the importance of protecting that particularly vulnerable group of consumers. The Government’s focus is on comprehensively reforming regulation in this sector. Responsibility for regulating debt management firms, as with all other consumer credit firms, has been transferred from the OFT to the FCA. As with customers of payday lenders, those participating in debt management plans will be far better protected under the new FCA regime.

The FCA has stated publicly that debt management firms must start putting consumers first and that it is unacceptable that people who are struggling to make ends meet are being talked into unsuitable plans. The Government have made sure that the FCA has robust powers to protect consumers who use debt management firms. The FCA is proactively monitoring the market and has a broad range of enforcement tools that it can use to punish breaches of the rules. There is no limit on the fines it can levy. Crucially, it can force firms to pay redress to consumers. The FCA will thoroughly assess every debt management firm’s fitness to trade as part of the authorisation process—the same process that applies to payday lenders.

Given the risk to consumers, the FCA has said that debt management firms will be in the first phase of credit firms that are required to be fully authorised. Its rules make it clear that the fees charged for debt management plans should not undermine the customer’s ability to make significant repayments to their lenders throughout the duration of the debt management plan. Concerns have been raised, including by the hon. Member for Walthamstow, about the huge proportion of somebody’s payment that, in some cases, goes to the debt management firm rather than the creditors. That is a matter of significant concern.

Welfare Reform Bill

Debate between Yvonne Fovargue and Jenny Willott

Wednesday 1st February 2012 Commons Chamber

[Jenny Willott]

I will not I am afraid.

This group of amendments is very varied and we have had a wide debate this afternoon. The Government have made improvements to the Bill, which I welcome, particularly those to the CSA fee. I hope that the Minister will take into account the points that my colleagues and I have raised, particularly on the issue of housing under-occupancy, which is probably the issue of most concern to us in the Bill. So far, I have found that Ministers have listened and taken concerns on board, and I hope they do that today because the Bill is in a much better state now than it was at the beginning of this process.

[Yvonne Fovargue]

I, too, would like to address the issue of under-occupancy and say that the concerns of my local housing department, Wigan and Leigh Housing, are so strong that we have been in correspondence with Lord Freud. There are very few one-bedroom properties, private or council, in my local area, and it will take eight to 10 years to move the 1,450 to 1,800 people who, on the estimates, might want to downsize. During that period, it is estimated, on Lord Freud’s own research, that 35% of those people— [Interruption.]