Debt Collection Letters

Debate between Yvonne Fovargue and John Glen

Tuesday 21st May 2019 Westminster Hall

[John Glen]

The hon. Gentleman makes a reasonable point, and that is something we need to examine carefully when we consider what needs to happen in this area. I thank the hon. Gentleman for his intervention.

Stakeholder views will be essential to inform the Government’s decision making, and I would welcome the opportunity to meet the right hon. Member for North Norfolk and any other interested colleagues across the House to better understand how this important issue should be addressed as our policy thinking progresses. During my time in office, I have encountered many individuals who have been in financially vulnerable circumstances and I have compassion for the unique challenges they face. Indeed, only last week I welcomed to the Treasury some individuals with lived experience of financial difficulty, to hear in more detail how they had got into those situations.

I would like to take this opportunity to assure the right hon. Member for North Norfolk that reviewing the mental health aspect of the prescribed content in debt collection letters will be top of my list of priorities during this programme of work. The issue requires continued dialogue to understand what the best outcome for these vulnerable individuals would be, and how best to deliver it. Given the letter’s rather terse words referring to a solicitor, which are really not appropriate and could have been written a long time ago, I will reflect on the right hon. Gentleman’s point about the changing nature of debt advice and about how best it can be presented.

That does not mean that those most at risk will not see benefit in the near future. I draw attention to the significant work that has been undertaken to meet the Government’s manifesto commitment of implementing a breathing space scheme, which I alluded to earlier. The scheme will give the most vulnerable consumers 60 days of respite from creditor action, to access debt advice and put their finances on a sustainable footing.

[Yvonne Fovargue]

Can the Minister confirm that the breathing space would also apply to statutory authorities, for example local authorities, which are possibly the biggest users of bailiffs?

[John Glen]

I will come on to that point in a few moments, but my instinct, as I think the hon. Lady knows from my visit to the all-party parliamentary group on debt and personal finance, is that if the breathing space does not contain the maximum amount of public sector debt it will not be meaningful. At this moment, however, I cannot formally confirm how the scheme will work, but I will say a few more things in a few minutes.

The Government set out the detailed policy for the breathing space scheme in a consultation launched in October 2018. As part of the scheme, firms will not be able to communicate directly with consumers to request repayment of debt. In particular, the consultation paper set out the design of an alternative access mechanism for those in mental health crisis. The mechanism would enable those individuals to enter breathing space without having directly accessed debt advice. I feel very strongly about the mechanism, as those suffering from a mental health crisis may find it particularly difficult to engage with debt advice services in the way that people without mental health challenges do.

The consultation closed in January 2019, and the Government will shortly publish a response to set out their approach to the whole scheme, before laying regulations to implement breathing space before the end of the year, which is when a comprehensive answer to the question asked by the hon. Member for Makerfield (Yvonne Fovargue) will be provided.

In conclusion, I share the concerns raised by the right hon. Member for North Norfolk and recognise that, in certain cases, the content of debt collection letters can increase consumer harm. I hope I have assured him that the issue will be at the top of my list of priorities when considering further reform in the consumer credit regulatory framework. I take the point about whether the letter issue can be expedited separately, and I look forward to working with the right hon. Gentleman to better understand the most timely and effective way of remedying the problem. I thank him very much for bringing the matter to the House.

Question put and agreed to.

Oral Answers to Questions

Debate between Yvonne Fovargue and John Glen

Tuesday 22nd May 2018 Commons Chamber

[Yvonne Fovargue (Makerfield) (Lab)]

The Government have decided not to proceed with the legislation that they committed to bring forward to protect consumers from the rip-off practice of logbook loans, despite the Bill being prepared and ready to go through the accelerated procedure. Will the Minister explain why he is prepared to allow innocent buyers to continue to be exploited through this outdated, misused legislation?

[John Glen]

The FCA is looking at a range of options, but I would be happy to meet the hon. Lady to discuss her concerns on this matter as soon as possible.

Financial Guidance and Claims Bill [ Lords ] (Second sitting)

Debate between Yvonne Fovargue and John Glen

Thursday 1st February 2018 Public Bill Committees

[Yvonne Fovargue]

The number of bankruptcies is not the issue; they are actually quite rare. A very small proportion of the people who go to debt organisations are made bankrupt. It takes most people with the average amount of consumer debt four to six months to deal with it. Those are not people who would ever have looked at bankruptcy. Bankruptcy is not appropriate for them and would not even be considered.

The average number of consumer debts is rising, and creditors are slow at responding. People often forget to bring in a debt, and so they have to write to all the creditors and redo the statements. Six weeks is just about better than nothing, but I would say, from my long experience of dealing with debts, that four months is probably the minimum. We want to prevent creditors from delaying it until the six weeks is over and people have to go for extensions, which may or may not be granted. Some creditors—I have to be honest—delay it simply so they are not part of the solution.

Although I still think the length of time is inadequate, I welcome the proposal for a breathing space. Another issue with the length of time is that it is very difficult for people who suffer from depression or low-level mental health problems to make regular appointments, and they are often asked to come in all the time to deal with their debt. That needs to be taken into account. I welcome the move, but please do not be wedded to six weeks.

[The Economic Secretary to the Treasury (John Glen)]

It is a pleasure to serve under your chairmanship, Mr Rosindell, and to participate in this stage of the process. I feel a bit like poacher turned gamekeeper, given that I was a member of the Work and Pensions Committee a few years ago when many of these matters were discussed. I remember having long discussions with my hon. Friend the Member for South Thanet and the hon. Member for Paisley and Renfrewshire South. It is still a matter of great sadness that I have not been to Paisley.

Amendments 34 and 35 would require the Government to implement a breathing space scheme within six months of the Bill’s receiving Royal Assent. It is legitimate to press that point, because everybody on this Committee—this was striking on Second Reading—is concerned and feels a sense of urgency. Before I became a Minister, I spent time working with Members of other parties on the all-party group on hunger and food poverty. I visited South Shields and saw at first hand, in a community that is very different from mine in Salisbury, the distress that debt can cause. Now that I am a Minister and in a position to do something, I am extremely focused on ensuring that this happens.

Members of all parties agree that creating a breathing space scheme will have significant benefits for thousands of the most vulnerable families. However, it will need to be designed properly and implemented in partnership with the debt advice sector and creditors. Creating a scheme will ensure that vulnerable consumers have time to assess their financial situation and begin to deal with their debts. The Government are committed to establishing a scheme as quickly and effectively as possible, including through the passage of the Bill. I am pleased that clauses 7 and 8 provide for the scheme’s introduction, but it is worth acknowledging how complex some of these situations are and how complex the scheme may need to be. It includes both a breathing space and a statutory debt management plan. It involves significant co-operation among creditors, debt advisers and those accessing a breathing space, who in many cases could be leading chaotic lives.

I listened carefully to the hon. Member for Makerfield on Second Reading. I always have great respect for her when she speaks in the House. Today she talked about needing four months, and on Second Reading she talked about needing six months. She cited an example of somebody who may think they have all their debts lined up, and then another materialises later on. Those are the sort of complex situations that we need to come to terms with in the design of the scheme. There are significant questions about how debtors can access the scheme, which debts are included, how flexible the scheme can be, and how it ties in with existing statutory debt solutions.

[John Glen]

I will come to that point and will be as explicit as I can, giving an indicative timeframe.

The scheme needs to be properly designed with consultation with experts in the debt advice and creditor sectors. That is key to ensuring that it works in practice and properly benefits the lives of the vulnerable people that we all want it to support.

The Government are clear that it will not be possible to conclude that process within six months of Royal Assent, which is what the amendment would require. However, I agree with the hon. Member for Makerfield that we must work quickly to establish the scheme, given the benefits it could bring to indebted individuals. To that extent, the Government have set out a clear timeline for the implementation of breathing space.

My officials are currently working hard to analyse responses to the Government’s call for evidence on the scheme, which closed on 16 January. Following that process, we will consult on a single policy design proposal this summer. In tandem, we will ask the new body for advice on specific aspects of the scheme that it is well placed to advise on, to ensure the scheme is rolled out smoothly and embedded in the practices of the debt advice and creditor sectors. We will seek that advice immediately after the body is established, and it will be very tightly framed to ensure that the process does not delay the scheme’s introduction.

Throughout the period, my officials will be drafting regulations to introduce the scheme and I can confirm that they will be laid as soon as possible in 2019. I feel the frustration of Members on, I suspect, both sides of the Committee. All I can say is that I will be doing everything I can and will be working very closely with the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Hexham, to make sure that we do this as quickly as possible.

[Yvonne Fovargue]

As one of those people who are feeling the frustration with the 2019 date, why do we have to wait for the establishment of this body when all the debt charities and most of the creditors have been pressing for a breathing space under the old system? Why do we have to wait for the new body to do that?

[John Glen]

I acknowledge the problem, but having taken the trouble to move three entities into one single body and to make it an authoritative place for people to go to for reliable advice across different elements, it would be appropriate, given how central the debt problem is, for it to have a meaningful contribution to establishing the parameters of the scheme. That seems consistent with the objectives that we have set out and discussed, although I acknowledge the wide—although not complete —consensus.

I will reflect on the point made by my hon. Friend the Member for Brentwood and Ongar about the Scottish experience. It is interesting and instructive that that has iterated quite significantly over time over many years, albeit with a significantly smaller cohort of just 2,000 people. That tells us that lessons have to be learned through experience of work on the ground. I am extremely anxious that we get the best possible scheme designed by the time the process is concluded. This process balances speed with getting the policy right.

[Yvonne Fovargue]

I would also mention the independent review of the debt advice provision. It concluded very speedily. It was a very short process, and concluded over the Christmas period, in January. Will the recommendations in that have to wait to 2019 to be implemented? Some of them seem extremely sensible.

[John Glen]

I am grateful to the hon. Lady for making that point. I am aware of that report, which came through on 25 January. I have seen a summary of its recommendations. Officials are looking at it and I will be dealing with it as quickly as I can. I was assisted with typical helpfulness from colleagues on the House of Lords stipulation. The House of Lords was very keen that the new body should have input into the formulation of the scheme and the respite period—that is worthy of consideration.