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Gregory Barker (Bexhill and Battle) (Con): Today presents a valuable and overdue opportunity to reassess the increasing difficulties in the consumer credit industry. I welcome the Minister's consensual and constructive approach, but it is extremely regrettable that the Secretary of State was not here to open our debate. The DTI hardly has a huge legislative burden this Session, and although the Bill is not partisan or contentious, it is important.

As we have heard, the consumer credit environment has changed drastically since the introduction of the Consumer Credit Act 1974. In 1971, there was a single credit card, but since then, spending on plastic has taken off at a staggering pace, gathering speed with the introduction of our flexible friend in 1972 and the subsequent arrival of the debit card in 1987. In the past 30 years, as my hon. Friend the Member for Upminster (Angela Watkinson) said, there has been a cultural revolution in the provision and take-up of credit. I do not want to turn the clock back or reminisce about a golden era, but it is vital that a 21st-century environment should have a 21st-century legislative framework to govern it, which is why I welcome the Bill.

The battle to win customers has inevitably resulted in the expansion of a competitive market. Today, more than 39 million Britons have a debit card, and 30 million have credit cards. Adding store charge cards to the equation, we have a staggering 130 million cards of various descriptions in circulation, all contributing to the UK's £180 billion credit card and personal loan industry. The existence of such consumer credit opportunities has made payment significantly easier for many individuals, but we cannot ignore the simple fact that when things go wrong financially credit can quickly become an inflexible financial nightmare. No matter how easy repayments seem and how attractive the advertisements appear, dabbling in the personal loan and credit card industry brings the possibility of severe financial risk and social repercussions.

The situation is perhaps best summarised by Diane Gaston, the head of communications at the National Consumer Council, who warned consumers to beware
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credit advertising deals that are often not as cheap as they first appear. The obvious temptation and notable attraction of low interest rates and easy access to loans should always be measured against consumers' ability to pay off debts if things go wrong in the long term, either through unemployment or ill health. Some responsibility can be laid at the door of consumers, but banks, building societies and other credit companies should be prepared to lend responsibly and resist bombarding consumers with attractive credit deals that are frequently more complex and economically more difficult than consumers imagine. We have heard vivid descriptions of such cases today.

Such considerations must also be balanced alongside the economic policies of the Government, which have clearly inhibited the ability of consumers to save and the incentive for them to do so. Findings show that the amount of money saved has fallen by nearly half since Labour came to power. The massive fall in the savings ratio has helped fuel the present consumer boom and bolster the economy, but it is storing up real problems for future generations.

Mr. Plaskitt: Does the hon. Gentleman accept that the savings ratio in this country is strongly geared to the housing market, and that on the two occasions under a Conservative Government when there was a house price boom, the savings ratio fell to levels lower than it is today?

Gregory Barker: There is a grain of truth in what the hon. Gentleman says, and look what happened. If he is arguing that the result will be a recession and another house price collapse like we saw in the early 1990s, my constituents will take that warning from him. I am staggered that anybody could stand up in the House and praise the collapse of the savings ratio. For anybody who is economically literate, it must be a matter of grave concern that people are spending more and more and saving less and less. Whatever asset price inflation has been, the percentage saved against those assets is declining. The hon. Gentleman and his Government who support that culture are storing up problems for future generations.

As hon. Members in the Chamber may know, for some time Consumer Credit Counselling Services has been lobbying for changes, requesting measures that will allow consumers to enter into credit agreements in a far more informed way than they have done to date. We must not ignore individual responsibility, but we cannot expect everyone who enters into a credit transaction to be an expert on all parts of financial accounting relevant to their agreement. As many of us are aware, financial regulations and credit agreements are often complex transactions requiring much time and effort to be invested in understanding them, to ensure maximum benefit for borrowers.

Of course, consumers must make themselves aware of the issues likely to arise, but we should not expect the average person to be a financial expert capable of understanding the frequently confusing and endless small print at the bottom of documents. We must realise that the worst credit arrangements are often taken up by those least able to understand the small print and those who, with a pressing need for credit, are not in a position to shop around. However, it is important that
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consumers take some responsibility for their financial decisions, so I support measures that encourage consumers to expand their financial knowledge. Personal responsibility cannot and should not be shirked, but for the most vulnerable and least fortunate their circumstances often mean that financial decisions are very difficult and are made quickly and under enormous pressure.

The issue needs to be addressed by both firms and consumers. I applaud the inclusion of clauses requiring creditors to provide people entering into credit arrangements with appropriate financial information. As other hon. Members have said during the debate, we need to ensure in Committee that the Bill enforces clear, like-for-like comparisons. Firms and consumers have a mutual interest in the consumer credit market working more efficiently, which requires confidence and ability to be developed in all parties. I welcome measures by some private and public sector bodies that have been working consistently towards such objectives. I am further encouraged by attempts to establish a national strategy in the Bill that will place legal obligations on parties to provide access to information, raising financial awareness and competence among consumers and businesses.

What impact will the Bill have on financial service businesses? It is our duty as representatives of our constituents to ensure that we legislate for the industry in a manner that provides sufficient safeguards and protection for consumers, especially the most vulnerable. Simultaneously, however, we must also seek to maintain a delicate equilibrium between adequate consumer support and a strategy that does not overburden business without obvious benefit to the consumer.

I draw hon. Members' attention to a point made by British Chambers of Commerce. Although it has strongly supported moves to limit unfair practices in the consumer credit market, it has warned that businesses should not be subject to over-burdensome legislation that has no positive effect. I am sure that my hon. Friends agree that there is little to be gained by imposing unnecessary regulations on an industry without any benefit to consumers. It is therefore imperative to recognise that although the Consumer Credit Act 1974 has served some consumers well for many years, it has little to do with the new consumer credit realities of today.

The progression of time, the varying needs and demands of consumers and the advancing pace of the credit market require the reconsideration and reassessment of present consumer credit legislation. Such efforts will ensure that we implement the structure best able to offer the necessary and appropriate levels of protection to both companies and, most importantly, consumers.

A similar sentiment is apparent in the data collected by the consumer magazine Which?, which regularly publishes reports relating to consumer issues. Last week, it released a critical report on the consumer credit industry highlighting existing unacceptable practices, which range from high penalty charges issued on late payments to the hard selling of insurance polices, all of which involves targeting vulnerable consumers up and down the country.
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Importantly, Which? has also responded favourably to the announcement of plans to reform the existing legislation by asserting, as we have recognised today, that the 1974 Act is

and that

I shall briefly return to spiralling levels of household debt. Although I have already outlined my support for measures to update legislation that is ill suited to our current credit climate, my support for the Bill is strengthened by my concern about spiralling levels of household debt. Although the Government inherited a history of household debt—as others have said, it took some 600 years to amass—it has doubled in this Labour Government's lifetime to more than £1 trillion.

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