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John Mann (Bassetlaw) (Lab): I wish to ask my hon. Friend the Minister several questions, which I am sure he will answer at an early stage of the Bill's progress, if not today.

It is salutary to remember that during the two weeks in which the United Nations put together a record £2 billion for south-east Asia, World Bank profits over that period exceeded that amount. Does the Minister agree that, given that bank profits remain at record levels, if banks are not prepared to regulate themselves properly so that they are fair to consumers, it is appropriate for politicians to regulate them? However unwelcome such regulation might be in principle, it is being forced upon us.

Over the past year, I have dealt with three cases that are relevant to the Bill. The Minister is aware of the Lewis case, which ended in tragic circumstances. It is a tribute to Mrs. Lewis that she has represented well the interests of all families who live with the consequences of debt. I also dealt with a family who were about to lose their house because of mortgage debts, and with a woman who had never worked, yet had £14,000 of debt, all of which was due to credit given by the big banks. Is it appropriate that it should be left to my negotiating skills—however good or bad—to resolve such problems? Should not a systematic approach be provided by the banks, or put in statute, to resolve them, rather than relying on people such as me—in essence, the voluntary sector?

Should we not legislate to deal with the credit card cheques that the banks issue? The Co-operative Bank has specific links with the Labour movement, yet I recently received four credit cheques from it. Does the Minister agree that it is unethical for the so-called ethical Labour movement bank to issue credit cheques? Will he join me in calling on the Co-operative Bank to take a lead among all banks by refusing to issue such credit cheques to anyone in future?

Does the Minister believe that the banks should use a debt-to-income ratio for credit applications, similar to that used for mortgage applications? Does he agree that in addition to annual credit statements from credit suppliers, people should receive a consolidated credit statement similar to that available to consumers in the United States? Does he share my regret that when the banks discussed a voluntary system of sharing information within the Association for Payment Clearing Services, one of this country's major banks was not prepared to agree with the others that credit requires self-regulation?
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5.23 pm

Mr. James Plaskitt (Warwick and Leamington) (Lab): I welcome the Bill and the secondary legislation that the Government introduced towards the end of last year. Taking them as a package, I am pleased by the Department's response to the points that we on the Treasury Committee emphasised following our investigative work over the past couple of years, which was thoroughly covered in the speech made by my right hon. Friend the Member for Dumbarton (Mr. McFall), the Committee Chairman.

During our investigation, we found a worryingly long list of the industry's failings. They fell into three categories, the first of which was failures of transparency. Illustrations of that included unreadable contract information—literally unreadable in some cases; too much misleading promotional material; and incalculable APRs. I am pleased that some of those issues have been picked up in the secondary legislation that has already been discussed elsewhere in Parliament.

The second category involved questions about the industry's real competitiveness. One of the most glaring examples that we found was store cards. Virtually a cartel operates, and we are still looking at interest rates of about 30 per cent. In some cases, the rates have not been revisited or reduced since 1999. I am pleased that, partly as a result of the issues that the Select Committee teased out in the inquiry, the Competition Commission is looking at the store card industry. I hope that its review will have some consequences for how the industry conducts itself.

The third category involves unfair trading practices. I come back to the unsolicited issuing of credit card cheques. There is one glaring omission in the Bill: it contains nothing that will help us deal with those cheques, which are sent to 16 per cent. of UK households. Virtually every issue is unsolicited, and evidence shows that they are sent to a greater than average proportion of cardholders who are already experiencing some form of financial difficulties. The Treasury Committee concluded from our investigations that in many instances the cheques are sent out irresponsibly by some lenders.

Last year's Government White Paper appeared to agree with us. At paragraph 5.62, it cites as an example of irresponsible lending

I hoped that, as that example was flagged up in the White Paper, we would see some follow-through in the Bill. I hope that there will be time in Committee to consider amendments to cover that.

Credit card cheques are simply not necessary. They did not exist a few years ago and they are a wretched development in the expansion of consumer credit. Unlike credit cards, they offer no interest-free period. Interest starts as soon as the cheque is used. The rate of interest can be double that for the credit card to which they are nominally attached. There is a handling fee of 2 per cent., which does not apply to the credit card. There is less consumer protection for the transaction than if it had been made by credit card. Such transactions are far less secure against fraud than those made by credit card, yet in virtually all cases in which they are used, the consumer could have made the purchase using the credit card itself.
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We have to ask what the real purpose of credit card cheques is and why the industry continues to promote them. The Treasury Committee asked for a number of measures to deal with them. We asked for clearer information on terms and conditions, statements on the cheques about applicable APRs and notice that interest was payable immediately. We asked that companies make it clear to users that they have less protection if they use credit card cheques than they have under any other aspect of consumer protection legislation, and that credit checking be carried out before they are issued.

I take the view that the existence of credit card cheques is indefensible. I accept that it may be difficult to go straight to banning the practice. When we had the chief executives before the Select Committee, I asked them to justify the unsolicited issuing of credit card cheques and I found that they could not. Although their explanations were possible defences for the existence of credit card cheques, none of them had a defence for the unsolicited issuing of them. The truth is that they are a purely cynical, opportunistic marketing opportunity—an enticement to users to use up their credit limit. One has only to look at the glossy promotional material that comes with the cheques to find confirmation of that. The literature says, "Use this for a gift, for a treat, for a holiday, to pay the school fees, to pay a utility bill or even the council tax bill." To suggest to consumers that they should undertake expenditure of that nature using the most expensive form of credit available is irresponsible.

It seems to me that the industry hopes that the cheques will flop on to the doormat on the same day as a glossy holiday brochure—that the consumer will put two and two together and end up paying six for it. I am not convinced that there is a case for those cheques, and they should certainly not be sent unsolicited. They are not part of the fair relationship that the Bill seeks to achieve. They do not help to achieve affordability, because they are the most expensive form of credit. They are not responsible lending. The industry says that when it introduces its revised code in March it will deal with some of these matters and offer consumers the right to opt out, but that does not come close to achieving what needs to be done. We must go much further, and we should require an opt-in. Cheques should be issued to consumers only if they actively request them.

The Bill provides an opportunity to end the unsolicited issuing of such cheques. It is a good Bill, but it is incomplete. If we could add such a provision, it would be much better.

5.30 pm

Mr. Wayne David (Caerphilly) (Lab): The Bill has been a long time coming but, nevertheless, it is welcome and it has been worth the wait. It is to the Government's credit that it commands a consensus, and it has been introduced following a tremendous amount of consultation with various parts of the industry.

As a Caerphilly MP, I welcome the Bill. Soon after I was elected in 2001, I had a meeting with the manager of the Bargoed citizens advice bureau. I asked him what was the issue of greatest concern to him and the town of Bargoed. He said that without question it was the issue of indebtedness. At the end of 2001, I read the results of
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the greater Gwent survey on indebtedness, which made the stark statement that there was a direct correlation between areas of deprivation and credit use. It cited Blaenau Gwent, the poorest region in the county—indeed, it is one of the poorest in the whole country—as having the worst levels of indebtedness. Monmouthshire, one of the most affluent areas, had a comparatively good record. It showed, too, that in the previous two years, in the borough of Caerphilly, part of which I represent, 7 per cent. of the population had been contacted by money lenders, many of whom were unregistered. Up to 57 per cent. of people who had taken out loans had experienced personal difficulties with those money lenders. That graphically depicts the scale of the problem.

A constituent came to my surgery a couple of years ago. Not unusually, she had taken out a loan of £20,000 and had signed a contract agreeing to an interest rate of 1.97 per cent. a month. That does not seem very much, but the annualised rate was 22 per cent. She discovered before long that she was paying £70,000 on a £20,000 loan, and found herself in court facing a debt of £100,000, a sum that she could never hope to repay. Similarly, a single parent who found herself in financial difficulty was approached in her local club by a supposedly friendly gentleman who offered her a helpful loan of £200. He said that there were no strings attached, but a few weeks later he knocked on her door asking for the £200 with an extra £200 in interest. That is a clear example of the problems that we are up against.

Sometimes, those problems can be resolved by people working together and by the police. However, I took the initiative on the issue of indebtedness with the local newspaper, the Rhymney Valley Express, and we ran a joint campaign against the loan sharks. We sought to highlight the issue and raise awareness, and we stressed the viable alternative of credit unions. The campaign also argued forcefully for changes in the law. That is why I am pleased with the legislative proposals before us.

As many hon. Members have said, the Bill has innumerable good features. Central is the proposition that we should introduce a concept of fairness to replace the concept of extortionate credit. I welcome that provision in clause 19, but there is room for clarification. I strongly recommend that the proposals from the National Association of Citizens Advice Bureaux be considered carefully by the Government and in Committee.

NACAB has produced an excellent briefing on various aspects of the Bill. There is much to commend those proposals. While the Bill may not be as strong as many of us would have wanted, it is undoubtedly a huge step forward. I urge hon. Members in all parts of the House to support it this evening, and I hope it gets on to the statute book as quickly as humanly possible.

5.35 pm

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