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Norman Lamb: Yes. The network is under enormous pressure and there are signs that it is dying, so it should be a priority to find new uses for it. I very much support the work of credit unions and it would be a very good thing to use the post office network in that way.
We need a competitive market, but that can be achieved only if consumers are informed, which depends on transparency and clarity of information, as well as the absence of misleading marketing and promotions. Indeed, the 2003 White Paper was entitled "Fair, Clear and Competitive". There must also be adequate protection for consumers and the means for them to seek redress. We all accept that personal responsibility is important, but the industry also has a duty to behave responsibly, particularly towards vulnerable consumers, including people on low incomes, people with mental health problems and young people. As the father of a 17-year-old son, I am acutely aware of the importance of responsible lending to young people.
The industry has had to face up to quite a challenge. It can be easy to tar everyone with the same brush, but I think that parts of the industry have behaved irresponsibly and unacceptably. That does not apply only to the backstreet lenders; there are names on the high street that have behaved improperly and got people
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into a lot of difficulty, leading to some tragic cases, including suicides. There is culpability among the high street names as well as the backstreet ones. The Select Committee on the Treasury should have some credit for initiating a debate on some of those unacceptable practices. During the inquiry, Barclays bank had to withdraw a promotion, under pressure from the Office of Fair Trading, because it was misleading.
There has been a response and progress has been made. The introduction of summary boxes giving clear information is one way in which the industry has responded. It has moved some way, although not far enough, in my view, towards providing clear information so that the consumer has the information that is necessary to make an informed judgment. Some of the worst excesses are therefore now in the past, but there is still a long way to go and key concerns remain. We need to consider how, if at all, the Bill addresses those concerns.
First, there has been a failure to achieve adequate data sharing, and reform is essential. We have not got there yet and I am not convinced that the Bill does anything effective to address the problem. I shall be interested to hear the Minister explain precisely how he envisages we can crack the problem. Difficulties arise when people go to a number of different lenders and borrow—they may well be making the minimum monthly payments—so that the total amount never shows up as a default, but cumulatively gather a debt that is completely unsustainable, after which everything crashes. It is incredible that that can continue.
Many financial institutions accept that data sharing must come and that it must be complete, but some institutions are still resisting it. On this issue, as on some others, the Minister could use the Bill and the threat of possible amendment to force the hand of some of the companies involved and persuade them to move further than they have done so far. I urge him to consider that. There has been a long debate about the problem of data sharing, and it is time for some action.
Which? has suggested a possible solution and I would be interested to hear the Minister's comments. It suggests that the credit agreement should contain the ability for the consumer to consent to the sharing of information, with some key caveats. First, there should be clarity about the information to which consent to disclosure applies. Secondly, the sharing of information should be limited to organisations recognised by the Information Commissioner as credit reference agencies. Thirdly, the data should be used only for assessing credit worthiness. This is not rocket science, but getting from the industry a voluntary commitment to introduce such a requirement in all agreements would go a long way towards sorting out the problem. I shall be interested to see whether Minister wishes to take the proposal forward. We can take action through either regulation or voluntary agreement. My preference is always for voluntary agreement, if it can be achieved.
The second specific concern that remains—I raised it in an intervention on the Minister—is the fact that although there is new regulation on the single method of calculating annual percentage rates, there are still about 10 different ways in which credit card companies calculate interest, depending on when the interest rate starts to run. The inevitable consequence is that a single APR achieves nothing in terms of greater transparency
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if the consumer cannot make a proper comparison between one card and another. The industry resists any uniform approach to calculating interest, often on the grounds that it would cramp its style or restrict innovation and so on. I am not wholly convinced, but there is another way in which the problem of lack of clarity and the ability to compare one product with another can be dealt with: showing the cost of credit using a common scenario or illustration in respect of all credit cards. The information could be shown in pounds and pence so that the consumer can see the cost of credit in cash terms and not in percentage terms, which many of them do not understand.
I pursued that concept all the way through the Treasury Select Committee inquiry. Initially, there was no interest at all, but by the end of our inquiry, John Vickers from the Office of Fair Trading had indicated support, as well as a number of consumer organisations. A number of credit card companies have not only indicated support, but have been trialling the idea of illustrations in pounds and pence. If there were voluntary agreement across all credit card companies to have a single set of illustrations, the problem of having one single interest rate calculation could be overcome, as people could see the cost of borrowing on different credit cards. I know that the Minister has said that the Government are monitoring the issue and that the Association for Payment Clearing Services is trying to introduce some uniformity to illustrations. What can he do to push the industry in the right direction, so as to create genuine transparency in the cost of credit?
Other issues remain unresolved. The Daily Mail referred this morning to a problem that cannot be addressed by regulation, but to which the industry must face up. Staff are often incentivised to sell more credit and they get extra money for flogging more, whether or not that is appropriate. It is inappropriate, especially in respect of more vulnerable consumers.
On credit card cheques, I know that a new opt-out protection has been introduced by way of the banking code. I was told in a letter from one of the Minister's officials that the Government plan to consult on the commitment that the Minister gave, during consideration of the Bill before the general election, to introduce secondary legislation on transparency of terms and conditions regarding credit card cheques. What is the time scale? Is he planning to consult now or will he take many months to get around to it? There is a serious problem with consumers not understanding the consequences of using the cheques.
The next problem that remains is minimum repayments. There are new warnings and some credit card companies are now giving illustrations of the cost of making minimum repayments, but the dangers remain. If the repayments are set too low, the debt that the consumer faces continues to grow. That is another problem that the industry must pursue further.
Penalty charges have been the subject of inquiry first by the Office of Fair Trading and now by the Competition Commission, and we may get somewhere. When the right hon. Member for Leeds, West and others talk about the problem of high interest rates, however, we must remember that it is often penalty charges that get people into difficulties. Because I did not pay off my
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Halifax account in time, four cheques went through, each of one of which carried a £30 charge. Such charges may prove to be punitive for people who are struggling on low incomes and that matter must be addressed, perhaps through the banking code.
We have already discussed the problem of the order of payment on credit cards. Some consumers do not understand that they are paying off the 0 per cent. debt that they have carried over from another credit card rather than subsequent purchases, which are subject to a rate of interest.
The payment protection insurance sector is making super profits. Again, because staff are too often incentivised, protection insurance is sold to people who are unlikely to be able to use it, and it would be good if the industry were to respond to that point.
The Bill does not specifically deal with any of those issues. I always prefer to see voluntary action by the industry and the banking code is the ideal mechanism for achieving that. If the industry does not take adequate action, however, the threat of regulation may be necessary.
How does the Bill measure up to the principles that I set out earlier? The Minister has stated that it will not catch all the issues, and I accept that point. It is fair to point out what has already happened by way of statutory instrument. In October last year, new rules were introduced on advertising consumer credit, including the APR issue, and on the prominence of key information on the cost of credit. In terms of transparency, however, the single APR is useless if interest is calculated in several different ways. New rules on the disclosure of information before consumers sign an agreement have also been introduced by statutory instrument. Consumers have the right to take the agreement away and study it, which is a welcome reform. New, fairer rules on early settlement have also been introduced, and those steps are all positive.
Turning to consumer rights, the Bill does not include measures on capped or maximum interest rates. The "Debt on our doorstep" campaign and some hon. Members who are present in the Chamber today have argued for a cap on interest rates, but the evidence that I have seen from other jurisdictions across Europe and America suggests that it would not achieve its objective. If a measure does not protect the most vulnerable people, what is the point of introducing it? The evidence shows that a cap would not protect the most vulnerable consumers.
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