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Mr. Russell Brown (Dumfries and Galloway) (Lab): As we have heard this afternoon, it is an absolute tragedy that in modern-day society we continue to hear stories of people taking their own lives because of their debt problems. It is therefore warmly to be welcomed that we have this Bill back with us today. I suspect that other hon. Members who were here during the debate on the previous Bill, which received broad support across the House, will be equally relieved that it has returned after it fell on Dissolution. As this Bill is almost identical, I hope that there will be a reasonable degree of unanimity, although I already sense that there are still slight disagreements on some aspects of it.
No one in the Chamber can fail to remember the Meadows case in Liverpool; in fact, the Minister referred to it earlier, keeping in mind that an appeal will be held on Monday. What was the real problem in that case? Was it the fact that an original debt of £5,000 rose to £385,000, or the fact that it took all of 14 years to go through the whole court process? Whatever is the case, there is no doubt that the introduction of the compulsory alternative dispute resolution scheme will improve consumer rights and offer greater protection.
For too long, consumers have been exposed to extortionate rates of interest. In general, the vast majority of people who find themselves in a financial
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plight have more than one debt. Only a couple of weeks ago, I had the unfortunate experience of meeting a constituent who was struggling with debt that had arisen from a credit card. She was a woman in her early 50s trying to cope with two or three different financial problems at the same time, one of them being a mortgage repayment. She is tied into a mortgage endowment that will, she told me, terminate in four or five years' time, but there appears to be a significant shortfall in its maturity figure. She knows full well that she will have to cope with that fairly major problem in four or five years' time. However, the credit card debt was starting to get out of control. For several months, she had been making payments faithfully and had never defaulted, but only 20 per cent. of what she paid was diminishing the balance that she owed. Some 80 per cent. was therefore being paid back in interest. Under normal circumstances, people would think that credit cards were fairly sound and reasonable but we have heard about negative experiences today.
The lady was reaching breaking point and she said to me, "If I continue in this vein, I will be in my mid 80s before I get this repaid." She was struggling. Thankfully, I was able to encourage her to go to the bank and speak to people about the debt, and the good news is that she now sees some light at the end of the tunnel.
We are constantly advised to save for our retirement and prepare for our later years but consumers never appear to be advised about the concept of saving. Perhaps I came from a different stable several years ago. Today's consumer is vastly different from those of 20 or 30 years ago. There have always been people who could afford anything they wanted. There were also those who saved to buy a specific item or endeavoured to make a purchase in a short-term, interest-free period. However, nowadays, we never hear of people saving to purchase products for the home or anything that might be deemed a luxury item. Indeed, what is a luxury item today? We live in a different society and people no longer save.
My right hon. Friend the Member for Leeds, West (John Battle) said that people were ashamed of debt. Although I believe that that is true of some people, it worries me when we hear of others who almost boast about it. There has been a change in attitude in 20 or 30 years. Debt used to be a stigma for most people. Nowadays, that applies to fewer people. That is apparent even in game shows. "Who Wants to Be a Millionaire?" captures my imagination from time to time. The bold Chris Tarrant asks contestants, "And how much would you like to win?" to which people explain their reasons for how much they want to win. Often, one of the reasons for wanting to win a specific amount is to pay off debt, including credit card debt. I therefore stress to my right hon. Friend the Member for Leeds, West that some people almost boast about it. We live in a different society nowadays.
I was trying to make the point that people do not find it easy to talk about their financial arrangements. For the poorest, it is not only a question of shame. Most people will not discuss how they balance their budgets and on what they spend their money. Even those who boast about how much borrowing they have done might not spell out their whole budget. We need, perhaps as part of youngsters' education, to teach them
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to think and talk more about how to balance budgets and manage income. We are all bad at being open about it, even to our partners.
Mr. Brown: My right hon. Friend is right. Something needs to be done through education, especially for our young people. The hon. Member for North Norfolk (Norman Lamb), who spoke for the Liberal Democrats, mentioned his 17-year-old son. I have two daughters who are slightly older and it makes me somewhat anxious to hear them talking about their credit cards. I avoid asking questions in case I do not get the answer that I want to hear. It is all about being careful.
Despite the Government's valiant efforts to make our society more inclusive, some people still find it difficult even to open a bank account. Their financial circumstances are such that the banks do not want to know. Sometimes, perhaps because of where they live, there is no credit union. I applaud colleagues' comments about the value of credit unions in many communities. Many people who fall into the category of being unable to join a credit union or have a bank account never seem to have much of a problem with securing debt. Contributions in the Chamber this afternoon make that abundantly clear. All too often, those people get into the hands of loan sharks or companies that have no conscience about a consumer's becoming seriously indebted.
In the past financial year, Dumfries and Galloway citizens advice services dealt with 905 clients with debts that totalled just over £11 million. In April alone, they dealt with 42 new clients with debts that totalled £401,430. They are currently dealing with 461 cases with debts that total just under £5.5 million. To some right hon. and hon. Members, those sums might seem very small in the grand scheme of things, but in reality, they are becoming increasingly worrying in an area that suffers badly from a low-wage economy. I want to put on record my thanks to Dumfries and Galloway citizens advice service and the local welfare rights staff who work so diligently to assist my constituents with their financial problems.
The Government's White Paper highlighted the fact that escalating consumer debt can be traced back to the lack of ongoing information on credit agreements being provided by lenders. This is of particular concern to consumers who fall into arrears, as they are often unaware of the consequent charges on their account, such as default costs for missed payments, compound interest being charged on the amount owed, or underpayment on the accumulation of their debt. These are specific problems. We have heard this afternoon about interest rates, but sometimes they are not the problem. Sometimes the problem is the default payments that have to be made, and many consumers tend to bury their heads in the sand in such circumstances.
Although the Consumer Credit Act 1974 places some duties on the lender to provide information, they apply only when the consumer makes a request for it. I am delighted that the new Bill will require the lender to provide annual statements at no cost to the borrower, and that those statements will have to provide specific information to help the borrower. The aim will be to ensure that the borrower is kept fully informed of the status of their account throughout the entire life of the
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agreement. I also welcome clause 6, which requires businesses to issue annual statements for all regulated fixed-sum credit agreements with a term of more than 12 months.
This debate has thrown up some important issues that have not been dealt with by the Bill. We have heard demands for interest rate capping, and the issue of unsolicited credit card cheques has also been raised. Changes relating to APR calculations were introduced in October 2004I compliment my hon. Friend the Minister on the part that he played in their introductionbut there are still big questions to be answered on that issue.
Responsible lending is important, and we must be critical of those lenders who exploit consumers, but, as my right hon. Friend the Member for Leeds, West said, we must also consider the issue of education, because responsible lending goes hand in hand with responsible borrowing. This is about the exploitation of the poor, but the whole issue of irresponsibility regrettably involves wider society as well, and if left unchecked it can attack communities and neighbourhoods of all different social backgrounds. I applaud the Minister for bringing this Bill back so quickly, and I echo the plea that we should not only place it on the statute book but ensure that it is implemented as soon as possible.
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