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Charles Hendry (Wealden) (Con): I am grateful to the hon. Member for North Norfolk (Norman Lamb) for tabling this sensible and constructive new clause. I am pleased to offer the Conservative party's support for it. On several occasions in Committee, I raised the importance of making advances in data sharing. I also endorse what he said about asking the Government to sort out the issue in its entirety. A range of issues are involved and we are all looking for them to be dealt with together rather than piecemeal.
There is concern that a unique opportunity to protect consumers is being missed. The Bill does an enormous amount in that direction, but the Minister rejected our pleas in Committee for controls on credit card cheques, which was an issue raised by the hon. Member for Rhondda (Chris Bryant).
Charles Hendry: The Minister is extremely good at saying no, as the hon. Gentleman says from a sedentary position. He is the natural heir to General de Gaulle and Margaret Thatcher in saying no so forcefully and regularly.
The Minister also said no to our pleas for measures to stop unsolicited increases in credit card limits and rejected the plea for a responsible lending test, even though it was articulately advanced by his right hon. Friend the Member for Leeds, West (John Battle). We are therefore concerned that things that would greatly help the interests of borrowers are not being taken into account as fully as they might be in this Bill.
As I stated in Committee, we all agree that the nature of the credit industry has changed beyond recognition over the past 30 years, and particularly during the past 10 to 15 years. That is the whole point of the Billto bring provisions and consumer protection up to a level at which it can successfully respond to those changes. As Members on both sides of the House will know, in 1971 there was only one type of credit card. Today, there are more than 1,300. Thirty years ago, £32 million was owed on credit cards, but today that figure is almost £50 billion. In fact, there are now more credit cards than people in this country. With that, a range of new issues have arisen. As my hon. Friend the Member for Hemel Hempstead (Mike Penning) said, when people transfer the balance from one card to another, the initial card does not get closed. Someone drew to my attention recently the fact that, although she thought that she had closed a card because she had transferred the balance, she then discovered that charges were being put against that initial credit card. She was told that that was because she had not reported the card lost or stolenshe could not just close it. To me, that shows a significant loophole in the current way of operating.
Competition within the industry and the ability of consumers to shop around with confidence for credit deals is greater now than ever before. Consumers can now apply for and open accounts over the telephone and the internet, which is relatively hassle-free. While the increases in competition and greater flexibility and access to the market for consumers are welcome, at the same time, the risks and dangers of accumulating debt have become all too apparent. Members will recall that, on previous occasions, I drew attention to specific cases of individuals who have run up multiple debts on numerous credit cardsdebts that have been far beyond what their income allows them to repay. As a result, they borrow more and more to try to alleviate their difficulties, but all that that serves to do is to wind them further and further into unmanageable debt. It is a spiral of debt that we all know and many of us fear, which, in a number of the cases cited by Members, has led to tragic consequences.
On the day of the Bill's Second Reading, the Daily Mail reported the tragic case of Stephen Lewis, a 37-year-old production worker from Worksop in Nottinghamshire, who ran up debts of £70,000 on 19 credit cards despite earning only £22,000 a year. In the end, he felt that he could escape from that huge debt only by taking his own life, leaving a wife and two children.
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Chris Bryant: In all the examples that I have encountered in my constituency or read about in the newspapers, the issue has been new credit rather than any of the old credit arrangements. The new clause, however, proposes to punch quite a big hole in some of the principles of our data protection legislation. I wonder whether it is proportionate to the real problem. Does the problem really lie with the historic credit arrangements that many of us may have? The hon. Member for North Norfolk (Norman Lamb) himself said that he had been with his bank all his lifequite some decades now.
Charles Hendry: I think that if Stephen Lewis's data had been shared more generally, and if the lenders had known that he was already borrowing on a range of credit cards and was well beyond being able to repay the debt on the basis of his income, the lenders would have been more cautious about issuing new cards. That is the kind of case that concerns us.
I should point out to the hon. Member for West Bromwich, West (Mr. Bailey) that the arrangements will not be mandatory, in that if someone says, "You cannot have access to my data", the lender will decide whether lending to that person is appropriate. The lender will have the extra information that he or she may have something to hide. Most of us would be quite happy for our data to be shared because we have nothing to hide, but when people do have something to hide and say, "You may not share that information", the lender should beware. The hon. Member for Rhondda mentioned caveat emptor. I am not sure of the Latin for "the lender should beware".
Mr. Bailey: I understand the hon. Gentleman's point, but it seems to be based on the presumption that the lender will always act responsibly. I am sure that that is true of the great majority of the credit industry, but it does not apply to all of it.
Charles Hendry: The hon. Gentleman had a chance to vote for the responsible lending test in Committee, but he voted against it. We certainly want more responsible lending and we had the opportunity to make that difference. It was disappointing that the Committee did not accept the amendment to which the right hon. Member for Leeds, West spoke so articulately.
I am grateful to my hon. Friend the Member for Putney (Justine Greening) for drawing my attention to a constituency case that she had encountered. A mother, whose anonymity I shall preserve for understandable reasons, wrote:
"My son . . . aged 45 suffers from schizophrenia and is in receipt of anti-psychotic medication for this illness. He has built up a credit card debt of over £30,000 for which he pays interest of about £500 a month. I do not know the exact amount because he will not show me the credit card statements. The incapacity benefit he receives can just about service the interest on the credit card debt. He does not want to go bankrupt and he threatens suicide. In view of his illness it is very difficult to reason with him and he is very reluctant to give up the cards."
All Members of Parliament encounter such cases, which cause tremendous concern and distress. The data-sharing arrangements proposed in new clause 1 could help to deal with the problem.
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The background to the new clause is a growing debt problem. The number of bankruptcies and repossessions increased by 25 per cent. last year, the number of appeals to the Consumer Credit Counselling Service increased by 60 per cent., and credit card arrears and bad debts are also increasing. Those problems could become worse. We should take the opportunity that the Bill presents and do all we can to prevent them from reoccurring. That means taking every possible step to ensure that lending is responsible. Lenders should be able to use information to ensure that borrowers can afford to enter into agreements.
We all realise that we cannot stop people borrowing too much when they wilfully give lenders incorrect information about their circumstances or other cards that they have, but we can do much more to make such activities more difficult. Data sharing is a crucial part of the process, which is why we support new clause 1. The new clause aims to make it easier for credit companies and credit reference agencies to share their data, so that it is easier to prevent people from entering into unaffordable agreements.
Most members of the credit industry already share, or are about to share, data on their credit agreements with the credit reference agencies, but some problems remain. Lenders first issued credit long before they would have seen a need to share data and, as a result, many credit accounts do not allow for sharing in their respective agreements. Accounts that were opened before lenders decided to share data are governed by the current legislation. They are not eligible for inclusion in credit files until the account holders consent to the sharing of their data.
In the case of accounts with a long life such as credit card or current accounts, decades may pass before the whole portfolio is available. The new clause seeks to solve that problem. As the number of agreements continues to increase because it is becoming easier to enter into them, and lenders seek more sophisticated means of risk management, data sharing becomes increasingly important.
It is beyond question that lenders have a vested interest in lending responsibly. Only a very few loan sharks make their money by preying on people and leading them knowingly into debt that they cannot afford. Responsible lending reduces credit losses, thus creating a financial incentive for the undertaking of credit agreements that do not place the borrower under financial strain. There is also the issue of reputation: lenders do not want to be seen to contribute to individuals' misfortune.
By entrenching in the Bill the credit industry's right to share data, subject to the protection offered to consumers by the Data Protection Act, we can help to prevent individuals from entering into agreements that they cannot afford. Protection of that kind is one of the fundamentals of the Bill, and as the industry evolves yet further over the next few years and decades, the new clause will help to ensure that the level of protection offered to consumers meets those demands.
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