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Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments), and agreed to.

Mr. Speaker forthwith declared the main Question, as amended, to be agreed to.


Mr. Rob Wilson (Reading, East) (Con): On a point of order, Mr. Speaker. I know that you are well aware of the disgraceful treatment by the hon. Member for Reading, West (Martin Salter) of the former Labour Member for Reading, East. In this evening’s debate,
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however, the hon. Gentleman launched a highly personal attack on me while I was not present in the Chamber and unavoidably detained elsewhere. I was not notified before the debate that he would be making remarks about me. When I went to the Hansard office to see what the attack consisted of, I was informed that I could not look at what another Member had said during the debate. That meant that I could not challenge the version of events set out in the House this evening. Please will you advise me, Mr. Speaker, on what can be done to stop this happening again?

Mr. Speaker: I have not read Hansard and therefore do not know what was said, but if an hon. Member is going to attack another hon. Member, it is a courtesy and convention of this House that adequate notice is given to allow the hon. Member concerned to come into the Chamber. I would consider adequate notice to be sending a note. I do not wish to get involved in the argument until I see Hansard, but I give that as a general piece of advice to all hon. Members.

Andrew Selous (South-West Bedfordshire) (Con): On a point of order, Mr. Speaker. I seek your guidance on how I can receive an answer from a Minister in the Department for Communities and Local Government. I wrote to the Department on 7 November, but did not receive a reply. I then tabled a written parliamentary question, but I have not received a reply to that either. Today I contacted the permanent secretary at the Department.

The matter relates to a visit by a Minister in the Department to discuss housing and planning in my constituency, which I strongly believe should not be made in a ministerial capacity. Given that I have written to the Department, tabled a parliamentary written question and raised the matter with the permanent secretary, will you advise me, Mr. Speaker, how I can take this forward?

Mr. Speaker: Perseverance is most important in the House. The hon. Gentleman must keep going to the Table Office to put down parliamentary questions. When it is the day for oral questions, he must ensure that he tables an oral question on the matter that concerns him.


Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

Legal Services

Question agreed to.


Alzheimer’s Drugs

10.22 pm

David Lepper (Brighton, Pavilion) (Lab/Co-op): In presenting this petition I need to place on the record
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the fact that I am a member of the Alzheimer’s Society and a trustee of a Brighton and Hove-based charity, ARDIS, which works on behalf of those with Alzheimer’s and other forms of dementia, and their carers. The petition is in the name of Mr. Neil McArthur and 981 other signatories whose signatures were collected by volunteers of the Alzheimer’s Society during a four-hour period.

The petition reads:

To lie upon the Table.

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Doorstep Lending

Motion made, and Question proposed, That this House do now adjourn. —[Steve McCabe.]

10.23 pm

Dr. Alan Whitehead (Southampton, Test) (Lab): I am pleased to have secured the debate. The subject is straightforward. As the title on the Order Paper implies, it is about doorstep lending and the interest rates that follow from that.

Doorstep lending lies far away from the mainstream of conventional lending as most people know it—the bank loans, the credit card debts and the mortgages that we hear about in the press. It often involves sums that would be considered trifles in that world. A typical doorstep lending sum is about £350, the sort of amount that someone with a flexible card or a good credit rating will navigate as a matter of course, but of course the people who avail themselves of such sums from doorstep lenders do not have access to those financial devices by and large. Indeed, many have no access to any financial devices. They may have no bank accounts, no credit rating or no savings. Most will not be home owners, and they will probably be among the estimated 2 million or so people in the United Kingdom with no access to mainstream financial services.

Doorstep lending fills that gap, at a cost. It may involve small loans, but it is not small business. It is estimated to have an annual turnover of about£1.8 billion, and one doorstep lending company, Provident Financial, has about 60 per cent. of the market. Companies such as Provident Financial will say that the costs of servicing door-to-door collections, usually on a weekly basis, and the credit risks involved in such lending mean that they will charge a higher annual percentage rate than the more familiar credit card companies and high street banks, but the question that we ought to ask immediately is “How much higher is reasonable?”

Provident Financial is by no means the highest-rate lender, but its average APR—which is also roughly the industry average—is 177 per cent., and some APRs are as high as 800 per cent. That means that those least able to shop around for their financial services and least able to carry the consequences of debt repayments are charged APRs that are not just higher than high street credit rates, but astronomically higher. It is estimated that, even when collection and risk factors are taken into account, the industry overall overcharges customers by about £75 million a year, or about £7 on each £100 lent.

Mrs. Madeleine Moon (Bridgend) (Lab): Does my hon. Friend agree that the lie is given to the arguments advanced by the doorstep lending companies by the role of credit unions, which are able to lend to families with poor saving records at ordinary rates, often lower than those found in the high street?

Dr. Whitehead: My hon. Friend is right. I shall say a little about credit unions, which do indeed have a very good record for lending at affordable rates.

The consequence of doorstep lending as I have described it—and, of course, I exclude credit unions
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from that—is people getting deeper and deeper into debt, often as a result of a very modest foray into credit, and rapidly reaching a point at which repayment seems out of the question. I can cite two cases of people in my part of the world who have experienced precisely that.

Mrs. D is a tenant of a housing association based in Hampshire, which—as a number of housing associations are beginning to do—actively helped her to manage her debts when they were uncovered. Mrs. D. is a single mother with four children. She receives income support, tax credit and child benefit, but she took out an initial loan of £500 from a doorstep lending company to buy household appliances and things for her children. The first loan cost her £2,500 to pay back, and the next loan that she took out—also of £500—cost £3,000 to pay back. When her smallest child was born, she went to another company for a third loan, which cost £4,500 to repay. The loan companies collecting her repayments on the doorstep pressed her to pay that money instead of her rent, and she rapidly went into substantial arrears. She could see no way out of her spiralling debt and became depressed and suicidal. She was eventually rescued by the intervention of her landlord, the housing association, which helped her with benefits and arranged for her to pay the money back at a reduced rate; but she will be paying it back for a number of years.

Three years ago a disabled lady called Sheila, also in my part of the world, opened the door to a friendly looking gentleman who offered her a loan of a few hundred pounds. She took out a £200 loan, but the amount owed soon expanded to more than £5,000. She then found herself subject to threats of physical violence, and even threats to destroy her wheelchair. She was helped by a community organisation, the South Coast Money Line, which lent her enough money to repay her debt at a manageable rate of interest. She has now repaid the whole amount.

Those examples are not isolated, and do not exaggerate the depths of misery that unregulated interest rates on small loans collected on doorsteps can bring about, especially as their destinations are often people with no resources with which to extricate themselves from the trap in which they find themselves. They certainly have no access to the consumer credit choices that are available to most of the population.

That observation is why I give two cheers—but not yet three—for the various measures that have been undertaken, or are being undertaken, in this field. The Consumer Credit Act 2006 introduces an unfair credit test that makes it easier for people to take unfair lenders to court, but many people in the position I have described would no sooner take lenders to court than they would fly to Mars. The Competition Commission has just published proposals that will go some way towards ensuring transparency in doorstep lending, with comparative rates posted on the internet and lenders required to spell out the annual costs of loans, but many doorstep borrowers will not have access to the internet and will not have the credit rating or the mobility to shop around for loans, so the man on the doorstep will still have a monopoly in respect of them.

The Government have allocated £35 million from the financial inclusion fund to assist in the expansion and
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administration of credit unions and community development financial institutions.

I come now to the important points made by my hon. Friend the Member for Bridgend (Mrs. Moon). I consider the development of credit unions and CDFIs to be very important. Credit unions are a quietly expanding success in the field of small loans and they have twice as many members as they had in 2003. However, they suffer from a lack of ability to finance the funds that they will advance for loans, and in most instances they require people to be regular savers with the union before small loans will be advanced.

Mrs. Moon: Perhaps my hon. Friend will be interested to know that a housing association in my constituency has loaned £15,000 to my credit union so that, thanks to the Farepak debacle, it can allow people who have not got a credit history to take out loans that will get them through Christmas and take them out of the reach of loan sharks. When that £15,000 is repaid it is to remain within the credit union, perhaps to help people get out of rent arrears debts and to fund future financial advice and guidance for families on low incomes in my constituency.

Dr. Whitehead: My hon. Friend gives us an example of commendable action by a housing association. It is important to address overcoming the problem of credit unions having the money to loan to people even if they have not previously been savers with the credit unions. In terms of the organisation of credit unions, it is generally true that there must be a community of both haves and have-nots to fund them: those who are investing because they want them to work and those who are saving because they want to avail themselves of a loan at some stage.

When they work, they make an enormous difference. A typical loan of £250 from a credit union over 26 weeks would be repayable at £10.18 per week, which is £135 cheaper than a typical, but not top-end, doorstep lending company. So I hope that the £35 million will go some way towards enabling credit unions to play a far wider role in terms of small loans, and particularly in advancing loans without a saving requirement first. I know that the Commission on Unclaimed Assets is looking into the possible use of unclaimed assets in the banking system partly to assist with that kind of funding. It is important that the funds are there for credit unions to lend from, and this could be an important route to achieving that.

I would like to see, as is the case in a number of other countries, a basic bank entitlement introduced to the UK banking system, just as there is a basic service obligation on utilities—a basic account not for borrowing, but so that money can be administered by people with sparse means without recourse to the cheque advances, the pawnshop or the doorstep lender.

If this raft of measures comes in—in the case of the Competition Commission’s proposals, that will not happen for another two years—the landscape will be brighter for people needing small loans in the way I have described. So it may well be the case that many of the problems I have described will eventually begin to be overcome, but why not tackle the issue head-on and regulate the amount of interest that may be charged on the doorstep in the first place? Taken in conjunction
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with the good and important measures that I have described, we would certainly have the change of terrain that we need, and at an early stage.

I am not the first person to make this suggestion, either in this Chamber or elsewhere. It is, for instance, a central suggestion of the National Housing Federation, which is undertaking a great amount of work in this field, and of the “debt on our doorstep” campaign. The Government have to date not warmed to the idea that interest rates should be regulated. The most recent Competition Commission report did not endorse the idea. It is argued with some force that regulation might make things worse for borrowers by driving the legitimate and reputable doorstep lenders out of business and leaving the market to illegal and criminal usurers.

It is reasonable to seek to ensure that doorstep lending companies can make a living and can take properly into account the overheads with which they work, but there is compelling evidence that the present lending arrangements go well beyond that requirement. The priority, therefore, should be to look at ways in which lending rate regulation can work with the grain of good lending companies and not against them, rather than throwing the baby of indebtedness out with the bathwater of financial regulation.

A fruitful way of approaching this issue that I certainly endorse, as put forward by the National Housing Federation, is to look at capping in terms of the total credit charge of the loan, rather than the annual percentage rate for the loan, as we more normally do. As most loans are for short periods—less than 35 weeks—the issue for the borrower is knowing what the overall sum borrowed is, including all repayments. A limit on the total credit charge for short-term loans of, say, 44 per cent. of the principal sum loaned—and of perhaps 69 per cent. of the principal sum loaned for longer-term loans—would ensure that reputable companies could stay in business and keep repayments to a higher but manageable amount. It would also establish a transparent context for the loan, and information on alternatives could be provided.

The proposal would allow reputable companies to stay in business because, calculated in that way, all of Provident Financial’s business would be unaffected and it would be able to manage its loan structure within these limits. It is companies closer to the limits of legality, which charge the astronomical rates that I have mentioned, that would feel the heat of the change—and frankly, about time, too.

I hope that my right hon. Friend the Minister and the Government therefore feel able to look at such a proposal in a different light than hitherto—not as a cap that prevents lending or drives people underground, but as a cap that provides, as in a number of other countries with such an arrangement, an honourable place for fair lending on the doorstep, and no place for those who effectively suck the life blood out of the victims to whom they lend via their own front doorstep. That is, after all, the direction of travel of the very welcome reforms heralded by the Consumer Credit Act 2006, the funding for credit unions and the
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Competition Commission’s proposals. A cap on the total charge for credit would be the star on the Christmas tree of a better way forward.

What I want—I am sure that this aim is shared by all Members—is successfully to replace what almost amounts to mediaeval usury with a modern and fair approach to lending. People need to borrow, and those in the positions that I have described tonight willoften need to do so in gravely disadvantageous circumstances. We should seek to ensure that fair lending on the doorstep helps to solve the problems they have borrowed in order to address, rather than adding, sometimes irretrievably, to them.

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