Consumer Rights Bill

Lord Alton of Liverpool Excerpts

Wednesday 26th November 2014 Lords Chamber

[The Lord Bishop of Birmingham]

My Lords, I am speaking today to the amendment to the Consumer Rights Bill in the name of the Bishop of Truro. He sends his deep regrets that he cannot be in his place today. I extend my and his thanks to the noble Lords, Lord Mitchell and Lord Alton, and the noble Baroness, Lady Bakewell, for supporting the amendment in Committee. Peers from all sides of the House spoke in favour of the amendment.

In recent years, we have seen a massive increase in the use of payday loans and therefore in the advertising of them. As we know, in Birmingham and other parts of the country, access to affordable credit is extremely difficult for vulnerable families. In September this year, the Children’s Society published a report on the effect of advertising and telemarketing of payday loans. The report had a number of findings on which noble Lords spoke in Committee and I would like to remind your Lordships of four of those.

More than half of children aged 10 to 17 are seeing payday loan advertisements “often” or “all the time”. A third of teenagers would describe payday loan adverts as fun, tempting or exciting. These teenagers are significantly more likely than their counterparts to say that they would consider taking out a payday loan in the future. Three-quarters of parents back a ban on payday loan advertisements before the watershed. Parents aged 18 to 24 are twice as likely as those aged 25 to 34 to have taken out a payday loan. This amendment proposes the watershed as the sensible cut-off point to protect children best. The 9 pm watershed is a well known, well rehearsed and established tool for parents, who are able to have some control over how much television their children watch. Even if in the real world we are all aware that some children will watch television after this point, banning adverts of this kind before the watershed would prevent them seeing the majority of them.

In the government response to the amendment in Committee, the noble Baroness the Minister described how new rules on payday loans advertisements with regard to signposting and risk warnings would be significant enough to protect vulnerable families. The rules are welcome but regrettably, warnings, although important in protecting adults, do not always protect children from detrimental impact on their long-term attitudes to debt and money management. In that debate, the noble Baroness also outlined the recent changes to the curriculum which made financial education a statutory requirement. That is another welcome change to help combat the inappropriate marketing practices of lenders. Now we need to make sure that that work is not being undone when children go home from school and sit in front of the television.

The amendment has gained support both in the House and outside. Major organisations have added their names in support of this change. Organisations such as StepChange, the Money Advice Trust and MoneySavingExpert have all seen the point of using the watershed cut-off. I hope that the Government will respect that widespread support and take the opportunity not only to give your Lordships a firm commitment to look at the issues in depth but to consider changing the regulations on scheduling of payday loan adverts.

[Lord Alton of Liverpool (CB)]

My Lords, in returning to this issue, which I spoke to at Second Reading and in Committee, I first thank the noble Baronesses, Lady Neville-Rolfe and Lady Jolly, for the time that they and their officials have given to it. The meeting that they held with me, the right reverend Prelate the Bishop of Birmingham and the noble Lord, Lord Mitchell, earlier today was certainly helpful.

As the right reverend Prelate just said, this issue has not just exercised Members on all sides of your Lordships’ House at all stages of the Bill but it has also engaged the public outside. I am glad to speak today to Amendment 47, to which I have added my name as a cosignatory. Our amendments are a composite of the amendments which the right reverend Prelate the Bishop of Truro and I moved in Committee and build on that momentum. I hope that they become part of the Bill. However, I recognise that although legislative moments come and are the most important point for parliamentarians to insist on provisions, it is not always possible to achieve legislative outcomes. If that is the case today, I hope that when the Minister comes to reply to the debate, she will be able to say, if the Government agree, as I think they do, with the principles contained in the amendments, how they will be rigorous in ensuring that the advertising industry, the licensing authorities and, above all, the payday loan industry will act in accordance with the amendments, and how we as a House will have the opportunity in due course to hold all those bodies to account.

[Lord Higgins (Con)]

I am looking in vain for some reference to the watershed to which the right reverend Prelate referred. I cannot see where it is in Amendment 47.

[Lord Alton of Liverpool]

The issue that the noble Lord rightly raises would be covered in the regulations to be laid before the House under proposed new subsection (1). There is a difference between being able to advertise to and target young people, which is the main thrust of the amendment, and the second part, which is about whether there can be regulation after the watershed. It is true that the advertising industry and payday loan lenders recognise that there is an issue about targeting young people, but up until this point, we have not heard enough from them about what they would do about advertising that might appear after the watershed. If I may, I shall return to that in a moment or two.

[Lord Higgins]

I am very much in favour of the amendment, but the right reverend Prelate referred to the watershed as if it were in the amendment. Am I right in thinking that in fact it does not appear in the amendment, only in a statutory instrument intended under the amendment?

[Lord Alton of Liverpool]

It is certainly true that it could appear in an instrument or regulations. However, subsection (1) of the proposed new clause refers to the content as well as the timing with regard to people below the age of 18. What that part of the amendment recognises is that some young people are bound to be watching television after the watershed and that would certainly need to be addressed.

Payday loan advertising is a significant factor which contributes to the social context in which people make their financial decisions. People are endlessly blitzed by messages encouraging them to spend and to borrow, whereas there is minimal knowledge about money advice and debt help services. Our failure to develop a nationwide network of credit unions has always been a major disappointment to me and a contributory factor to the ability of these payday loan lenders to walk into that space.

With the prevalence of payday loan advertising increasing by more than 20 times from 2009 to 2012, according to Ofcom research published in December 2013, far outstripping the advertising of sound financial management or general financial education—although there is commendable and wonderful work, as the right reverend Prelate referred to, by organisations such as Christians Against Poverty, StepChange, the Children’s Society and CARE—it is hardly surprising that payday loans are increasingly being seen as a normal and responsible means of personal financial organisation. What today’s children see, hear and understand from what they are taught today, and from the advertisements that they see, will impact hugely on their future.

What is particularly concerning about the normalisation of payday loans as a means of borrowing is that it particularly manifests itself among young people, specifically, in younger parents. According to Playday not Payday, a report produced earlier this year by the Children’s Society, 39% of parents aged 18 to 24 are likely to have used payday loans at some point, compared to 18% of 25 to 34 year-olds and just 8% of 35 to 44 year-old parents. It is interesting that the same report concluded that 30% of 18 to 24 year-old parents describe payday loans as an acceptable means of managing day-to-day expenses. Perhaps we can take some encouragement in that 9% of 18 to 24 year-old parents recognise that although they have used payday loans, they do not see them as an acceptable means of managing day-to-day expenses—but that is scant encouragement.

This week, Ofcom, the regulator and competition authority for the United Kingdom’s communications industry, published results concerning children from its Digital Day 2014 research. The study found that just over three-quarters—78%—of children aged 11 to 15 and 90% of six to 11 year-olds watched live TV every day over the course of a week. With so many children consuming so much television, it is important that we ensure that they consume what is appropriate.

In our earlier debates on the Bill it was said that there is a logical inconsistency in the current approach to the advertising of payday loans. I agree with that. We properly accept certain limitations on advertising, even in a free-market economy, where it is recognised that normalising potentially harmful behaviours should be avoided, as is the case, for example, with alcohol or gambling advertisements. Payday loans should be treated in the same way. I have yet to hear a cogent argument against that.

Critics of closing the loophole note that payday loan advertising is not targeted at children and that restricting adverts until after the 9 pm watershed—the point made by the noble Lord, Lord Higgins, earlier on—is therefore unnecessary. I must say that I find that argument unconvincing, although I note that the noble Lord is not one of those who advance it. An advert can appeal to someone without being targeted at them. Although payday loans may not be advertised specifically around children’s programming, children do not only see programmes designed for them. They see a range of content.

In a poll conducted by YouGov and commissioned by the Children’s Society, 74% of parents across the country backed a ban on payday loan adverts from airing on TV and radio before the 9 pm watershed. We should listen to them. Parents also tell us that they feel under pressure from their children with regard to payday loans. Research conducted by the award-winning MoneySavingExpert.com website revealed that more than one in three parents with children under the age of 10 have heard their children repeat slogans from payday loan TV advertisements. In the same poll, 14% of parents said that when they refused to purchase something for their under-10 year-olds, they were nagged to take out a payday loan for it. All of us who have children know all too well the almost irresistible gut-wrenching pull of the plea of a child—especially on a sleep-deprived parent. We may reminisce with rose-tinted spectacles about this now, but the reality is that for some families this is what is called “pester power”. It is the beginning of a slippery slope, often towards indebtedness and poverty.

If there are steps we can take to avoid families slipping unnoticed into indebtedness, we must surely take them. These amendments do not represent a magic bullet. I do not think that the right reverend Prelate, the noble Lord, Lord Mitchell, or the noble Baroness, Lady Bakewell, would argue that. I accept that there is no single solution or quick fix. Whole-person financial care is vital. Financial education is crucial to prepare children for financial independence. Equipping children and young people to make financially capable choices will also help to break the sort of cycles of deprivation that many of us have seen, especially in urban areas—places like the city of Liverpool, which I represented for 18 years in another place. But preventing seductive, alluring, irresponsible advertisements can also play its part.

These amendments will therefore make a difference. They will ensure that children are less familiar with high-cost consumer credit products such as payday loans. They will ensure that adults are protected from overt pressure in the form of overbearing and intrusive unsolicited marketing. They will help families and insulate children from the subtle pressure and normalisation of payday loans as an appropriate form of financial management.

For all those reasons, I am very happy to support the amendment so ably moved by the right reverend Prelate the Bishop of Birmingham.

[Lord Mitchell (Lab)]

My Lords, two years ago, the payday loan sector in this country was completely unregulated. Payday lenders from around the world opened up in the UK. For them, it was the new frontier: you could get away with anything—and they did. These companies enjoyed very rapid growth, to the extent that Wonga, as just one example, was considering a public listing that would have valued it at more than £1 billion. These people would stop at nothing. Their success, of course, was built upon the misfortune of the millions of people who had no other option but to take out these loans, and of the tens of thousands who suffered, and continue to suffer, acute distress as the value of their loans ratcheted up at 5,000% per annum.

However, things have changed—and very much for the better. It took a superhuman effort, and we encountered a great deal of initial resistance from the Government. But today legislation is in place which has already started to contain the activities of the payday lending companies. In five weeks’ time, the Financial Conduct Authority will introduce interest rate caps that will remove many of the excesses. I congratulate the Financial Conduct Authority for grabbing this bull by the horns, and making life very tough for the cowboys who had reigned supreme. It is estimated by the FCA that in 2015 most of the lending companies will leave the industry and that only four serious payday lending companies will remain in business. It is not often in politics that one can say, “Job well done”. But it is job well done—or at least, nearly done.

This afternoon we are addressing some of the outstanding abuses that the payday lending companies still employ—none more so than the part of their advertising that is targeted at children. Yet again, the government are holding out against legislative action, and yet again they claim that sufficient powers already exist for the FCA, Ofcom and the Advertising Standards Authority to restrict such advertisements; even though there is overwhelming evidence to show that children are influenced, and continue to be influenced, by these advertisements.

In Committee, the noble Baroness, Lady Jolly, made an argument that, in my view, missed the point. She based it on the fact that advertisements are not targeted directly at children. She said that Wonga, as one example, has specific policies not to advertise on children’s TV. I will resist the temptation to comment on the value of any of Wonga’s ethical stands.

--- Later in debate ---

[Lord Alton of Liverpool]

My Lords, I am grateful to the noble Baroness, not least because of the discussion that some of us were able to take part in earlier about this very issue. However, a debate and a review, of course, are no substitute for legislation, as she will agree. Will she at least commit, not about debates or reviews but about what the Government can commit to themselves, which is legislation if the review does not bring forward the necessary mechanisms to control this disease which has been described by so many noble Lords today as affecting so many people?

[Baroness Jolly]

My Lords, I do not dispute for one minute that we would all like to see this problem go away. Regrettably, these decisions are made by Treasury Ministers and this is well above my pay grade.

--- Later in debate ---

[The Lord Bishop of Birmingham]

My Lords, I move Amendment 48 in the borrowed shoes of the right reverend Prelate the Bishop of Truro, which are reasonably comfortable—or were, until about 10 minutes ago. The amendment is in his name and that of my noble friend Lord Alton.

The subject is telemarketing, which is in the same vein as payday loans. The discussion of this amendment in Committee made some strong progress with the issue, and I was pleased to see how many of your Lordships spoke in support of it right across the House. I am sure that many noble Lords will have been irritated by cold calling down the telephone. The Department for Culture, Media and Sport’s current consultation on nuisance calls is an important contribution, and an opportunity to tackle the issue of cold calling as a whole, but this amendment is focused on the specific problems caused by cold calling for high-cost credit.

As the right reverend Prelate the Bishop of Truro said in the previous debate in September, the report Playday not Payday, which has already been mentioned by my noble friend Lord Alton, looked into the devastating effect of payday loans on children and particularly at the use of telemarketing. It found that only 7% of those parents who had never taken out a loan were receiving such calls, whereas 42% of those who had taken out loans previously were receiving calls. Again, younger parents, aged 18 to 24, are most likely to have taken out a payday loan, so the bulk of these calls are going to young parents who are already financially vulnerable. This concerns me greatly. According to a poll of clients of StepChange, the debt charity, one-third of them have received an unsolicited marketing call offering them a payday loan. Although unsolicited calling may have some benefit for consumers in some industries, there is no question but that they are unsuitable for high-cost credit.

In Committee, we discussed how a gap in the regulations is allowing payday loan companies to use unsolicited marketing to offer people payday loans through phone calls and texts. For mortgage products, however, this type of unsolicited marketing is banned by the Mortgage Conduct of Business rules. The Financial Conduct Authority, whose efforts have already been mentioned and which regulates payday lenders, is very clear on this issue. It says:

“Cold calling can expose consumers to high pressure sales tactics which mean that they can end up with an inappropriate or over-expensive product or service. Our investment and mortgage financial promotion rules therefore ban cold calling … unless certain conditions are met”.

The noble Baroness agreed in Committee to look into this issue, and I look forward to hearing her response. With the Financial Conduct Authority now taking over regulation of payday loans, it makes perfect sense to protect people from high-pressure selling of what can, even after the new cap on costs, turn out to be very expensive products.

[Lord Alton of Liverpool]

My Lords, I second the amendment and support the right reverend Prelate the Bishop of Birmingham in moving it. My name is on the Marshalled List in support of the right reverend Prelate the Bishop of Truro, who tabled the amendment. I will keep my remarks brief because we exhausted many of the arguments in the previous amendment.

One figure that struck me very much is the £8.3 billion estimate of the social costs of debt problems. Putting aside such staggering figures, which are quite hard sometimes to understand, I think about the families I have met over the years who have seen their family life, community life and whole neighbourhoods broken as a consequence of indebtedness and the debt culture. The time that your Lordships spent when this Parliament was first convened considering the crisis we were facing because of the national debt is being replicated in the area of personal debt. Sometimes we overlook the latter because we are concentrating so much, rightly, on the former. However, many families are deeply immersed in debt, which is incredibly destructive of their family life. I suspect that one of the major factors in the breakdown of family life is people taking out all sorts of commitments and debts that they did not fully understand, when they entered into them, they would not be able to honour and meet. It ultimately leads to friction, disagreement, inability to pay and, then, catastrophic results. Anyone who read the front-page report in the Times newspaper this week about the effects of the breakdown of family life in this country on outcomes, particularly for young people, should surely be troubled by these things.

All of us will have experienced high-pressured, targeting salesmanship. It is incredibly frustrating to pick up the telephone and find people trying to sell you yet something else that you do not need, but many of us can easily be susceptible to it. This is a good amendment and one that I hope the Government will feel able to accept today. I am very happy to support the right reverend Prelate.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, if noble Lords in this House are already quite fed up with these calls, how much more so it must be for those at home all day, or those without mobile phones, who are almost afraid to answer their landline for fear that it is going to be someone out to con them.

I will broaden this beyond callers offering high-cost credit to all those others who keep phoning us: claims management companies making offers about non-existent car crashes or mis-sold PPI and those making the blatant illegal fishing calls trying to obtain credit card details under the guise of doing marketing. We know that seven in 10 landline customers receive live marketing calls, which add up to 7.8 billion calls a year. These are unwanted calls. The Information Commissioner’s Office receives about 160,000 complaints a year about unsolicited calls and texts. MPs tell us that it fills their postbag. It is the number one complaint for Ofcom, which gets over 3,000 complaints a month. Furthermore, Ofcom’s own research shows—perhaps this is no surprise—that it is vulnerable people who are especially at risk, with a quarter of them getting as many as 10 calls a week that they know to be scams. I am even more worried by those who do not think that they are getting scam calls, because they probably are getting them but think that they are genuine, which really is frightening.

We are wondering how much longer we have to wait for action, but these two amendments are a useful first step. It has taken some time to launch the consultation for the Information Commissioner’s Office to be able to lower the bar before it can take action. Our amendment would allow us to look at who is actually doing the calling and try to stop it at that stage. The first thing that has to happen is for people to know who is calling them. If people can see the telephone number, that will help them to know whether to lift the phone. However, more importantly, in terms of helping to stamp out the practice, having the telephone number would enable complaints to be made and action to be taken. At the moment, more than half of nuisance calls arrive without caller line identification, so you do not know who is phoning you. A large number of those calls, maybe a quarter, may be from abroad. Even if the caller line identification simply said it was an international number, you would probably know that it is one that you do not want to pick up—unless you happen to have a child going round the world and phoning you up from time to time for money, which I gather happens quite a lot. Other calls say simply “number withheld”, which is what we want to put an end to.

Amendment 50A, tabled by my noble friend Lord Stevenson and me, would mandate caller line identification for non-domestic callers, with telephone operators making the facility to read that free to subscribers. When I was young, we used to have to buy a telephone answering machine, but that is now built into our telephones; so should this be, so that we can see who is phoning us. The Culture, Media and Sport Select Committee in the other place supported prohibiting the withholding of numbers for marketing calls and so did the all-party group. In moving a debate on a 10-minute rule Bill in the other House, Alun Cairns said that he supposed that this,

“could be compared to someone knocking at the door wearing a mask or a balaclava. Would we answer the door”,

in those circumstances? He then said:

“Of course we would not. Why, then, do we allow the same thing to happen over the telephone?”.—[Official Report, Commons, 28/2/13; col. 158WH.]