Debates between Robin Walker and Philip Davies during the 2010-2015 Parliament

High Cost Credit Bill

Debate between Robin Walker and Philip Davies
Friday 12th July 2013

(11 years, 3 months ago)

Commons Chamber
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Robin Walker Portrait Mr Walker
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I agree with the hon. Gentleman.

This Bill deserves our support, first because it is a good and well-drafted Bill; secondly, because it addresses a hugely important issue that really matters in our constituencies; and thirdly, because of the polite, sensible and reasonable way in which the hon. Member for Sheffield Central has set about building a cross-party coalition of support for it. He has support from members on both sides of our Select Committee and, as far as I know, from all parties in this House, although the Liberal Democrats have not yet offered any.

This should not be a party political issue, but an issue on which we are all acting in the best interests of our constituents. As the hon. Gentleman clearly set out, there is a need for measures to protect the most vulnerable consumers from unaffordable loans. The many organisations on the front line, such as Citizens Advice, StepChange, Which? and Christians Against Poverty, have set out a powerful case for change to the way in which the sector works.

In rising to support this Bill, I pay tribute to the hugely important work of volunteers in providing debt advice, research into the problems of high-cost lending and the steps necessary to protect the most vulnerable from the risks of high-cost credit. Local organisations in Worcester that have contacted me about the issue include Worcester citizens advice bureau, Two Pennies Money Advice, St Paul’s hostel and the Tolladine mission, all of which, alongside numerous church and religious groups, provide invaluable support to my constituents and vital community services. I am very grateful for their support in drafting this speech and the information they have provided to me.

I have also received a number of letters of support for the Bill from a number of individual constituents and, indeed, from Unite the Union, an organisation with which I do not always find myself in agreement—at least in its national aspect—but whose local representatives I have always found to be reasonable, sensible people who want the best for their members and with whom I have been working closely lately on a couple of issues in the constituency.

Philip Davies Portrait Philip Davies
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I, too, receive representations from Unite representatives. Does my hon. Friend agree that if this is such a big issue for the Unite union, perhaps it would be better employed withdrawing the £8 million it donates to the Labour party and lending it at low cost to some of its members who otherwise have to go to payday loan firms?

Robin Walker Portrait Mr Walker
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My hon. Friend makes an interesting suggestion. I would encourage Unite the Union to engage with all political parties and to perhaps provide some of its funding to one nation Conservatives, who can help its members in a positive way.

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Robin Walker Portrait Mr Walker
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I would be very happy to do so. I have already praised Unite for some of the work it does in my constituency. I have no issues whatsoever in doing that.

Although I am sure many of the companies in the payday and high-cost loans industry will protest that they merely provide a service that their customers want, there are too many examples of people who have been trapped into loans they cannot afford to repay and of vulnerable people who have acted without sufficient advice or without the understanding that we would want them to have of the real costs and risks that they are taking on.

Research by Which? has shown that nearly 24% of people taking on so-called payday loans are using them to repay other forms of credit. StepChange tells me that constituents from Worcester who have contacted it owed as much as £1,717 on payday loans, which is much more than they are likely to receive in monthly income.

I have spoken in previous debates in support of the broad concept of capping the cost of lending, but I am aware of the controversies involved. I know that some colleagues warn—and, indeed, that many non-governmental organisations and charities argue—that there is a real risk in setting caps that more people could be driven into a black market and into the hands of illegal money lenders who would charge even more and offer less recourse.

Philip Davies Portrait Philip Davies
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My hon. Friend has mentioned the number of people who have difficulties with payday loans. We certainly all sympathise with that, but surely in the interests of balance he should also refer to the number of people who are satisfied with their payday loan companies and the 90% or so who say that they would recommend their payday loan company to their friends.

Robin Walker Portrait Mr Walker
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It is fair to acknowledge, as my hon. Friend suggests, that some people are satisfied, but I am concerned that briefings from these companies tell us that 75% of the people they are lending to are in employment. What about the 25% who are not? We should be worried about them, and about the ones who are trapped in unaffordable loans. The Bill sets out sensible measures to deal with that problem.

I am glad that the Bill sets out to remind the FCA of its responsibility to consider a cap. That is something that Parliament has previously urged it to do, in an unopposed motion. I would gently point out to the hon. Member for Foyle (Mark Durkan) that the Government have not opposed a cap, and that their MPs have voted for a motion that urged regulators to consider capping. That matter is still very much on the agenda.

The Bill proposes a number of other measures that could make a real difference, with or without a cap being imposed. Measures to improve the transparency of costs and ensure that advertising carries reasonable warnings seem to be a reasonable and proportionate starting point. Limiting roll-overs of short-term loans will be essential if the payday loan industry’s own argument that the relatively small cash cost of a short-term loan is to be believed, and if the argument that theoretical APR is irrelevant is to be accepted.

If roll-overs are allowed to happen too often, at the very high interest rates that some lenders charge, debts can spiral. It is not in the interest of borrowers or lenders for people to be trapped in a situation in which they cannot pay off their debts. I see no good reason for anyone to object to a limit on roll-overs. Indeed, the Consumer Finance Association tells us that it already carries such a provision in its terms of membership. However, not all payday lenders are members of that association and, furthermore, its terms of membership do not seem to be as rigorously enforced as they might be.

There are many other positive provisions in the Bill but the one that I want to focus on and which I think could make the biggest practical difference is the idea of a levy. The hon. Member for Sheffield Central has kindly acknowledged my long-term interest in this idea. I have long argued that it is unreasonable that banks and credit unions pay towards the provision of debt advice services but that payday lenders do not. This is a hangover from the regulatory regime that existed under the last Government, and, given the growth of the payday loan industry and other forms of high-cost credit, this matter will need addressing in any event.

However, I would be inclined to go further than simply putting payday lenders on the same level as lower-cost lenders. We have a responsibility to ensure that consumers are properly informed, but much of the evidence that we have heard today shows that they are not. We need to ensure that every consumer—particularly the most vulnerable—has access to free debt advice and an understanding of all their options when it comes to borrowing.

The coalition Government have rightly supported the growth of credit unions, as did their predecessor. Credit unions can often provide credit at a much more reasonable rate than payday lenders, as the hon. Member for Harrow West illustrated very well in his speech. However, they do not necessarily have the resources to advertise widely, and their coverage of the country is patchy. I want to see a credit union offering support to my constituents, but since the sad demise of the Black Pear union, we do not have a local organisation in Worcester with the capability to do so. We would welcome credit unions from elsewhere coming in, and I am glad that the Six Towns credit union has entered talks to do so, but it will take time for it to establish its presence and to scale up.

In previous debates, we have heard the argument that Governments do not set caps for lending costs, and that it would be wrong to interfere in the market by doing so. However, we have a good, recent example of the Government setting out a cap for lending, which has attracted broad support. The proposed 3% monthly APR limit for credit union lending has allowed credit unions to increase the interest that they can charge on loans, and thereby to reach a wider audience. That is still seen as a reasonable rate, as it is far lower than that charged by many payday lenders.

I would advocate using that cap on credit union lending as the base for a new levy. Organisations that lend above that rate should pay a levy proportionate to the amount of interest and costs that they charge, beyond the level charged by credit unions. That levy could then be used to fund free financial advice services. If the levy were set at a percentage of all interest above the 3% monthly rate, it could raise a substantial amount, given some of the rates being charged by payday lenders. Just 5% of Wonga’s profits would equate to £3 million that could be used to provide free financial advice.

This approach could create a virtuous circle whereby either the market share of the high-cost lenders would be reduced by the prevalence of better and more widely available free advice services, or the amount of free advice to support the most vulnerable consumers would grow as the industry did. It would also have the advantage of providing a financial disincentive for lenders to set their rates too high, and a competitive advantage to the credit unions. It could provide a valuable new source of income for a sector that has faced many challenges in recent years.

There is a precedent for such an approach in the voluntary support of major players in the gambling industry for GamCare, but in this case, it is important that any levy should be imposed by the regulator and backed by legislation, rather than being put forward by the industry on a voluntary basis. The industry has had plenty of time to consider making a contribution to free financial advice, and so far it has largely failed to do so. There is no evidence that the industry would act in concert to provide the level of support that the financial advice services needed, and I support the idea in the Bill that a levy should be managed by the regulator. I hope that the Government and the FCA will pay careful attention to the case for a levy, whatever the outcome of today’s debate and the progress of the Bill.

How the levy should be distributed could be a matter for debate. Some might argue, as the hon. Member for Harrow West did, that it should be used to fund credit union expansion, but I believe that a subsidy of any sort would distort the business model of credit unions and could risk making them less sustainable. I have discussed this point with representatives of the credit unions, including Six Towns. It would be better for the levy to provide them with a competitive advantage in being set above their lending cap, and to fund the financial advice that might direct more people to them as customers.

Some will argue that the levy should be directed towards financial education for young people and the most vulnerable. I would welcome some of it being available for that purpose, but I hope that its primary use would be to fund the valuable work of the voluntary sector in providing free financial advice and to ensure that the type of services that the hon. Member for Sheffield Central has signposted are sustained, supported and expanded so that they reach the people who need them most. I have no doubt that a substantial part of any such fund would be likely to go to Citizens Advice, and rightly so, but it must reach a wider range of voluntary organisations that provide free financial advice and help with debt, including the many valuable faith-based groups that engage in this area.

I believe that the best mechanism for allocating the proceeds of a levy would be a challenge fund, perhaps managed by the Big Lottery Fund, to allocate funding to debt advice services and financial education initiatives according to their reach in communities around the country, with the aim of encouraging support for the most vulnerable.

To make such a levy workable, it would be necessary to have a central register for payday loans. As the Bill sets out, such a register is desirable in any case. It would help lenders to establish whether their customers have outstanding loans and to avoid overloading people with a range of different debts. This is one area in which I disagree with my hon. Friend the Member for East Hampshire. I point out to him that such a system appears to be working well in Canada.

If I were to suggest one improvement to the Bill, it would be that it should provide a means for people whose only recourse is to high-cost credit to build up their credit rating so that they can return to the mainstream market. That is something that we might address another time.

I do not wish to detain the House longer because this is an important Bill and I want it to progress. There is strong cross-party support for the Bill. I hope that Government Members will recognise the value that it brings to an issue of grave concern and the potential that it has to raise substantial revenues for the voluntary sector in a way that can only benefit our constituents. I hope that Ministers will reflect on the many valuable propositions that it contains. I know that some of my hon. Friends are wary of private Members’ Bills and are wont to criticise legislation that they feel is informed by a “something must be done” approach. The case for this Bill, however, is not that something must be done, but that it is the right thing to do.

Scrap Metal Dealers Bill

Debate between Robin Walker and Philip Davies
Friday 13th July 2012

(12 years, 3 months ago)

Commons Chamber
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Philip Davies Portrait Philip Davies
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Sadly, my hon. Friend is right. One of the great outrages of the Labour Government was that they introduced a law which meant that everybody, no matter how well or badly they behaved themselves, had to be released from prison halfway through their prison sentence. It was not that they became eligible for release halfway through their sentence; they had to be released halfway through their sentence. For some of the lower-end offences, people can be released much earlier than halfway through the sentence.

According to the Ministry of Justice, as I am sure my hon. Friend the Minister will confirm, somebody sentenced to six months in prison can be let out within six weeks, which is a scandal. Somebody sentenced to prison for 12 months can be released after three months, and somebody sent to prison for two years can be released after seven and a half months. This is what the Government should be focusing on. Let us have proper sentences handed out by the court. When people who are involved in this despicable crime are sent to prison, let us keep them in prison for the length of the sentence that the court handed out, rather than letting them back out into the community in five minutes flat to carry on from where they left off. If we were to go down that route, it would have a much greater impact on the level of crimes such as metal theft.

Technology will be a huge tool in counteracting such crime. I mentioned SmartWater earlier. My hon. Friend the Member for Croydon South also praised it in glowing terms. The SmartWater Foundation, which is providing it free of charge for all war memorials, is to be highly commended. Network Rail experienced a huge reduction in metal theft when it used SmartWater. To illustrate the point, the SmartWater technology is so good that different parts of the track can be identified by the type of water on it, so when somebody turns up at a scrap dealership with metal that is covered by SmartWater, not only can it be identified as stolen, but it is possible to identify exactly where it has been stolen from.

This technology is one of the main reasons why we should be hopeful for the future and about our ability to tackle the crime of metal theft. Rather than using it just to catch people, SmartWater and the police have been working together to use it more as a deterrent. They take the ultraviolet equipment to the local scrap metal dealerships, put up signage saying that anything that has SmartWater on it will not be accepted at the dealership, and that all scrap metal is tested. There is plenty of evidence to show that when SmartWater is used, scrap metal dealers will not accept stolen metal because they know what the consequences will be if they are caught with it on their premises.

One of the most telling things that my hon. Friend said in his opening remarks was that the low chance of being caught was driving the crime. We must use SmartWater much more. I know from a question to the Church Commissioners last month that the Church of England is now using SmartWater to cover many of its roofs, and we know that it is to be used on war memorials. I think that we should be encouraging as many people as possible to use SmartWater to deal with this problem at a reasonably low cost.

My hon. Friend the Member for Bury North (Mr Nuttall) referred to the British Metals Recycling Association, which he said—I think he is right—appears to be in favour of the Bill, but some of the things it has said in the past have actually made a great deal of sense. It has identified illegal scrap metal sites as the main problem and called for better enforcement of existing legislation by the police and the Environment Agency to close illegal sites. If that is right—I have no reason to think otherwise—and illegal scrap metal sites are the main problem, the introduction of an awful lot of new regulation and new costs for legal scrap metal dealerships would not only make no difference to the problem, but be likely to make it worse. The only possible impact would be to encourage some of the legitimate scrap metal dealers, who do not want the cost of the regulation to become illegal. The danger is that some of the Bill’s provisions might inadvertently make the problem worse.

The British Metals Recycling Association has previously expressed concern that any move towards cashless transactions could simply disadvantage small, legal and well-run scrap sites, unless there was

“effective enforcement against unregulated operators”.

Robin Walker Portrait Mr Robin Walker
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My hon. Friend is clearly a champion of free markets, but he must understand that in order for them to work properly they need a level playing field. Is not one of the risks that the current changes in the Legal Aid, Sentencing and Punishment of Offenders Act 2012 will make it difficult for small operators if the unlicensed operators are able to accept cash and they are not? Is not that why the proposed change in this Bill to make sure that all operators are subject to the cash ban is so important? It would provide the level playing field that will allow a proper free market.

Philip Davies Portrait Philip Davies
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I absolutely take my hon. Friend’s point, which he makes characteristically well. The issue is whether we will end up with a level playing field. I do not doubt that we will end up with a level playing field for all legitimate scrap metal dealers—that is clearly the case—but, according to the British Metals Recycling Association, much of the problem is not with the legal dealers, but with the illegal ones, so we do not have a level playing field and all the Bill would do is further uneven it by making it even harder for legitimate sites to compete with illegal ones.

The key point—this is where we might come to some agreement—is that this could work, as the British Metals Recycling Association has stated, only if there were

“effective enforcement against unregulated operators”.

My concern is that we would have an awful lot of enforcement against regulated operators, which is what the Bill would do. It is about targeting those who are already regulated and piling more regulation on them, but that will not help to tackle the unregulated ones.