Consumer Credit Bill

May I also pay tribute to the hon. Members for Tunbridge Wells (Greg Clark), for Basingstoke (Mrs. Miller) and for Rochford and Southend, East (James Duddridge) for their beautifully delivered paeans to their respective constituencies, parts of England of which, I must admit, I was hitherto deficiently knowledgeable. My only regret is that I am unlikely to get an invitation to address a branch meeting of my party in those areas, although I will take up the kind offer of the hon. Member for Rochford and Southend, East of possibly hosting Plaid Cymru’s annual conference—I am not sure what the steering committee will say, but hope springs eternal. Most of us would agree that the Bill is long overdue and much needed, and we would all pay tribute to the Minister, to whose enormous personal credit it is that the Bill has returned to the House at such an early stage. Millions of families are living on the edge of a financial precipice, and more and more fail to keep up with their debt repayments, driving them further into difficulty. We heard the hon. Member for North Norfolk (Norman Lamb) referring to the data from some of the clearing banks about bad debts. It was reported yesterday that London Scottish bank, which specialises in lending to customers with weak credit ratings, has nearly doubled its provision for bad and doubtful debts. Clearly, the phenomenon is widespread. As other Members have mentioned, it is important to understand the wider context, as the problem of over-indebtedness has deep social roots. It is a cultural as much as a social and economic phenomenon, and is an element of the competitive consumption and hyper-consumption which is part of modern culture and society, which exists at all levels of income, and which percolates down to those on lower incomes. That is why it is right and proper for Government to intervene. Such an endemic problem, with such deep social and cultural roots, needs to have a societal response, and only a Government can provide the framework to get to grips with that. It is therefore absolutely right to introduce this Bill, whatever the Monetary Policy Committee has done with regard to interest rates this afternoon. I do not know whether it has added further to the pain that we all suffer from time to time. Clearly, however, the problem of debt is deeply rooted, and it is right for the Government to address it. Other Members have referred to some of the figures, and the National Association of Citizens Advice Bureaux has reported a 74 per cent. increase during the past seven years in the number of debt cases with which it deals. Yesterday, the Department published its own survey, conducted by MORI, on over-indebtedness. The Minister said that it provided some comfort because it showed that the percentage who find debts unmanageable is still relatively small, although that is subjective, as people were reporting their own feelings—the objective view of their indebtedness might be somewhat different. Nine per cent. said that they spent more than half their incomes on total credit repayments—almost one in 10. That is an incredible figure. Other parts of the survey also struck me as worrying, such as the finding that 8 per cent.—a different 8 per cent.—spent more than a quarter of their incomes on unsecured credit repayments. Those are historic, unheard of levels. We are talking about a small proportion of people, but a proportion that is spending serious quantities of disposable income on credit repayment. The most recent family spending report from the Office for National Statistics reveals that the problem extends across the board. The average British household now spends £592 a week. Its income is £570. So the average British family are living beyond their means—admittedly by only about £20 a week, but of course that is itself an average. At one end of the spectrum, there are serious problems with unsustainable consumer borrowing. It is obviously right for the Government to act quickly. The key problem with their proposals relates to the issue of rights and responsibilities, that mantra to which the Prime Minister likes to refer. The Bill gives consumers important new rights to apply to the courts or the Financial Ombudsman Service, or use the alternative disputes procedure, and to ask those authorities to consider whether a lender has acted unfairly. It does not, however, place any new duty on lenders to consider borrowers’ means properly before granting loans. Some of us feel that the Government have not got the balance entirely right at this stage. A wonderful parallel is the Consumer Credit Bill tabled yesterday in the South African Parliament by the South African Department of Trade and Industry. I am sure that there are very good relationships between the two Parliaments; if there are not, no doubt the former Chief Secretary to the Treasury will be able to facilitate them. The Bill, which was preceded by a draft version, proposes a maximum rate of interest and fees. Almost every country in the world with an interest rate cap is aware of the difficulty—the lender could get around it by introducing charges through the back door—and allows for it in legislation by rolling together interest rates and other charges. The South African Bill also imposes a maximum limit on consumer liability to prevent lenders from getting around an interest rate cap by extending the term of a loan.