Consumer Credit Bill

I apologise to the Minister, and to you, Madam Deputy Speaker, for missing his speech. I wrote to the Speaker to say that I could not be in the House at that point. As I led for the Opposition in Committee on the previous Bill, I can perhaps anticipate what he might have said, but I promise to read it tomorrow. They say some things never change. In my first Parliament, I was frequently the last Conservative speaker—the wind-up speaker, as it were—and in my third Parliament nothing has changed. However, I do not mind this afternoon, because I have been inspired to even greater confidence that the Conservative party will be returned to Government very soon. The reason for my new-found confidence is the quality of the speeches that we have heard from our new Members—my hon. Friends the Member for Tunbridge Wells (Greg Clark), for Basingstoke (Mrs. Miller), for Rochford and Southend, East (James Duddridge), for South-West Hertfordshire (Mr. Gauke), for Hornchurch (James Brokenshire); and, although it was not his maiden speech, by my hon. Friend the Member for Wantage (Mr. Vaizey), who has spoken for two days running. All were extremely impressive. They spoke with such passion about their constituencies that I am tempted to talk about Tewkesbury, but I think that you would rule me out of order, Madam Deputy Speaker. I hope that my hon. Friends will forgive me for not going into each and every speech due to the lack of time and the fact that there were so many. I would just say that I am proud to call them colleagues and look forward to working with them all. I am sure that they will make great contributions not only to the Conservative party but, more importantly, to the work of this House. Parliament has become weakened in recent years, sad to say, but I am sure that their contributions will help to restore some sense of proportion All my hon. Friends mentioned their predecessors, and I too pay tribute to them. I saw Richard Page very recently at Epsom races on Friday, which will come as no surprise to my hon. Friend the Member for South-West Hertfordshire. As I said, I served on the Committee that considered the Bill and spoke on Second Reading, Report and Third Reading. The issue is of great interest to me because I had Front-Bench responsibilities for it before the general election. I appreciated the Minister’s openness and I am glad that he brought the measure back to the Commons as quickly as he could. Although we welcome it, he knows that, in Committee, I tabled many amendments, none of which were accepted—I wish the team who serve on the Committee better luck. The Minister might just slip next time—I accept that he did not on the previous occasion—because some aspects of the Bill could be strengthened. I always remember the words of my grandfather, who said, ““When you’re in debt, you’re in danger.”” That is true, but it is also true that some borrowing is necessary. Some businesses have to borrow, and some people have to borrow to get through a difficult time in their lives or perhaps to realise an aspiration. It is important that the opportunity to borrow exists, but, as has been said, indebtedness and defaults on debts are increasing. Although it is true that much debt is to do with mortgages, many mortgages nowadays are remortgages to cover previous debts on credit cards and so on. We are now in an era when we may make a deal for a five-year mortgage. Let us imagine that we borrow £100,000. At the end of the five years, when we come to renew the mortgage and perhaps look for a better deal, it is unusual to take out another £100,000. Instead, the figure would probably be £110,000 or £120,000 to cover something extra. Although that is linked to the house, the sum does not necessarily cover only the mortgage; it often covers other debts. I therefore do not believe that we should ignore the high level of debt in this country. The 1974 Act was introduced in a different era—it seems such a long time ago. I was 16 in 1974 and I remember someone bringing an electronic calculator to school. It seemed like a revolutionary machine. Much has changed since then. I therefore welcome the Government’s attempts to deal with the new status of consumer credit. Our objective must be to strike a balance between protecting people and not overburdening what are by and large good businesses that provide a good service. We should have available credit but try to ensure that people are not ripped off or end up with more debt than they can manage. That is easy to do. My hon. Friend the Member for Wealden (Charles Hendry) described how he was persuaded to take out a credit card with a £3,500 limit. He has far more resources than me, yet I ended up, against my better judgment when I was not paying attention at—I will name the company—Marks and Spencer, with a credit card with a limit of £7,500. I did not ask for that credit card. I thought that I would get a card that simply gained points so that the next time I went to the store, I would get 10 per cent. off. It was not sold to me especially accurately and it was only when I showed it to my secretary that I realised what it was. The ease with which I got that card struck me as possibly dangerous. It is easy to get into debt and borrow money. It is much easier to borrow than to earn money. We must remember that. We have heard a little about the lack of education about debt. We rightly warn people of the dangers of alcohol, cigarettes—perhaps I should not mention that campaign—drugs and other things. However, we rarely, if ever, educate people about the dangers of debt. Many years ago, perhaps it could be said that I had more debts than was good for me. It is depressing to go out to work and find that most of one’s income goes on paying past bills and debts. It is perhaps even worse when someone in employment takes out a loan, then things go wrong or they find themselves unemployed, and they simply do not have the money to pay off their debts. We really must consider the importance of educating people about debt. We also need a very good regulatory regime, and I know that that is what the Government are trying to achieve. I am not quite sure that we shall get there as a result of this Bill, although I broadly support it, as I did last time in Committee. However, certain aspects of it need improvement. The main difference in this Bill is the change from a test for extortion to a test for unfairness, which I welcome. However, it is extraordinary that the 1974 Act included a definition of extortion, yet this Bill contains no definition of unfairness. We have moved from defining what is illegal to not doing so, which strikes me as odd. There are many drawbacks involved in that move. Lenders will not know what is illegal but, more importantly, neither will borrowers. How is a vulnerable borrower to decide whether to go to court to get an agreement struck out when he and, more importantly, his lawyers do not know what is legal and what is not? It has been pointed out that, until a number of court cases have established case law on this matter, there can be no certainty. I do not therefore believe that these measures move us forward quickly enough in the right direction. We have also been told that the Office of Fair Trading will issue guidelines. Well, we heard that in January. At that time, I asked in Committee when that would take place. It is now June and we still do not have the guidelines. Even more worrying is the increased power that the Bill will give to the OFT. I have come across a similar problem before, and the Minister knows the example that I am going to cite. I have an interest in horse racing; I represent the Cheltenham racecourse—the greatest racecourse in the world—which is in the Tewkesbury constituency. The OFT carried out an investigation into the running of the horse racing industry that was potentially destructive, because it simply did not understand the industry. However, the most depressing aspect of the matter for me, as a constituency Member of Parliament, was that I had no way of affecting the OFT’s decision. I had no access to its representatives; I could not go to see them. I could write to them, and I got some bland replies, but I could not bring the case to the House and ask the appropriate Minister to intervene. Actually, the Minister did his best—in fact, I think that there were a couple of Ministers involved, as the matter spanned two Departments—but the issue had already been referred to another body that had the potential to destroy a very important industry. In the light of that experience, I am very concerned about giving the OFT the powers contained in the Bill. Regarding the lack of a definition of unfairness, it is even worse that the Bill will apply retrospectively. It is not even as though lenders will be able to say, ““Well, from now on, we are going to be very careful.”” They can say that, of course, but in the case of agreements that have already been drawn up, it will be too late. Retrospective legislation should not be encouraged. I know that there will sometimes be grey areas in which it might have to be considered, but I do not think that this is one of them. I also expressed my concern about this in Committee. I am also worried about companies that make small loans—companies that collect £5 a week from their customers who, by and large, seem very happy with the arrangement. This legislation could be a bit heavy handed for those lenders. By and large, they seem to do a fairly good job and they are quite popular with their customers, and I hope that the new provisions do not cause problems for them. Those small loans can be very helpful to people. I am also concerned about the problem—I am not sure whether the Bill addresses it at all—of people who get into trouble by borrowing not necessarily from one source at a high interest rate but from a number of sources. Someone who applies for a mortgage is assessed in terms of their income and so on, and they either get the mortgage or not. The same care is not taken, however, when someone applies for a credit card. It is therefore very easy to borrow £2,000 on one credit card, £2,000 on another, and £2,000 on another, which ends up as an awful lot of money. When we considered the Bill, we heard the sad case of the gentleman who committed suicide because of his spiralling debts from 22 credit cards. The fact that he had so many cards is exactly why he got into that situation. I discussed the ease with which cards are issued with the industry and received the rather bland response, ““Well, okay, that is the risk we take””. If there are enough people with credit cards, it can afford one or two dropping out—I am paraphrasing what it said—so it does not take as much care on loans of £2,000 as it might otherwise do. That is okay if someone has only one loan of, say, £2,000, but when they have 10 loans, which they have been able to get because of the lack of data sharing, the situation ends up being very serious. I want the Government to examine that.