Consumer Credit Bill

My Lords, I am sure that we would all respond to what the noble Baroness has just said by wishing her a speedy recovery. Two Christmases ago, I received an advertisement from a bank that invited me to make my Christmas happy with a personal loan. I hope that no one has offered to make the Minister unhappy on his birthday with a similar offer. I ought to begin by declaring an interest, although I am not entirely sure about the boundary between declaring and advertising an interest. I am the author of a book on the subject, so I declare that interest and say that the book is available at all good bookshops. Like many people who have spoken about the Bill, including the noble Baroness, I support it. Paradoxically, the relatively small number of noble Lords who have advanced their names to speak in this debate reflects the fact that it is relatively uncontroversial and widely supported. That is a very good thing. It is extremely important that we deal with issues of unfairness. As it has not been mentioned so far, I acknowledge the contribution of an excellent report produced by a commission under the chairmanship of the noble Lord, Lord Griffiths, which I believe was set up by the then shadow Chancellor and which has many valuable things to say on this topic. Behind the Bill lies the awareness, which is widely shared, that the place of the market in credit is extremely important, but that it cannot be left to itself. This is not an area where we can simply let price decide; there are public interest issues in the level of credit and how it is given and enforced. That is why the part of the Bill that begins with Clause 19 is so important. The introduction of the notion of unfairness in a credit relationship seems right. I do not agree with the Confederation of British Industry that that must be spelled out in great detail. That seems precisely a matter that we can look to the courts to decide, while providing through our debate some indication of some of the factors that we want the courts to bear in mind in considering unfairness in the matter of credit relationships. I realise, as will other noble Lords who have received the same briefings, that a debate is under way among those who deal a lot with the vulnerable victims of indebtedness about whether some kind of ceiling on interest rates would be a good thing, with the citizens’ advice bureaux, whose experience in this matter is formidable, briefing against it, and Debt on our Doorstep, which includes a huge number of significant agencies, considering that one would be helpful. My view is that the interest rate should definitely be a factor that the courts could bear in mind in deciding whether a loan is unfair. I do not believe that one has to spell out an exact figure, and I am certainly not in favour of the criminalisation of lenders unless, of course, they resort to threatening behaviour. But interest rates can be unfair, even if they are properly notified and agreed with. In a matter of this kind, if one allows the market to rule, there will be those whose weakness in the market and in their general financial circumstances makes them likely to enter into relationships that are unfair and which it is not in the public interest that they should enter into. It is certainly not in the public interest that we should provide courts and legislative machinery for the recovery of debts from people who have been the victims of very unfair interest rates. It seems to me that the situation is analogous to world trade. It is possible for a market to produce situations that are unfair, and if they are unfair, it is proper for society to intervene, whether nationally or internationally, to rectify that unfairness. In that respect, I do not believe that the market should be sacrosanct. My main purpose in speaking in this debate is not one that will have any direct effect on the drafting of the Bill, but it is something that we need to think more seriously about than we are apt to: that is the cause for reflection contained in the very title of the Bill: consumer credit. Those words draw attention to the fact that the rates of interest and loans, to which we are devoting attention in this debate, are for consumption. Without doubt, attitudes to the use of borrowing for the purpose of consumption have changed radically in our lifetime. In an earlier debate, the then Minister said that in making this point I was asking for a return to pre-modern economics. That is not the case. I ask that we take seriously what our parents and certainly our grandparents would have taken very seriously, that the escalation of indebtedness is not a social situation with which we should be content. There is no doubt that the availability of credit and the changing attitudes to credit have had a major effect on, for example, the housing market and on levels of consumption. That has produced a bubble which might burst, causing enormous human suffering. Even if it does not burst, it is already having an effect on the consumption of the world’s resources which should be available for tomorrow. We are treating the planet on which we live as a credit card; a credit card with no credit limit and no repayment date. That is because we have allowed attitudes to change in a very uncritical way. I am not asking for a return to pre-Depression economics, but it seems to me that we have sleep-walked into a realm of imprudence about which a good deal of further reflection and, if necessary, economic and legislative action may be required. In that connection, perhaps I can comment on what the Minister and the noble Baroness have said on data sharing. One of the insufficiently remarked on aspects of data sharing is the weakness in the credit market of anyone who has never borrowed before. It is almost becoming necessary to advise people to take out a loan even if they do not need one because only if one has had a loan and repaid it does one have a credit rating. That is a serious situation, in which we are disadvantaging people for living within their means. We also need to take seriously the effect the transfer of finance from grant-aiding to loans has had on the student population. It is true that when grants were inadequate people took out loans, but now they have one kind of loan—a student loan—and other loans, offered by the banks which they usually need to take up. That is educating people to fail to distinguish between loans for investment and loans for consumption, and that is deeply misleading. We should be very concerned about that, and I should like to feel that the Government would be similarly concerned. So the issue of data sharing is not just an issue of civil liberties, though it certainly is that. It is also a subtle means by which people are lured into a level of debt beyond what they should have. I am concerned that, as well as attending to the detail of this Bill—and I hope to play some part in that—and ensuring that the unfairness test includes all the factors that can contribute to unfairness in a debt and credit relationship, we do not put from our minds the aspect of economic change in our general living, which is this escalation in debt and credit. I frequently use the example of people who took out mortgages before the war, and were quite clear that it was their duty to repay as quickly as possible, because others might need a mortgage more than they did. Imagine walking into a building society today and saying that you would like to repay your mortgage in order that someone who needs it more than you do could have one: you would certainly be looked at as though you were from another planet. That is quite a grave situation—a situation in which people are encouraged to borrow beyond their means. One of the things I shall be looking out for in Committee is that we make clear to ourselves that allowing somebody to borrow what they cannot properly repay should be grounds for being deemed to have entered into an unfair credit relationship. I repeat my support for this Bill; I repeat my support for the desire to do something about unfairness in debt and credit relationships. I wish to add that some of that unfairness is induced by the totally uncritical attitude adopted in recent years to the explosion in credit. I believe we should remedy this before it is too late. I know that the House is eagerly awaiting the maiden speech of the noble Lord, Lord Mawhinney, and will welcome the enormous experience, not least in this area, that he will bring to the work of the House.