Financial Services Bill

First, on a personal note, may I express my sadness that the Economic Secretary to the Treasury, my hon. Friend the Member for Dudley, South (Ian Pearson) has announced his intention not to stand in the next general election? That is a particular sadness to me, because he has been a personal friend of mine for 25 years. He will recall that I and many others worked on his successful by-election in what was then Dudley, West in 1994. He has been an outstanding Member of the House and will be sadly missed. The Financial Services Bill is a tribute to his work as a Member of Parliament and as a Minister. Overall it is a good Bill. It has many good bits, such as those relating to the remuneration of executives, recovery and resolution plans, collective proceedings and the Financial Services Compensation Scheme, but it also has some gaps, which new clauses 1 to 7 seek to address. Nor does it grapple with the concept that some banks are too big to fail, and when we discussed that in Committee the Minister understandably said that he was looking for international agreement. Since then, President Obama has said that the US will go down that route, and I hope that the Government will look at the issue again, because there is still time to add it to the Bill. The Bill also does not address the issue of overdraft costs following the Office of Fair Trading's unsuccessful court claim, and that should be looked at again. Nor does the Bill address the repossession of properties that were owned by buy-to-let landlords when the tenants had no idea that the landlord was in difficulty with his or her mortgage. Happily, the issue will—I hope—be resolved by the private Member's Bill tabled by my hon. Friend the Member for Bolton, South-East (Dr. Iddon). The fourth gap in the Bill is the question of doorstep lending and the extortionate credit rates that doorstep lenders charge, although they are not entirely alone in doing so. I am grateful to the Centre for Responsible Credit and their excellent officer Damon Gibbons for his assistance on this issue. The problem with doorstep lenders is the huge cost. The debate in this country has become clouded by core considerations about the existence of competitive markets and how those would be affected by the restrictions that would be enabled, although not necessarily introduced, by the new clauses. The concern is that price caps, which the new clauses would allow, could have adverse effects on the credit market. However, we have to consider whether doorstep lending credit markets are competitive. The concern is that they are not competitive and that prices for doorstep lending and other fringe, albeit legitimate, lending are artificially high, allowing those few lenders in the market, who are, of course, taking greater risks, to charge considerably more than would be the case if the market were competitive. For example, the Centre for Responsible Credit has estimated that Provident Financial has 70 per cent. of the market. Provident Financial disputes that figure, but it is fair to say that it is a dominant player in the market, and the concern is that its dominance has led to an abuse of market position. Under the law at present, Provident Financial and other similar lenders are operating legitimately, but there are grave causes for concern. The cost of doorstep lending from a company such as Provident has gone up as interest rates have come down. That may be because risks have gone up—I understand that—but the Competition Commission has reported that a Provident loan of £100 repaid in 55 weekly instalments carried a total cost in credit of £65 and an annual percentage rate of 177 per cent. in 2006. Today, the same loan would have a cost in credit of £82 and a massive APR of 272.2 per cent. That is an extraordinarily high amount to charge for such a loan, even bearing in mind the additional risks and collection costs that a company such as Provident incurs.