Financial Services Bill

Thank you for that guidance, Mr. Speaker. Perhaps I should table a new clause to the Constitutional Reform and Governance Bill setting out the statutory duties of PPSs, rather than considering them in the context of this debate. As ever, I am grateful to you for putting me back on the straight and narrow. I have some sympathy with new clauses 1 to 7. Those of us who are in comfortable, well-paid jobs, with easy access to credit, will frankly be shocked by the APRs charged on home credit products. The hon. Member for Wolverhampton, South-West cited illustrative examples of the rates, which are indeed high. We could shine a light on other areas that involve high rates, such as pay-day cheques and lending, which involve high rates as a consequence of the relatively short duration of the loans. Such rates are eye-watering when compared with those for store cards, so we need to reflect on that too. There is a real challenge here, however, because we need to ask whether a price cap would work and what its impact would be. The hon. Gentleman picked apart the briefing that Provident circulated among hon. Members, but it included legitimate concerns, especially those raised by independent bodies. For example, when Policis examined the home credit market in 2004, it looked at the experience of countries in which caps had been imposed. Among its findings was that where there were rate ceilings, the cost of credit became less transparent and there was less latitude for consumers. It also found that the cost of such products switched from the interest rates charged to default rates, which was a point raised by the hon. Gentleman in connection with the comments by Elaine Kempson cited in the Provident briefing. It might be the case that default charges are not levied by home credit companies when a consumer decides that they are not in a position to pay for a certain week. Indeed, I think that the model followed by several companies assumes that there will be some weeks when people do not pay. However, in other parts of the financial services sector, competition on rates has led to other products being sold to make up the margin. For example, it is argued that a driver of lenders selling payment protection insurance has been that competition on loan rates has led them to try to recover their margin by selling that insurance, which has a relatively high margin. My fear in such a situation would be companies, were they subject to a rate cap, starting to charge consumers an additional cost for that default. In the same way, some would argue, as the hon. Member for Edmonton (Mr. Love) might when we consider other amendments, that one reason why the penalty charges for unauthorised overdrafts are so high is that they create a form of indirect cross-subsidisation from those who go overdrawn. They subsidise so-called free banking for the rest of us. The hon. Member for Wolverhampton, South-West was quite critical of the words of Elaine Kempson, but there is some truth in what she says and we need to bear it in mind.