Financial Services Bill

The problem is what would the consequences of that structure would be. I do not doubt that the new clauses have been tabled with the best of intentions, reflecting some of the concerns that have been raised, but we need to think carefully about the unforeseen consequences. For example, there may be a switch from high rates to low rates with additional charges. I am not sure that the demand for credit would necessarily be extinguished as a consequence of the proposals. We may not think it is right, but people would still need credit to deal with unexpected variations in income or expenditure, and where would they go if that money was not available from Provident? I will return to that point. The Policis report suggests that rate caps ended up in a rather odd situation whereby lenders felt it was uneconomic to advance relatively small loans, so either no money was lent to customers or they would be lent a higher amount than was strictly necessary. In Committee, we talked briefly about ending unsolicited increases in credit limits. We need to think about what amounts people would lend. The hon. Member for Wolverhampton, South-West questioned the merits of this argument, but in France and Germany rate caps meant that more people used illegal lenders. That is the evidence from the Policis study. The hon. Gentleman also implied that the only opponents of rate caps were home credit companies, but let us not forget that in 2005 a coalition including Citizens Advice, AdviceUK, the National Consumer Council, Which? and ABCUL—the Association of British Credit Unions Ltd—all urged the House of Lords to oppose a rate cap. There is a coalition here: it is not just people in the home credit market but a wide range of people with a close interest in this area who are concerned about the impact of a rate cap. I shall not repeat in full the words of Elaine Kempson—the hon. Member for Wolverhampton, South-West cited them at length—but let us turn to the alternative and what would happen if the rate cap were applied. Elaine Kempson said:""Finally, there is a danger that lenders would move out of this market altogether, leaving poor people even more prey to unlicensed lenders."" The hon. Gentleman suggested that credit unions might fill that gap. I am a great supporter of credit unions, which do an excellent job, and I agree that it would be good to see them grow so that they supplied a share of the market comparable with what they are able to supply elsewhere. However, even credit unions have to turn people down. Many people are concerned about the fact that credit unions want a cap on the rates that they charge. Credit unions will not supply the whole demand, and others will move in to that space, which I am concerned will be filled by illegal money lenders and loan sharks. As I said in my intervention on the hon. Member for Wolverhampton, South-West, there has been a great deal of discussion about whether there is a sustainable model for not-for-profit home credit. The Joseph Rowntree Foundation suggested that the APR would probably be 123 per cent., so it is an expensive operation.