Consumer Credit Regulation

A burglar might have a lot of expertise in telling us how to keep our homes safe, so it is important to keep an open mind and listen to everybody in the argument. The point is that the association is concerned that if we over-regulate, illegal loan sharks will fill the void left behind when other, more reputable lenders leave the market. The Office of Fair Trading did a review this year of high-cost credit products, pawnbroking, pay-day loans and home collection credit. It concluded that capping price controls was not necessarily the answer:"““This is because controls such as interest rate caps can contribute to reducing competition in the sector and lead lenders to recover lost income through increasing charges for late payment and default.””" Were a cap introduced, there would be a risk of all lenders raising their interest rates to match their competitors, thus making access to loans more difficult for borrowers. The cost of loans is twofold—it is a combination of interest rate and length of term of borrowing—so although some interest rates are very high, that can be offset by the length of the loan. The variety of lending options ensures that the specific requirements of all consumers can be met. I shall not go into the pay-day and home credit loans, or indeed store credit cards. The point is that they all have a role to play, provided that they are properly regulated. We have heard reference today to the review by the Department for Business, Innovation and Skills and the Treasury. I know that they are covering slightly more than credit and store cards; indeed, they are covering an issue that I have raised in my private Member's Bill—unauthorised overdraft charges. I am very hopeful that we will now get a good resolution on that. I would, however, appreciate clarification from the Minister as to what we will be covering, because my understanding is that we could take the opportunity to consider that important and complex issue. Finally, is not the answer to give deprived communities better access to mainstream debt? We have talked about the Post Office and basic bank accounts. Everyone has a right to a basic bank account, and that should be much better promoted. We have talked about credit unions, and some companies, such as My Home Finance, have reduced their APR to 29.9%. That might sound like a lot of money, but in the context of illegal loan sharks it is quite something. I look forward to the Minister's problems—sorry, the Minister's comments [Laughter.] He certainly has enough problems, that's for sure. In all this, it is important that we take into account the fact that, somewhere, we have to price for risk.