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Consumer Protection

Volume 476: debated on Thursday 22 May 2008

4. What policy options he has considered in relation to protection of consumers from unscrupulous lending and debt collection practices. (206982)

The Government are committed to tackling unscrupulous lenders, including loan sharks who exploit vulnerable people in our poorest communities. In 2004, we established two pilot enforcement teams in Birmingham and Glasgow to track down and prosecute illegal moneylenders. Following evaluation of those pilots, my right hon. Friend the Secretary of State announced the provision of some £2.8 million in September for a national crackdown on illegal lending, and to that end there is now a team in every region of Britain.

My hon. Friend is right: the crackdown has helped, and the Consumer Credit Act 2006 does its bit. However, some startling things are happening nowadays. For instance, sell and rent back seems to be gaining popularity with some people. Does my hon. Friend agree that that is probably another example of unscrupulous lending? Does he also agree that Parliament should examine the issue, and that we should not leave it to the Office of Fair Trading to determine whether such loans are right or wrong?

As my hon. Friend says, we must keep in view the way in which the consumer credit market works, both as a Government and as a Parliament. When we know of the existence of unscrupulous lending, we should take the relevant action to deal with it. We need to ensure that the law is effective and is working. To that end, at a consumers’ conference last week, my right hon. Friend the Secretary of State announced a fundamental review of the consumer regime with the aim of introducing further measures, in the first instance to help vulnerable consumers.

Does the Minister think that high street banks are doing enough to help people on low incomes to gain access to mainstream financial services? What measures are the Government taking to encourage the banks to do more than they are currently doing?

We would always encourage high street banks to keep under close review what more they can do to help low-income consumers and those who are in trouble. As the hon. Gentleman will know, the Treasury has embarked on various kinds of work with the banks, and, through a growth fund for third sector lenders such as credit unions and community development financial institutions, has provided some £38 million to expand that work. More than 76,000 loans have already been made to financially excluded consumers through growth-funded credit unions, and we seek to invest even more through additional funds that have been provided.

My hon. Friend will recall the Adjournment debate that I led on the tragic death of Mrs. Brazier in my constituency following the actions of debt collection agencies seeking repayment of debt that was not hers. Does he share my alarm that practices including the collection of money by an agency from a person unrelated to a debt who is clearly in distress continue and are, apparently, robustly defended in the industry?

I pay tribute to the way in which my hon. Friend has pursued the case of Beryl Brazier. He will know from the Adjournment debate that he initiated just before Christmas of the steps we have taken and the conversations that have taken place both with the Information Commissioner and the Office of Fair Trading. He may be aware, too, that as part of a recently completed investigation the OFT has issued warnings to some 13 companies involved in this area of work, telling them how they need to take steps to improve their work.

The hon. Member for Glasgow, North-West (John Robertson) raises an important point, particularly at a time when there is increasing consumer debt, which is likely to continue in the period ahead. Does the Minister agree that what is needed is not simply more legislation or even more initiatives, all of which are welcome, but his Department working closely with the police to ensure that some of the very worst practices are stamped out?

I agree absolutely that there has to be effective joint working across a range of agencies. In the case of the illegal moneylending teams of which we are seeing the roll-out, there is effective collaboration not only with the police but, on occasion, with housing associations and housing authorities to help crack down on certain areas. It is frequently the most vulnerable people in our communities who are exploited and targeted by loan sharks. The two teams in Birmingham and Glasgow have had a series of successful prosecutions of often very violent people, helping to get better protection for people in vulnerable communities and to lock away some particularly unpleasant individuals.

It is now three years since consumer credit legislation covering this area was introduced, and it does not sound as if it is working well enough. Does the Minister agree that if there is one area where many people would support the most swingeing powers for Government, it is in cracking down on these dreadful people?

The tools are there, through both the reforms that we have introduced to consumer credit through the Consumer Credit Act 2006 and the illegal moneylending teams that we have established. The successes of the two pilot teams in identifying some 250 illegal lenders in Glasgow and Birmingham have benefited some 2,000 victims and helped to save them an estimated £3.3 million in payments that they would otherwise have had to make. The fact that they have also led to successful prosecutions should give Members confidence that the roll-out across the country of illegal moneylending teams will enable us to continue to bear down on such terrible practices.