My Lords, the Government recognise that it is often the most vulnerable who have to pay the highest costs when accessing credit. We are commissioning research into the impact of introducing a cap on the total cost of credit that these lenders can charge. We are also looking at the high cost credit market as part of our consumer credit review and we will publish our final response before the end of this year.
I thank the noble Baroness, Lady Wilcox, for her response. Does she agree that companies which charge 2,000, 3,000 or even 4,000 per cent are legalised loan sharks? Will the Government look at requiring these companies to put a health warning on their advertisements in highly visible, large type explaining clearly the costs of their services and advising people that their local credit union would offer better value for money?
The noble Lord, Lord Kennedy, has covered three big items. I know what an expert he is on the last one, so I will leave that for the moment. This Government and the previous Government have looked again and again at capping interest rates, but our worry has always been that that would push people towards illegal money lending. We then do not know when they are in trouble and they can be treated very violently. Even looking to see whether we should be changing this in any way is a new venture for us. The noble Lord is absolutely right in his second point. People should have the right information on which to base their choices.
Has the Minister seen the latest figures for personal debt, showing that a staggering £1,450 billion is owed in personal debt by the nation at the present time? If it is right—and it is—to reduce national debt, should we not be doing far more to help families who are massively in debt in Britain today, especially through the promotion of credit unions?
We have tried and continue to try to see how we can get people to set up credit unions. They are so popular in America, Australia, Canada and Ireland, but we just do not seem to like them in this country. However, we are continuing to struggle to do that. The noble Lord is right about total household debt: £1.45 trillion is an enormous figure, but of that £1.24 trillion is owed on mortgages. We are a real country for buying our own houses and taking out mortgages. The amount left over is the money owed on personal loans, credit cards and high-cost credit. For this, we must make absolutely sure that people have the right information before they get themselves into difficult situations.
My Lords, taking the last point made by the noble Baroness in response to the previous question, is she satisfied that the review the Government are carrying out will ensure absolutely that the result does not force the very poor into the hands of loan sharks, whose method of collection involves violence?
When the consumer credit review report comes out, we will know its findings, so I cannot comment on them for the moment. However, it is always the most vulnerable who we must worry about because they are the least likely to ask for help until it is too late. We will continue, as we would always continue, to make sure that the disadvantaged really are a priority for us.
My Lords, can the Minister advise the House on whether the Government have any plans for regulating commercial providers of debt management plans, which have never been regulated and under which consumers pay upfront fees and take longer to pay off their debts? Does the Minister agree that there is a real need for free and impartial debt advice such as that provided by the Consumer Credit Counselling Service?
We certainly agree that there should be free debt advice and we will continue to provide it. I think the noble Lord also asked about debt management companies. We are concerned about these. The Office of Fair Trading has recently taken action in this area and we are working with the industry itself on how we can resolve these issues. Good people in the industry do not want the bad people in it because they give them all a bad name.
My Lords, are the Government at all concerned about the fact that there is some £60 billion of outstanding credit card debt on which interest rates of 17 per cent or more are being charged? Much of this is non-performing. Does that not cast something of a shadow over the balance sheets of the banks?
We are working hard to bring under control unsustainable borrowing and irresponsible lending—between which lots of bad things happen. There is no doubt that good information is terribly important for people to be able to make decisions. However, the Government are not risk averse to the freedom for our people to make decisions and take risks—and fail. We want our people to be free to succeed and that means that some of them will fail.
My Lords, would the Minister accept that in many credit contracts, judges in a civil capacity have a considerable jurisdiction to strike out and amend their unconscionable terms? Will she see to it that the greatest publicity is given to this power which has long been vested in civil judges?
My Lords, is the Minister aware that many of us now get six or more phone calls every week? It is not just a high street issue but has become an absolute telephone menace. People are phoning all the time, stating that this is an official announcement and under the new law they can clear all your debts in no time at all. This is absolutely wrong. I have asked this question previously and the Minister told me that there was nothing the Government could do. I understand now that there is a blocking system. Will the Government publicise how to block these calls so that these poor people are not imposed upon again?
Will the Minister also look into another serious abuse: the amount of money that currency exchange bureaux charge to customers travelling overseas for very small transactions in value, often with margins of 15 per cent either side? This is a serious abuse because they quote zero commission but charge a huge margin on those exchanges.