Mr. David Ames (Southend, West)I beg to move,
That leave be given to bring in a Bill to amend the Consumer Credit Act 1974 to give the Director General of Fair Trading a duty to establish a Code of Practice for traders who offer consumers the services of debt management and credit repair; and for connected purposes.I came into some money at the weekend, when I was one of the tiny number of those who won on the grand national. Unfortunately, my stake of £2 each way did not yield winnings sufficient to service adequately the huge debt that has been incurred by people across the United Kingdom. However, I believe that the largely unregulated way in which the current system works allows the most vulnerable sectors of society to be led slightly astray by some advertisements, particularly in tabloid newspapers.If my Bill were to become law, traders would be obliged to comply with a code, and the Director General of Fair Trading would be given powers to enforce compliance with it by use of compliance orders, fines and compensation orders. The Bill would also ensure that, before publishing the code, the director general is required to consult representatives of consumers and those who are likely to be affected by it. The code would be published and widely disseminated.
The Bill would prescribe the issues to be addressed in the code of practice, including the advertising and marketing of personal debt services; the terms on which such services are provided; charges; the standards of services to be provided by the trader; arrangements in debt management services for the protection of client moneys; arrangements for ensuring the competence of the trader's staff; procedures for handling complaints from consumers; and any other such matters as the director general, having consulted, considers necessary and appropriate for the protection of consumers' interests.
I know that the Minister for Competition and Consumer Affairs is interested in the issue because I recently had the good fortune to attend a meeting that he hosted and at which I engaged in conversation with representatives of citizens advice bureaux. I decided to persuade the House of the Bill's merits largely because of those conversations.
The National Association of Citizens Advice Bureaux recently published a report, entitled "Daylight Robbery", that highlights the fact that consumer credit borrowing has increased dramatically in the past 20 years. In the past 21 years, there has been a revolution in the consumer credit industry. As of August 2000, outstanding unsecured consumer credit in the United Kingdom amounted to £122 billion. It is a huge sum, equivalent to £3,425 for every adult between 18 and 65 in the United Kingdom.
Consumers' enthusiasm—I do not criticize them for it—to buy now and pay later has been matched by credit companies' willingness to devise an ever greater range of credit products. In the past two years, citizens advice bureaux across the country have reported a 37 per cent. increase in the number of inquiries on consumer credit debts. In the past 10 years, citizens advice bureaux and other free advice agencies have seen an increase in the number of commercial companies offering services for a fee to those who are in debt. Undoubtedly the number of such companies has mushroomed.
851 Since deciding to promote this Bill, I have been inundated by letters from people describing their debt problems. However, as I said, although I came into money at the weekend, I am afraid that my £86.50 will not be sufficient to service all their debts. Nevertheless, I should like to share one example with the House. One person, whom I shall call "client A", has one dependent child. The client contacted a debt management company for help with debts of £25,000, and the company told the client that creditors would accept offers of £1 per month. However, when bailiffs began to call at the client's home, the client discovered that no agreement had been reached with creditors.
The client went to the CAB for advice. The CAB adviser discovered that the client's total debt was £51,000. When the CAB spoke to the client's creditors, it found that the debt management company had not made any arrangements with creditors. The creditors told the adviser that they would rather deal with the CAB than with a debt management company. I am delighted to say that, as a result, the CAB has the client's debt under control.
The National Consumer Council contacted me, saying:
People are often at their most vulnerable when needing debt management services. To feel confident in using them, they need clear information about the choices available in the market place"—this is what I am asking the Minister to consider—and also to know what to expect from both fee charging and free services.The NCC believes:debt management services should be properly regulated".I am also indebted to the Sunday Express. A journalist there called Rachel Baird has, for the last few weeks, written a series of articles headed "Debt 'Parasites' Spark Crusade", in which she has reported the experiences of all sorts of people who—sadly—have got into debt, panicked and gone to some of the companies that I am describing, with very unfortunate effects.The company Direct Line has contacted me to say that it
is concerned many consumers are using the services of these agencies without being fully aware of the potential consequences and costs. Often, it would be more effective for the consumer, and in their best long-term interests, to deal directly with the lender".852 Direct Line is concerned about misleading advertising, hidden costs, the impact on credit rating, failure to take the full financial situation into account, and long-term costs.Equidebt is another company that has contacted me. It speaks of a breed of cash flow managers targeting vulnerable people who want up-front payment of some sort. It says that such managers want to make money out of such people. The Finance and Leasing Association also contacted me.
As we all know, there are many advertisements for such services in the newspapers. They say, for instance, "Debt Problems? Money Worries?", offer "unsecured personal loans", and make such statements as
We could arrange you a mortgage fast!Perhaps many of those companies are responsible; perhaps the majority give good advice. Unfortunately, according to the citizens advice bureaux, not all of them do.Many of the advertisements suggest that, for a fee, companies advertising credit repair services can wipe the slate clean for those who have got into money difficulties in the past and had court judgments recorded against them. That is nonsense.
There is a real need for consumers to be protected from the services of debt management and credit repair companies. Those needing such protection are undoubtedly the poorest and most vulnerable members of society. I hope that the House will support the Bill.
Question put and agreed to.
Bill ordered to be brought in by Mr. David Amess, Mr. David Atkinson, Mr. Richard Burden, Mr. Simon Burns, Sir Sydney Chapman, Mr. Roger Gale, Mrs. Linda Gilroy, Mr. Mike Hancock, Ms Oona King, Mrs. Marion Roe, Mr. Alan Simpson and Mr. David Wilshire.