MPs have called for more regulation of debt management firms and high-cost credit providers to prevent the exploitation of vulnerable consumers.
Payday lenders, commercial debt advice firms, the Money Advice Service and the bailiff industry were all singled out during an extraordinary Commons debate yesterday as areas where policy action was needed to improve consumer protection levels.
Debt advice in particular, was singled out as an area where more intensive scrutiny of the commercial sector was needed, while further clarity was also required on the future of the free sector.
“The Money Advice Service is evidently a new body still trying to find its feet,” said Alex Cunningham, Labour MP for Stockton North. “But we desperately need a clarification of its role. For example, if it aims to co-ordinate debt advice, does that include fee-charging services?”
Tracey Crouch, Conservative MP for Chatham and Aylesford, also criticised commercial debt management companies (DMCs) for putting profit before customer welfare.
She said: “More regulation is not something I typically welcome but, in tackling rogue DMCs it is clearly necessary.
“Currently, a clear bias exists in favour of pushing consumers into plans that are more likely to yield more in fees, rather than focusing on paying down their debts steadily over time. So the debt management plans are not always in consumers’ best interests. In many cases they fail because the level of debt built up is too great and the monthly payments are also too great.”
Meanwhile, George Hollingbery, Conservative MP for Meon Valley, criticised the Ministry of Justice for failing to issues a consultation on regulation of bailiffs.
Citing a pledge from the government manifesto to consult on the matter in the spring, Hollingbery said: “It is not spring 2011 – it is early winter 2011 – and that consultation is still not with us.”
MPs also concluded that more education was needed around payday lending as part of a “three-pronged approach” to dealing with the growth of high-cost, short-term credit products. This approach also includes better regulation and the provision of alternative products.
Addressing the House at the debate of the conclusion, consumer minister Edward Davey acknowledged the concerns, and appeared to share recent concerns expressed by the Office of Fair Trading over potential abuse of continuous payment authority by payday lenders.
He said: “Payday loan companies dipping in and out of people’s bank accounts, taking money set aside for rent and food, is simply not on, and we need codes of practice to reflect that.”
To read the full debate, visit: http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm111201/debtext/111201-0003.htm
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