We need better regulation of consumer lending, particular in regard to high-cost lending.
I regularly hear from constituents about how their mental health experiences have made dealing with problem debts harder. Many tell me about receiving calls, texts and letters from their banks, local authorities and other creditors at a time of acute distress. Without support they are at risk of falling into further financial difficulty as a result of increased fees and charges.
The Financial Conduct Authority (FCA) is responsible for regulating high-cost credit in the UK. In a letter to payday lenders in October this year, the FCA said they should reassess the quality of their affordability tests. The government says the FCA has tough enforcement powers to protect consumers and act against firms that do not meet its standards. It states that since 2014, the FCA has been proactive on consumer credit, to ensure that all consumers who use high-cost credit products are treated fairly.
However, I believe we need urgent action from the government to change this broken model of consumer credit and review the way lending is regulated. The business model of payday lenders such as Wonga, which collapsed in August this year, is exploitative and immoral. They demonstrate much of what is wrong with our economy: too many people stuck in insecure employment, on low pay and reliant on short-term debt to keep their heads above water.
In May this year, cross-party action by backbenchers, including myself, persuaded the government to make life a little easier for people with serious mental health problems who find themselves in debt.
A new Breathing Space scheme will provide people with the chance to apply for up to six weeks free from further interest, charges and enforcement action. People would also be offered a statutory repayment plan to help pay back debts in a manageable way. Over 70 MPs backed amendments to the Financial Guidance and Claims Bill, led by myself, Conservative MP Johnny Mercer and Liberal Democrat MP Rt Hon Norman Lamb to make it easier for people with serious mental health problems to join the scheme.
I am committed to tackling the issue of high-cost credit by capping exploitative lending, working with lenders to protect the most vulnerable and by ensuring we have economic policies that lift the living standards of all to prevent people falling into a debt spiral.