November 26th 2014 – Debate on Pay Day Loans and the Targetting of Young people
Lord Alton of Liverpool (CB): My Lords, in returning to this issue, which I spoke to at Second Reading and in Committee, I first thank the noble Baronesses, Lady
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Neville-Rolfe and Lady Jolly, for the time that they and their officials have given to it. The meeting that they held with me, the right reverend Prelate the Bishop of Birmingham and the noble Lord, Lord Mitchell, earlier today was certainly helpful.
As the right reverend Prelate just said, this issue has not just exercised Members on all sides of your Lordships’ House at all stages of the Bill but it has also engaged the public outside.
I am glad to speak today to Amendment 47, to which I have added my name as a cosignatory. Our amendments are a composite of the amendments which the right reverend Prelate the Bishop of Truro and I moved in Committee and build on that momentum. I hope that they become part of the Bill. However, I recognise that although legislative moments come and are the most important point for parliamentarians to insist on provisions, it is not always possible to achieve legislative outcomes. If that is the case today, I hope that when the Minister comes to reply to the debate, she will be able to say, if the Government agree, as I think they do, with the principles contained in the amendments, how they will be rigorous in ensuring that the advertising industry, the licensing authorities and, above all, the payday loan industry will act in accordance with the amendments, and how we as a House will have the opportunity in due course to hold all those bodies to account.
Lord Higgins (Con): I am looking in vain for some reference to the watershed to which the right reverend Prelate referred. I cannot see where it is in Amendment 47.
Lord Alton of Liverpool: The issue that the noble Lord rightly raises would be covered in the regulations to be laid before the House under proposed new subsection (1). There is a difference between being able to advertise to and target young people, which is the main thrust of the amendment, and the second part, which is about whether there can be regulation after the watershed. It is true that the advertising industry and payday loan lenders recognise that there is an issue about targeting young people, but up until this point, we have not heard enough from them about what they would do about advertising that might appear after the watershed. If I may, I shall return to that in a moment or two.
Lord Higgins: I am very much in favour of the amendment, but the right reverend Prelate referred to the watershed as if it were in the amendment. Am I right in thinking that in fact it does not appear in the amendment, only in a statutory instrument intended under the amendment?
3.45 pm
Lord Alton of Liverpool: It is certainly true that it could appear in an instrument or regulations. However, subsection (1) of the proposed new clause refers to the content as well as the timing with regard to people below the age of 18. What that part of the amendment recognises is that some young people are bound to be watching television after the watershed and that would certainly need to be addressed.
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Payday loan advertising is a significant factor which contributes to the social context in which people make their financial decisions. People are endlessly blitzed by messages encouraging them to spend and to borrow, whereas there is minimal knowledge about money advice and debt help services. Our failure to develop a nationwide network of credit unions has always been a major disappointment to me and a contributory factor to the ability of these payday loan lenders to walk into that space.
With the prevalence of payday loan advertising increasing by more than 20 times from 2009 to 2012, according to Ofcom research published in December 2013, far outstripping the advertising of sound financial management or general financial education—although there is commendable and wonderful work, as the right reverend Prelate referred to, by organisations such as Christians Against Poverty, StepChange, the Children’s Society and CARE—it is hardly surprising that payday loans are increasingly being seen as a normal and responsible means of personal financial organisation. What today’s children see, hear and understand from what they are taught today, and from the advertisements that they see, will impact hugely on their future.
What is particularly concerning about the normalisation of payday loans as a means of borrowing is that it particularly manifests itself among young people, specifically, in younger parents. According to Playday not Payday, a report produced earlier this year by the Children’s Society, 39% of parents aged 18 to 24 are likely to have used payday loans at some point, compared to 18% of 25 to 34 year-olds and just 8% of 35 to 44 year-old parents. It is interesting that the same report concluded that 30% of 18 to 24 year-old parents describe payday loans as an acceptable means of managing day-to-day expenses. Perhaps we can take some encouragement in that 9% of 18 to 24 year-old parents recognise that although they have used payday loans, they do not see them as an acceptable means of managing day-to-day expenses—but that is scant encouragement.
This week, Ofcom, the regulator and competition authority for the United Kingdom’s communications industry, published results concerning children from its Digital Day 2014 research. The study found that just over three-quarters—78%—of children aged 11 to 15 and 90% of six to 11 year-olds watched live TV every day over the course of a week. With so many children consuming so much television, it is important that we ensure that they consume what is appropriate.
In our earlier debates on the Bill it was said that there is a logical inconsistency in the current approach to the advertising of payday loans. I agree with that. We properly accept certain limitations on advertising, even in a free-market economy, where it is recognised that normalising potentially harmful behaviours should be avoided, as is the case, for example, with alcohol or gambling advertisements. Payday loans should be treated in the same way. I have yet to hear a cogent argument against that.
Critics of closing the loophole note that payday loan advertising is not targeted at children and that restricting adverts until after the 9 pm watershed—the
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point made by the noble Lord, Lord Higgins, earlier on—is therefore unnecessary. I must say that I find that argument unconvincing, although I note that the noble Lord is not one of those who advance it. An advert can appeal to someone without being targeted at them. Although payday loans may not be advertised specifically around children’s programming, children do not only see programmes designed for them. They see a range of content.
In a poll conducted by YouGov and commissioned by the Children’s Society, 74% of parents across the country backed a ban on payday loan adverts from airing on TV and radio before the 9 pm watershed. We should listen to them. Parents also tell us that they feel under pressure from their children with regard to payday loans. Research conducted by the award-winning MoneySavingExpert.com website revealed that more than one in three parents with children under the age of 10 have heard their children repeat slogans from payday loan TV advertisements. In the same poll, 14% of parents said that when they refused to purchase something for their under-10 year-olds, they were nagged to take out a payday loan for it. All of us who have children know all too well the almost irresistible gut-wrenching pull of the plea of a child—especially on a sleep-deprived parent. We may reminisce with rose-tinted spectacles about this now, but the reality is that for some families this is what is called “pester power”. It is the beginning of a slippery slope, often towards indebtedness and poverty.
If there are steps we can take to avoid families slipping unnoticed into indebtedness, we must surely take them. These amendments do not represent a magic bullet. I do not think that the right reverend Prelate, the noble Lord, Lord Mitchell, or the noble Baroness, Lady Bakewell, would argue that. I accept that there is no single solution or quick fix. Whole-person financial care is vital. Financial education is crucial to prepare children for financial independence. Equipping children and young people to make financially capable choices will also help to break the sort of cycles of deprivation that many of us have seen, especially in urban areas—places like the city of Liverpool, which I represented for 18 years in another place. But preventing seductive, alluring, irresponsible advertisements can also play its part.
These amendments will therefore make a difference. They will ensure that children are less familiar with high-cost consumer credit products such as payday loans. They will ensure that adults are protected from overt pressure in the form of overbearing and intrusive unsolicited marketing. They will help families and insulate children from the subtle pressure and normalisation of payday loans as an appropriate form of financial management.
For all those reasons, I am very happy to support the amendment so ably moved by the right reverend Prelate the Bishop of Birmingham.
4.30 pm
Lord Alton of Liverpool: My Lords, I am grateful to the noble Baroness, not least because of the discussion that some of us were able to take part in earlier about this very issue. However, a debate and a review, of course, are no substitute for legislation, as she will agree. Will she at least commit, not about debates or reviews but about what the Government can commit to themselves, which is legislation if the review does not bring forward the necessary mechanisms to control this disease which has been described by so many noble Lords today as affecting so many people?
Baroness Jolly: My Lords, I do not dispute for one minute that we would all like to see this problem go away. Regrettably, these decisions are made by Treasury Ministers and this is well above my pay grade.
A noble Lord: But you are a Minister.
Baroness Jolly: I am, indeed, a Minister. However, there are things to which this lowly Minister will not commit. I want to press on.
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Lord Alton of Liverpool: My Lords, I second the amendment and support the right reverend Prelate the Bishop of Birmingham in moving it. My name is on the Marshalled List in support of the right reverend Prelate the Bishop of Truro, who tabled the amendment. I will keep my remarks brief because we exhausted many of the arguments in the previous amendment.
One figure that struck me very much is the £8.3 billion estimate of the social costs of debt problems. Putting aside such staggering figures, which are quite hard sometimes to understand, I think about the families I have met over the years who have seen their family life, community life and whole neighbourhoods broken as a consequence of indebtedness and the debt culture. The time that your Lordships spent when this Parliament was first convened considering the crisis we were facing because of the national debt is being replicated in the area of personal debt. Sometimes we overlook the latter because we are concentrating so much, rightly, on the former. However, many families are deeply immersed in debt, which is incredibly destructive of their family life. I suspect that one of the major factors in the breakdown of family life is people taking out all sorts of commitments and debts that they did not fully understand, when they entered into them, they would not be able to honour and meet. It ultimately leads to friction, disagreement, inability to pay and, then, catastrophic results. Anyone who read the front-page report in the Times newspaper this week about the effects of the breakdown of family life in this country on outcomes, particularly for young people, should surely be troubled by these things.
All of us will have experienced high-pressured, targeting salesmanship. It is incredibly frustrating to pick up the telephone and find people trying to sell you yet something else that you do not need, but many of us can easily be susceptible to it. This is a good amendment and one that I hope the Government will feel able to accept today. I am very happy to support the right reverend Prelate.
