Today I am promoting a new clause in the Financial Services Bill to protect borrowers from the misuse of Continuous Payment Authorities by pay day lenders. These are harsh times for many working families. They are under pressure from rising fuel and food costs and are living in fear at the prospect of job loss and insecurity. They know how hard it is to stretch a wage from payday to payday. Many of them use payday lenders to bridge the gap in their finances.
Continuous payment authorities are set up by using a debit or credit card which allows lenders to withdraw funds from a debtor’s bank account. Various reports suggest that customers are not aware of their right to withdraw from CPA schemes and Consumer Focus and the OFT have done good work in highlighting the problems.
Last week the OFT issued guidance to payday lenders about how CPAs are used. The OFT report contains a catalogue of potential misuse as examples of ‘what not to do’. These include debiting a higher or lower amount than agreed, using the CPA without informed consent from the debtor and using it in an unreasonable or excessive manner.
Guidance is all very well but the law needs to send a clear message to those who abuse their powers as creditors. My new clause is designed to ensure that debtors are informed about their rights and that only the debtor can vary or cancel a CPA. We ought to legislate to redress the balance in the debtor/creditor relationship and my new clause is designed to do that. We ought to legislate to protector debtors in straightened times. We abolished imprisonment for debt by the Debtors Act of 1860. However, debt itself can create a prison and the misue of power by creditors can be as hard a punishment as being jailed for debt.
It’s time for the balance of power between customer and company to change – and that must be done by placing power and firmly in the customer’s favour.