My Lords, I have some sympathy with the amendment moved by the noble Lord, Lord Sharkey, to introduce a breathing space, and I have very much sympathy and agreement with his proposal that cold calling should be banned. He is right to say that cold calling has become a complete menace. It has, and it is getting worse by the month. I receive all kinds of spam texts and calls to my mobile, telling me I have debts and saying, “Would you not like us to help you repay them or have them written off?”. These people are a complete menace. The worst thing is that young people are taken in by them.
Of course, a lot of the problem is caused by lenders putting out offers of very cheap money to hard-up people, young and old, who are tempted to take advantage
of 0% for 20 or 24 months. Then in very small type somewhere at the bottom it says that, after a relatively long period, the interest rate applicable to these loans will change from 1% or 0.8% to an APR of anything from 25% to 37%, or even higher. I would think it utterly reasonable that some kind of moratorium be put in place to protect people who have been tricked into taking out loans of the kind that I have just described.
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Equally I am very nervous, as I am sure my noble friend the Minister is, about the Government taking on the responsibility to enforce a debt moratorium, because that would interfere in the market. The noble Lord, Lord Stevenson, pointed out to my amazement that lenders expect only 9% or 10% of debts to be repaid—in certain categories, I assume. That figure caused me huge surprise but, if a debt moratorium were in effect, I am sure that lenders would assume that even less will be repaid. This means it will affect the functioning of the market, to the extent that it will cost entrepreneurs and other people with properly managed debt plans more.
It is a delicate balance. I have considerable sympathy with the protection that a debt breathing space system would provide, but a lot of risks also need to be taken into account. However, something should be done about all the very cheap loans that last for up to two years until suddenly the interest rate shoots up, perhaps from less than 1% to about 30%, because they are the cause of a lot of individuals’ problems.