Update on debt purchase debate in House of Lords Financial Services Bill committee.

The amendment from Green Party peer Baroness Bennett proposing to automatically write-down debts sold on the secondary market was (finally) debated in the House of Lords grand committee on 3 March. In a general speech about levels of indebtedness across society in general, Baroness Bennett called for a general write-off of debts and focused on a perceived unfairness in the number of years over which sums owed could be pursued. Her proposal did not attract universal support. The only speech directly in support came from the seconder of the amendment, the Bishop of St Albans, although his contribution focused more on the problems of indebtedness he felt were compounding over the course of the pandemic period. He did not make reference to the levels of forbearance shown or payment deferral scheme over the past year.

Other speakers took the opportunity to talk in more general terms about issues of problem debt in society, rather than to the particular details of the amendment 55 from Baroness Bennett. Baroness Macintosh of Pickering voiced some sympathies with the amendment, and Lord Davies of Brixton called for a far wider ‘debt Jubilee’ write-off.

Baroness Noakes spoke strongly against the amendment, saying that it didn’t make sense, and that the proposal was flawed because it was not taking into account the level of default rate – citing her own example calculations of the destructive impact the amendment would have on the viability of selling on a loan book. Similarly, Baroness Kramer (LibDem) also spoke strongly against the amendment, making a positive case for the value of debt purchase in freeing up capital and liquidity for creditors who in turn make credit available for others. She said that the Bennett amendment would “constrain new business and be hugely damaging to those who go out and borrow”. She urged the Minister to reject the amendment which, she said, would seize up the secondary market. The Labour frontbench spokesperson Lord Tunnicliffe remarked that “we don’t fully understand this area” calling for a bigger debate on the issues. He said that he did not think he could argue for the amendment to be pressed to a vote.

Finally, the Government Minister, Lord True (Cabinet Office Minister of State) firmly rebutted the Bennett amendment, supporting the points made by Baronesses Noakes and Kramer, pointing out that the amendment would be fundamentally unfair in distinguishing between those whose debts were sold on and those which were not – and it would not be right to treat those in debt differently depending on who owned the debt.

No vote occurred in the committee and the amendment was withdrawn. It is possible that the issue may return in the ‘report stage’ of the Bill in the coming weeks, but the lack of enthusiasm for the specific measure from the Labour frontbench spokesperson and the strong rebuttal from the Government – as well as from Baronesses Noakes and Kramer - would suggest that the proposal has little chance of making further progress.

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