Lord Bird’s push to make credit more affordable for some of the poorest in society is a step closer to statute after overcoming a key parliamentary hurdle.
The proposed legislation, which aims to provide fairer access to more affordable credit for people living in poverty, had a first reading on June 28 last year before progressing to a second reading on November 24.
"Most people who are paying their rent are not having that rent record being used as a way of increasing their credit rating" @johnbirdswords on his bill in the Lords on Friday about credit records #bbcdp pic.twitter.com/IiVW0qNtCu
— BBC Daily Politics and Sunday Politics (@daily_politics) May 11, 2018
The Bill has moved closer to a House of Commons debate after two amendments, brought by Lord Blencathra on behalf of Lord Naseby, calling for a FCA review after two years in force and reducing the obligation to ensure credit service providers take rental payment data into account from “must” to “may” were withdrawn following discussions.
Conservative Lord Blencathra suggested that the Bill could act as a “double-edged sword” as using rental data may lift 80 per cent renters out of poverty but leave 20 per cent unable to obtain fair credit.
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Responding in the hour-long debate, Lord Bird, said: “If there are any unintended consequences then it is our duty to look at legislation and not simply write-off 80 per cent of people in order to protect 20 when the best thing you can do to protect them is to find out who they are, get very close to them and embrace them.
“Those are the people I know, the people I work with and the people I come from and there is absolutely no way I would ever come close to grassing them up.”
If approved, The Bill will open up fairer access to more affordable credit to a wider pool of responsible borrowers and prevent people from falling into the high-cost credit poverty trap.
By bolstering the financial resilience of Britain’s lower-income households, it will also help to puncture the £490 annual poverty premium where the poor pay more.
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At present, the rental payments of the UK’s 11 million renters aren’t recorded or recognised in the same way mortgage payments are. This means some of the country’s poorest people pay the most for credit, including repayment contracts for white goods, utilities and mobile phones.
The Big Issue Group has tested this approach in the social housing sector to tackle financial inclusion.
- They developed the Rental Exchange scheme, a partnership with credit reference agency Experian, which showed that 83 per cent of tenants stand to see their credit scores boosted because of their rent payment data.
- Research has shown that the Rental Exchange helps people to prove their identity: 84 per cent of social tenants are able to provide identity authentication when rental data is included in their credit file, compared to 39 per cent when it isn’t.
- In addition, 61 per cent of landlords have said that they support moves to include the rent payment history of tenants in credit scores.