Alternative Investment Fund Managers Regulations 2013

Baroness Hayter of Kentish Town Excerpts

Monday 13th November 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, I have not yet seen the details of my noble friend’s Private Member’s Bill, but I will look at it closely. The noble Baroness, Lady Kramer, is right that the noble Baroness, Lady Bowles, has raised this in the past and I thank her for her work in this area, including her detailed suggestions to reform MiFID, which the Government are considering. As I have said, FSMA 2023 gives us the powers to repeal and replace retained EU law in a more agile way. We intend to use those powers to solve the issue before us.

[Baroness Hayter of Kentish Town (Lab)]

Will the Minister tell us what consultation has taken place with the Financial Services Consumer Panel and other consumer groups on this?

[Baroness Penn (Con)]

My Lords, the operation of the consumer panel and other panels of the FCA is a matter for the FCA. I am sure that it draws on all its different panels, as appropriate, when taking forward its work programme.

Financial Services and Markets Bill

Baroness Hayter of Kentish Town Excerpts

Report stage
Tuesday 13th June 2023 Lords Chamber

I appreciate the efforts made by my noble friend and I have confidence in her, but we should be clear about the standards against which we will judge whatever the Government come back with over the next 12 months. My amendment does that, along with the other comments I have made, but, in the meantime, I will not be moving it.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, it is exactly three months ago today that we debated this issue in Committee, when the Minister heard many examples of what had been going on. She has done rather more than any of her predecessors in acknowledging that there is a problem with how the AML rules are applied to PEPs and that change needs to happen—but she has gone even further and done something about it. I will not say that it is simply because she is a woman and that is what we do, but it is interesting that she has done it. As we heard, she has tabled Amendments 96, 97, 118 and 119, which she has outlined.

I have added my name, as the noble Lord, Lord Moylan, said, to Amendment 105, which goes a bit further and is more specific than the Government’s amendment. Ideally, they might have accepted it and made a carve-out for our family members; as we have heard, we may be guilty because we are here, but they have done nothing wrong and it is awful that they are caught by it. So I welcome the Minister saying in her introduction that the review will specifically look at whether it is possible to tweak that somewhat.

As I said in Committee, this has been going on for rather a long time. The noble Lord, Lord Flight, was the first noble Lord to raise it that I could find, in 2013, and I have been on about it since 2015, as the House knows. We have had Written Questions, Oral Questions, meetings, press coverage and all of that. In addition to the inconvenience for us, this has also meant that all these banks and others are wasting their time looking at our business instead of, as we have heard, at some other people. It is not just Amex and others; it is car purchase firms and everybody else inconveniencing us and wasting their time.

The Minister has acknowledged that it is time for legislation. The key part of her proposal is distinguishing between domestic and foreign PEPs and a requirement both on HMT and the FCA to do something. What the Government have done may not be perfect, but it is a real step forward. I think the Minister is well aware that we will keep a rather beady eye on what is happening, and we will be back here if nothing changes.

In the meantime, we should thank the Minister for what she has done. We have made a big step forward and I am delighted that the noble Lord, Lord Moylan, will not be pressing his amendment. It is right that we accept where we have got to with the Minister, and we will watch that being implemented.

[Lord Sharkey (LD)]

My Lords, I have added my name to Amendment 105 in the name of the noble Lord, Lord Moylan, and I congratulate him on his determination and persistence. I do not quite understand his dislike of Turkish barbers, but we can deal with that some other time.

His amendment’s simplicity and its direct modification of the regulation is an appealing approach, as is the absence of the word “review”. I was very pleased to see the government amendments in this group, chiefly because, of course, they are government amendments. I am very grateful for the Minister’s clear and long-standing commitment to resolving, or at least ameliorating, the problem. I have only a couple of observations about the government amendments.

The explanatory statement to Amendment 96 says that UK PEPs

“should be treated as representing a lower risk than a person so entrusted by a country other than the UK, and have lesser enhanced due diligence measures applied to them”.

The amendment itself, in proposed new subsection (3)(b), states that

“if no enhanced risk factors are present, the extent of enhanced customer due diligence measures to be applied in relation to that customer is less than the extent to be applied in the case of a non-domestic PEP”.

Neither of those offers a definition or sets an upper limit to what this lesser form of due diligence should be. Is that decision to be left entirely to the financial services companies? If it is, can we reasonably expect uniformity of definition and behaviour?

Why would we expect the banks to significantly change their current behaviour? Would it not be more likely that they will simply water down some minor aspect of the diligence they currently feel is due and carry on otherwise much as they do now? In a way, that is what is happening anyway. The banks mostly ignore the FCA’s current guidance, as set out in paragraph 2.35 of FG17/6. The FCA, in response to that, applies no sanctions. Nowhere in the government amendments is there mention of sanctions for non-compliance with the new arrangements.

Given the rather cavalier disregard some banks have displayed towards the current guidance, do we not need some sanction for future non-compliance, or a way of making the FCA properly enforce its own guide- lines? What use are guidelines if they are not enforced? I would be very grateful if the Minister could say how a workable definition of “lesser due diligence” is to be arrived at and how the new regime may be enforced.

Financial Services and Markets Bill

Baroness Hayter of Kentish Town Excerpts

Report stage
Thursday 8th June 2023 Lords Chamber

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to take part in the debate on this group of amendments. I will speak to Amendments 42, 44, 45 and 47 in my name, and offer my support for all the amendments in the name of my noble friend Lord Bridges, to which I have added my name. I will leave him to set them out.

I again thank my noble friend the Minister, and the Treasury officials and team, for all the meetings and work done during Committee, and between Committee and Report, on the question of regulator scrutiny and accountability. I thank her particularly for adopting my Amendments 44 and 47 on the membership of the panels. On my Amendments 42 and 45, could she say a little more about the evidence base the panel will use to come to its recommendations? Would it be valuable to publish any dissenting opinions on the matters to be published? This would be extremely helpful for Parliament to scrutinise the panel’s decisions.

Finally, I ask a broader question around cost-benefit analysis. How will HMT and the regulator seek to ensure that the whole CBA process is meaningful, balanced, considers all majority and minority views, and does not fall into the potential trap of being a utilitarianist pursuit, which cost-benefit analysis can sometimes fall foul of?

That said, I thank again the Minister and the Treasury officials for their support for the amendments and for the discussions we had to come to this point, particularly on Amendments 44 and 47. I look forward to hearing in detail, particularly from my noble friend Lord Bridges and the Minister, the suggestion around the office for regulator accountability.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I will briefly speak to Amendment 39, to which I have added my name, and government Amendment 50. I declare that I am on the board of the ABI. More relevantly, as the amendments are about the Consumer Panel, I speak as a former vice-chair of one of the statutory panels, the Financial Services Consumer Panel. It was some time ago and our focus then was on the FSA rather than the present FCA, but our role was essentially the same.

I was on the panel before the events of 2007 and 2008. As a panel, we were warning about the risk to consumers of interest-only mortgages, high loan to value mortgages—which were really unacceptable to us—and high mortgages relevant to income. It was just before the crash, but I am not pretending that we foresaw what would happen, even though we were worried about those things. We did not anticipate what was happening in the financial sector, starting with Fannie Mae and Freddie Mac and Northern Rock. Our concern was about how consumers would fare should house prices tumble and their incomes not rise—or, indeed, if interest rates should increase. We saw them as a very vulnerable group of consumers.

What is interesting and relevant to Amendments 39 and 50 is that our role was only to advise the then FSA. Sadly, it did not pay enough attention to what we were saying. It might have given it a little bit more on its dashboard had it done so. Had our report been to Parliament and the Treasury perhaps someone might have noticed and taken an interest. That lives in the “What if?” category of history, but it explains my support of any report made by people who represent consumers being brought to public attention.

Amendment 39, to which I have added my name, was so brilliantly written and argued for in the Commons by my honourable friend Nick Smith. I should say that a long time ago we worked together when he was the Labour Party agent in Holborn and St Pancras and I was the CLP chair. Quite a bit seems to have happened since then to both of us. I knew at the time that he was able to take an issue with which he was dealing and see the broader context, which is how we come to the amendment he has essentially developed and which is in front of the House today.

My honourable friend’s interest was sparked when he was campaigning on behalf of members of the British Steel pension scheme—a scandal which led the NAO and the PAC to conclude that the FCA fell drastically short of its proper role in protecting consumers of financial services. His interest in that brings me to where we are today.

In my time, we have witnessed nearly £40 billion being paid in compensation to consumers who were mis-sold PPI, although the full costs were paid much later. Again, as consumer reps, we flagged up that this was not an appropriate product for most of those it was being sold to. Just occasionally, listening to consumers is good not just for them but for the industry and the whole economy. The voice of consumers is worth listening to.

The Government’s Amendment 50 is very welcome. It requires the statutory panels—I am particularly interested in the Consumer Panel—to report to the Treasury and for their reports to be laid before Parliament. This will bring consumer interest to the heart of our public discourse, which will be good for all concerned. I thank the Government for their amendment on this. I am happy that this trumps, or at least meets, Amendment 39.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, in general I support all the amendments in this group. I am particularly pleased to see government Amendment 50 on the panel reports, assuming that they are implemented, and government Amendment 63 and its companions in the next group to require the regulators to state how they have taken account of parliamentary committee reports in rulemaking. I thank the Minister and the Bill team for covering some of the amendments that I tabled in Committee and similar ones from other noble Lords.

In this group, I have added my name to the amendments tabled by the noble Lord, Lord Bridges, which concern the setting up of an office for financial regulatory accountability, as I did in Committee. The noble Lord is unable to be here today and has asked me to give his apologies and to introduce his amendments.

There is no need to go through the debate that we had in Committee, except to say that since FSMA 2022 there has been a growth in voices calling for an independent oversight body, including the main industry bodies. Those bodies were somewhat disappointed by the Minister’s suggestion in Committee that there was no industry support or suggestion along those lines, because they have made their views clear. I have received emails assuring me that they put points in the consultation responses as well as in published industry papers, although I acknowledge that those were early days and they may not have got as far as formulating ideas in the same way that I had in my consultation response.

There has also been a growth in support in this House. As has been said, if we had campaigned during the Brexit referendum that there would be this massive amount of power going to government, which would then be pressed onwards to unelected regulators, maybe some people would have had different thoughts, but that is water under the bridge. Going back to the amendments tabled by the noble Lord, Lord Bridges, the suite of amendments that cover the office for financial regulatory accountability—Amendments 64 to 72—includes some useful amendments from the noble Lord, Lord Eatwell, with which the noble Lord, Lord Bridges, agrees.

Arrivals Duty Free at UK Airports

Baroness Hayter of Kentish Town Excerpts

Thursday 30th March 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, we welcome engagement on this issue, and we have heard the case put forward for duty free on arrival. As I have noted, the Government believe it would place additional pressure on public finances. One challenge is that any potential uplift in spending potentially displaces spending with other domestic duty-paid retailers and therefore could compete against them. The Government would also need to be confident there was adequate infrastructure and resourcing to combat fraud and ensure compliance. We have no plans to consult on duty free on arrival, but we keep all taxes under review and we consider all available evidence as part of the tax-making policy process.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I am delighted that the Government are not looking at this but, if they were to do so, would they look at the alcohol harm that could be caused by the increase of cheap alcohol?

Financial Services and Markets Bill

Baroness Hayter of Kentish Town Excerpts

Committee stage
Monday 13th March 2023 Grand Committee

The really telling sentence in her letter was where, having explained the approach that she has agreed with the FCA and the banks through His Majesty’s Treasury, she said that a similar approach was taken when these issues originally occurred in 2017 and that this was widely agreed to have been an effective solution. It stopped working; somebody forgot about it. It works only as long as the pressure is on. That sort of approach might be a sticking plaster for a year or two, but it does not address the fundamental problem: we are way exceeding our international obligations, there is no call on us to do so and, in doing so, we are inflicting considerable harm on a lot of people when there are probably really bad people out there on whom resources would be better focused. We need to change the law. This is a good opportunity to do it. I look forward to the debate and beg to move.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I will speak to my Amendment 224 and to others in the group, including the ably moved Amendment 215, to which I have added my name.

I thought that this had been going on for a long time, but the 11 years on the sharia law amendment was even longer. This started only a decade ago, when the noble Lord, Lord Flight, raised it in 2013. Then the noble Lord, Lord Clement-Jones, raised it in 2014 and the noble Lord, Lord Flight, and my noble friend Lord Harris raised it in July 2015. I had a Question for short debate on it later in 2015, at which point the Minister at the time, who subsequently became Chief Whip—although he is no longer—completely understood it, partly because it had affected him, as he said in the debate. It was also covered in the Mail on Sunday, because Charles Walker had raised it in a debate in the Commons in January 2016. I also had a Written Question in March 2016. If we say that we are doing this quickly, I just remind everyone that this has been going on a very long time.

The problem is that neither the FCA, to which I wrote back in 2016, nor the Treasury has actually moved to lift the burden on us normal PEPs, despite the FCA’s July 2017 guidance which, if it was complied with, would solve the problem—but it has never been complied with. Since that guidance, which is FG 17/6, we have continued to raise the issue in the House—on 6 September 2021, 22 February 2021, 3 March 2021, 24 and 25 November 2021, 5 July 2022 and 28 November 2022. So there should be no surprise at anything that is being said today.

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[Baroness Penn (Con)]

My Lords, the Government have a lot of sympathy with noble Lords who feel that they or their families have been subject to unreasonable treatment due to their status as politically exposed persons, or PEPs. As noble Lords have mentioned, I have engaged with noble Lords to understand this issue and I am aware that the difficulties faced can range from seemingly disproportionate requests for information to accounts being blocked, leaving Peers and their family members at risk of being unable to effectively manage their financial affairs.

The Treasury and the FCA will continue to work to address this issue and to ensure that those subject to these rules are treated fairly and proportionately. Before discussing that work further, I will set out the importance of the PEPs regime to UK security and the fight against economic crime.

Enhanced due diligence by banks is a key component of the UK’s anti-money laundering and anti-corruption measures, and ensures that any suspicious activity is identified and reported to law enforcement. Given the potential for the positions of influence held by those subject to the PEPs regime to make them targets for serious and organised criminals and hostile state actors, law enforcement agencies have strongly favoured maintaining these requirements on domestic PEPs. The enhanced due diligence measures are a crucial part of the UK’s anti-money laundering regime and contribute to a coherent, systemwide approach to tackling economic crime, providing law enforcement with valuable and actionable intelligence to help protect the UK’s political system from hostile state actors, for instance.

However, the Government of course recognise that domestic PEPs often represent a lower risk than overseas PEPs. This is already explicit in FCA guidance, which states that domestic PEPs should be treated as lower risk by financial institutions unless other risk factors are present. The FCA remains committed to monitoring banks’ compliance with its guidance on PEPs, and will take action where it identifies systemic issues. The FCA did so last year, resulting in one financial institution apologising to all PEP customers after its failure to adhere to FCA guidance.

In last year’s review of the money laundering regulations, the Government committed to an assessment of the risk profile of domestic PEPs and made it clear that we would consider removing the requirement for mandatory enhanced due diligence if they were found to be sufficiently low risk. The Government’s assessment of the risk profile of domestic PEPs has concluded. As part of that work, they engaged with law enforcement and other operational partners to develop their under-standing of the risk posed by domestic PEPs. In light of that review, the Government consider that the existing requirements remain appropriate.

However, given the concerns raised, the Government will continue to work with the FCA to ensure that banks and other financial institutions appropriately and proportionately implement the guidance set out by the FCA regarding the treatment of domestic PEPs, that it is taken forward in a way that is proportionate to their individual risk and that adjustments are made to enhanced due diligence measures as necessary. I would like to reassure noble Lords that the Treasury continues to engage with the FCA on this issue and stress the importance of taking a proportionate, risk-based approach to the application of enhanced measures on domestic PEPs.

I turn to the specifics of the amendments. Amendment 215 from my noble friend Lord Moylan would remove those politically exposed persons who are tax residents from the regime entirely. As I have set out, including domestic PEPs in the regime is important because of the risks presented by their positions of influence. Such a proposal would weaken the UK’s protection from money laundering and corruption and leave us non-compliant with international standards. International standards for domestic PEPs, as my noble friend set out, are set by the Financial Action Task Force. They require countries to implement a legal framework that compels regulated firms to identify whether their customers are domestic PEPs and make an assessment of which due diligence measures to apply based on the risk presented.

Amendment 215 would remove the requirement for financial institutions to identify and treat those resident in the UK for tax purposes as PEPs, making the UK non-compliant with those international standards. The UK is a leading member of the Financial Action Task Force and was recognised in its mutual evaluation report in 2018 as having the most effective anti-money laundering regime of well over 100 countries assessed to date. The UK remains committed to ensuring that its anti-money laundering regime is compliant with these international standards. While I appreciate that, in drafting their amendments, noble Lords may have sought to remain compliant with those standards, I am afraid it is not possible to remove domestic PEPs from identification altogether and remain compliant.

[Baroness Hayter of Kentish Town (Lab)]

Why is it therefore possible to exclude councillors, as the guidance does, but not Peers?

[Baroness Penn (Con)]

That is a question of who is classed as a domestic PEP, not of the need to have a regime in place to identify domestic PEPs and then look at what enhanced due diligence measures should be applied to them.

[Baroness Hayter of Kentish Town (Lab)]

Does the Minister accept that we could therefore exclude all Members of Parliament?

[Baroness Penn (Con)]

I do not think that would be consistent with the Financial Action Task Force guidance that is interpreted at a UK level.

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[Baroness Hayter of Kentish Town (Lab)]

I am sorry, but the Minister said that we are a leading member of the Financial Action Task Force. It has been enabled to take councillors out; it is very hard to imagine that Members of this House could not be.

[Lord Moylan (Con)]

I know the answer to this. It is because the FCA said in 2017 that a council was not a parliament or similar body. Those words appear in the task force recommendation. By declaring that a council was not a parliament or a similar body, members of councils immediately fell out of the regulatory scope by virtue of the guidance as it was changed at that time.

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[Baroness Penn (Con)]

As I said, I shall take away the point about what further I can say about the work on the risk assessment. The focus has been on looking at risk, and my understanding is that, in considering that, the question of close associates or family members—I believe that is the terminology in the regulations—has also been considered.

[Baroness Hayter of Kentish Town (Lab)]

I am sorry about this, but the Minister will not be surprised, because we have had 10 years of this issue. There was a review last year, which she reported on in the House, which said that no change was needed, which is extraordinary. She referred to the case where we all got an apology, but that was only because we kept on standing up and asking for it, otherwise it would never have happened.

The important thing that I wanted to raise is that this somehow is going further than anti-money laundering—it is about general corruption. Some of us have been debating the National Security Bill, where it is being dealt with in another way. I do not think that the Minister has been following that Bill, but I can understand that she has not because she has been involved with this one. We now have the FIRS scheme, which will be set up when the Bill becomes an Act and which is about the other things—the approach to politicians by malign forces trying to corrupt us, or whatever. So can we take out corruption and that sort of thing, because the National Security Bill will deal with that? This is simply to be simply about anti-money laundering—in other words, dirty money.

A lot of what the Minister has said goes beyond that, and the fact that she cannot tell us means that the spooks—who tell us that they do not want it, by the way—want it for some other cause. That is not the purpose of the provisions on anti-money laundering; it is about dirty money. Perhaps the Minister could talk to the Home Office and Tom Tugendhat about how much is covered now on the approach to any of us as politicians by malign forces, because this is separate.

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[Baroness Penn (Con)]

The Government believe that the decision about the scope of the money laundering regulations is best taken by, and should remain with, the Government, rather than being delegated to the FCA.

I turn to Amendment 224 from the noble Baroness, Lady Hayter of Kentish Town. This would require the FCA to consult with consumers with regard to its functions relating to PEPs. In the discussion—

[Baroness Hayter of Kentish Town (Lab)]

The noble Baroness does not need to respond on this; it was a placeholder.

[Baroness Penn (Con)]

Okay—I was going to talk about the engagement that we have conducted so far and will continue.

My noble friend Lord Trenchard touched on my noble friend Lord Forsyth’s Amendment 234, but I am not sure whether anyone spoke to it specifically. In my response, I addressed the Committee’s desire to focus its attention on the statutory changes, and I am not sure we had a detailed discussion on the other proposals put forward here.

Noble Lords have made their position on the issue very clear. I hope that, to some extent, they have also heard the rationale for the Government’s approach and would agree with the desire to be in line with international standards in any action that we take in this area. As the noble Lord, Lord Tunnicliffe, said at the start of his remarks, we should bear in mind the context of the Government’s efforts, very much supported by this House—we are often pushed to go further by this House—in tackling issues of economic crime, which include money laundering. We have to recognise that London and the UK being such a centre for financial services, and the great benefits that that brings, also brings greater risks. It is right that we make sure that we have a regime that manages those risks as effectively as possible.

I shall write to noble Lords on the matters that I have mentioned, and any other matters in looking at this debate again, on which I can provide further clarity. I am sure that I will engage with noble Lords further on this issue ahead of Report.

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[Baroness Penn (Con)]

The noble Lord is absolutely right to say that. This Government are committed to do that with the regulator. I understand this Committee’s desire to look at legislative change, but I have also heard from the Committee that the guidance is clear on the lower risks of PEPs, and the challenge really lies in the effective implementation of that guidance. We should not take our eye off that work. It is something that the Government are absolutely committed to doing.

I know that noble Lords have raised the challenges of engaging with the FOS on this issue, but I remind them of that route. I have also said to noble Lords, as the FCA has said, that in the list of contacts that we have provided to parliamentarians with issues with their status as politically exposed persons, the FCA will monitor any of those points of contact in terms of complaints to look more systematically at whether there are issues in individual institutions so that further action can be taken on that basis. The Treasury will continue to engage with the FCA on how we can ensure that that takes place.

[Baroness Hayter of Kentish Town (Lab)]

I think that we have already mentioned why the FOS is so inappropriate. To expect a judge to take a complaint to the FOS is frankly out of order. It is no way for this issue to be raised. It is a very small number—but it is not appropriate to ask very senior judiciary to go via FOS, if their children are being affected. That is really not the right way forward.

[Baroness Penn (Con)]

I appreciate that it will not be the right route of recourse in many circumstances, but I do not agree that it is never the right form of recourse for people. It is important for people to know that that route is there. For particular cases, it may be appropriate. The noble Baroness has set out why, in many other cases, that is not the form of recourse that people want, which is why we have also set out other points of contact and ways in which to try to resolve these issues, which also act as a data point for the FCA as the regulator to look at issues in particular banks or institutions that are not applying the guidance appropriately.

Financial Services and Markets Bill

Baroness Hayter of Kentish Town Excerpts

Committee stage
Wednesday 1st February 2023 Grand Committee

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I declare my interest as a board member of the Association of British Insurers. I apologise that I was not able to speak at Second Reading. I had my name down, but unfortunately had to scratch because of a commitment from the committee that I chair.

I speak very briefly on Amendment 65 in the name of my noble friend Lord Tunnicliffe—I was not going to, because I am sure that he will explain it, but as it has sort of been challenged already, I thought it would be useful to bring the Committee’s attention to the view of TheCityUK. On the secondary objective, it says that economic growth and competitiveness would remain subordinate to the regulatory primary objective of promoting competition, preserving stability and protecting consumers. TheCityUK thinks that is the proper place for it. I think my noble friend may explain that his was more of a probing amendment, but certainly I hope that the Committee is of the view, along with many of us, not just TheCityUK, that primary means primary and secondary means secondary, and therefore that the primary will always trump the secondary.

Money Laundering Regulations: Politically Exposed Persons

Baroness Hayter of Kentish Town Excerpts

Monday 28th November 2022 Lords Chamber

Asked by

[Baroness Hayter of Kentish Town]

To ask His Majesty’s Government what further consideration they have given to the impact of Anti Money Laundering Regulations on Politically Exposed Persons.

[The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)]

My Lords, the recent review of the money laundering regulations concluded that there is still work to do to better understand the risk profile of domestic politically exposed persons—PEPs. It is crucial that the Government fully explore and understand any potential consequences of changing requirements on domestic PEPs before making any amendments to the UK’s anti-money laundering regime. This work is ongoing and part of the Government’s wider economic crime strategy.

[Baroness Hayter of Kentish Town (Lab)]

I thank the Minister for that Answer, but I am afraid that I do not understand it. On 5 July, she said that the review had been concluded and that no change was needed, despite all the evidence that she has had from Members of your Lordships’ House. Unbeknown to us but very helpfully, after that, the Lord Speaker wrote to the FCA on 21 July. However, the FCA’s reply on 15 August simply repeated that firms should act proportionately in dealing with PEPs. Two hours ago, we all received a letter from the Minister which says: “It cannot be acceptable that Parliamentarians and their families are denied access to personal finance.” However, as we will hear from the noble Lords, Lord Vaizey and Lord Kirkhope, and others no doubt, banks are still refusing to handle accounts of their family members, and other colleagues of mine are finding that their accounts are being closed. The system is not working. Can the Minister agree to meet me and other concerned Members of your Lordships’ House, together with the FCA and HMT officials, so that we can make progress? Clearly, led by itself, HMT is unable to do so.

[Baroness Penn (Con)]

I would be very happy to meet with the noble Baroness and other interested Peers to see what more we can do. I will clarify one point. The review of the money laundering regulations concluded earlier this year. One of the outcomes was that there was more work to do to better understand the risk profile of domestic PEPs. That work is ongoing. When we have a better understanding of the risk profile and any potential consequences of changing the classification of domestic PEPs, we will take our work forward accordingly. In the meantime, it is important that people are treated fairly by the financial institutions that they work with. We have included a list of points of contact for some of the major banks so that people who are having problems can receive help where it is needed. If Members have issues, I encourage them to make use of the Financial Ombudsman Service, if they need to, as a route to address any problems.

Financial Services: Cold Calling

Baroness Hayter of Kentish Town Excerpts

Monday 17th November 2014 Lords Chamber

[Lord Newby]

My Lords, the regulation of cold calling is split between the FCA, the Information Commissioner’s Office and Ofcom. The Nuisance Calls Action Plan was issued by the Government earlier in the year, one of the key parts of which is to bring these components together and to work with equivalent bodies in other parts of the world from where people make cold calls. In addition, a consultation is currently under way, which recommends that it should be much easier in future for the Information Commissioner’s Office to take action and to enforce penalties against people who are breaking the rules.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, next week we will have our amendment to the Consumer Rights Bill to deal with nuisance calls. It would make it compulsory for every marketing call to reveal its number, either for blocking purposes or to enable action to be taken. Will the Minister ask his friends in BIS to support that amendment when it comes to the House next week?

[Lord Newby]

I will definitely relay the noble Baroness’s request to my noble friends. As she will know from Committee on the Bill, a number of examples were given which made it less straightforward than she suggests, not least in terms of family members having access to calls being made from organisations such as helplines.

Financial Services (Banking Reform) Bill

Baroness Hayter of Kentish Town Excerpts

Wednesday 27th November 2013 Lords Chamber

I turn now to the amendment tabled by the noble Baroness, Lady Hayter, which, like the power to fine, is aimed at bringing about better outcomes for consumers who engage with the CMC sector. The noble Baroness has raised a very important issue of enabling the Office for Legal Complaints—OLC—to act as an important route of redress for consumers who feel that they have been treated unfairly by CMCs. The Government are in full agreement with the noble Baroness that consumers should be able to seek redress through the OLC. Although her intention is clear in tabling the amendment, in its current form it does not fully bring about the changes that she seeks to implement. However, as the Government support the spirit of the noble Baroness’s amendment we will give further consideration on how best to put it into effect. With that assurance, I hope that she will feel able to withdraw it.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, first, I welcome the government amendments within this group. As the Minister said, this is undoubtedly a useful addition to the regulator’s toolkit. However, although I am of course delighted that the spirit of my amendment is acknowledged, we cannot wait any longer for this. The Legal Services Act 2007 envisaged that complaints against claims management firms would be able to go to the legal services ombudsman. That was widely welcomed by Which? and everybody else. We know that in August last year the Government made the formal announcement that complaints by consumers against claims management firms would be able to go to the legal services ombudsman. That was agreed on both sides of the House and was warmly welcomed by us.

However, that was in August last year. Since then we keep hearing, “Don’t worry about it, don’t worry about it”. I have raised this issue in other Bills and there was an exchange of correspondence between me and the noble Lord, Lord McNally, about the importance of getting this done. Nothing happened—the last letter was in November. I should explain briefly to the House that the absolute desire is that these complaints should go to the legal services ombudsman. The Legal Services Act only enables that procedure to take money from barristers and not from claims management firms to pay for the ombudsman. Of course, because the regulator is the MoJ, that is a form of taxation so the only thing stopping this happening is the technicality of how we fund it.

That was accepted by the Government but they did not seem to come up with a vehicle to do this. I offered to do it for them via a Private Member’s Bill. That was prepared with the help of Which?, particularly Mark McLaren who did a lot of work on drafting that Private Member’s Bill, which we then offered as the vehicle to solve this. Nothing happened to that, although it was not declined until 12 November when the Government laid these amendments—which we were not expecting. The amendments are very welcome but do not solve the problem for two reasons: first, they do not allow consumers to get redress; and secondly, they therefore preclude the intelligence that would come from complaints. Frankly, people complain against something only if they have a chance of compensation.

Although the Government say that they will look at this, that is what they have said continuously since August last year. That being the case, we will want to put this to the House, either today or at Third Reading. I had hoped that the Government would say today that they would bring this matter back by Third Reading. Perhaps they could clarify whether that will be at some time in the future—which basically means another couple of years—or whether they are willing to do it by Third Reading.

Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2013

Baroness Hayter of Kentish Town Excerpts

Wednesday 17th July 2013 Grand Committee

[Baroness Kramer]

My Lords, I shall comment on three aspects of these orders, of which I am very supportive. First, I welcome the elements of the order that create a regulated environment for peer-to-peer lending platforms. While most industries have spent their energies saying, “Remove red tape”, this industry has been coming to the Government and the regulator saying, “Please can we have proper regulation”, because it knows that without proper regulation, rogue players can come in from the outside, undermine the credibility of the industry and probably provoke a regulator to come in with inappropriately heavy regulation as a consequence.

Can the Minister reassure me that the industry has been involved in negotiating and structuring these regulations? It looks to me as though they meet the test, but can he assure me that they reflect the kind of safeguards that that industry has already outlined in its code of conduct, established under its trade association? I think that that code was to be the basis of most of the discussions. It is a real way forward because, as we know, the banks have been very challenged over providing the credit we need in our economy, and peer-to-peer lending is increasingly coming in to fill that gap to provide both competition and additional resource, which is useful and positive.

Secondly, I pick up my noble friend’s comments on payday lenders. I share many of his concerns about this industry. Indeed, the whole House did so, as the Minister will remember, during the passage of the Financial Services Bill in 2012, when an amendment that we colloquially called the Sassoon-Mitchell amendment put very effective powers into the hands of the FCA. When it takes over supervision of this industry in April 2014, the FCA will have powers to regulate, manage and supervise it.

The powers were written with an eye to some of the regulation that has been put in place in Florida—I believe 13 states use this kind of regulation—which includes the ability to limit the amount of borrowing to $500 outstanding at any one time, to limit the number of outstanding loans, to cap interest rates and fees and to provide for a grace repayment period. It also has various other characteristics. I would like assurance that the order does not compromise the wide range of powers sought by the House in the legislation and in the amendment.

Like my noble friend, I am concerned with the impression the industry is giving of marketing energetically and raising its interest rates above and beyond what most of us already regard as high levels. I hope the FCA will be able to hit the ground running. That means going through the consultation process and deciding how it will manage that regulation.

It is also a systems issue. As the Minister knows, the various US states that have regulation have systems that allow them to see on a real-time basis what applications are taking place, what the amount is, what the interest rate is, unauthorised rollovers and so on, and they are able to manage the process. This not only allows the regulator to look at the data and intervene in retrospect, but enables it to set up systems so that if the rules are contravened an automatic decline shows up and an offending loan cannot be made. While it needs time to put such a system into place, I wonder how likely it is that the FCA will be in a position to deliver it as early as April and, if not, what the thinking is around it.

I am afraid my next question comes from my lack of understanding and my difficulty in reading my way through orders. It concerns social impact investment, the financial promotions order and its relationship to the FCA. The Minister will know that if, for example, a social enterprise attempts to create a new community hall, it can turn to members of the local community and ask them to donate. However, it cannot ask them to invest without offending Finprom unless it has become a qualified investment, which is financially impossible for any kind of small project.

We raised this issue during the passage of the Financial Services Bill and the Government expressed their desire to deal with this problem and enable a project to turn to individuals with small amounts of money and allow them to invest. Will the FCA have the necessary power to make those changes under Finprom without having to come back for new primary legislation? I assume that, in the end, we will see a kind of materiality clause that will state that if you want to make an investment of less than £500, or whatever, you will not have to go through all that incredible palaver and you will be able to do so. Will these orders affect that, or will it fall outside their scope?

[Baroness Hayter of Kentish Town]

My Lords, I thank the Minister for his clarity in introducing these orders. Very often we are not wholly behind what the Government are doing but, on this one, we are. We welcome the move to the FCA and these SIs. I have supported the policy behind them for a long time, but I do not know for how long my party has done so. We particularly welcome the powers they give to the FCA. As the Minister implied, they will be its enforcement tool kit for consumer credit and will strengthen its powers to punish misconduct. We also welcome the Government’s decision not to exempt small businesses, as that might have weakened, rather than strengthened, consumer protection.