Financial Services and Markets Bill [HL] Debate
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Baroness Kramer
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Financial Services and Markets Bill [HL]
Baroness Kramer ExcerptsMonday 22nd June 2026
(1 month, 1 week ago)
Grand CommitteeRead Full debate Financial Services and Markets Bill [HL] 2026-27 View all Financial Services and Markets Bill [HL] 2026-27 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 5-I(b) Amendments for Grand Committee (Supplementary to the Marshalled List) - (22 Jun 2026)
Baroness Bowles of Berkhamsted (LD)
My Lords, this and the following group dwell on the same territory; I will make my main intervention in the next group alongside my detailed amendments. I am sorry that I had to separate them out, but that was only because of the Chief Whip’s speaking-time restrictions on non-movers, which ironically mean that the debate will take longer overall. I have both general points and points on the substantive amendments. I agree very much with many other speakers, and in particular the noble Baronesses, Lady Neville-Rolfe and Lady Noakes. Overall, the Bill is extraordinary for the manner in which it does and undoes many things with questionable process.
My general approach on the point about the Consumer Credit Act is straightforward: I do not object to using the FCA to modernise and speed up redress mechanisms. We are already seeing that in practice with the motor finance commission cases, but that experience also contains a very clear warning. Here I depart from what the noble Lord, Lord Blackwell, would wish to have. In the first instance, the FCA made rules that were not in line with statute. It said that commission did not have to be disclosed unless asked about. We have ended up with a situation where firms which thought they were following the rules have been caught out because the statute said something different.
The moral lesson is simple: if you find yourself thinking, “Oh good, I don’t have to tell them about this nice little earner”, something is already unfair. In practice, some car salesmen discussed bonuses, quotas and commissions with customers, sometimes linking them to discounts. I have personal experience of that. But if the statute had not existed, what would have happened? The logic is that the old way, non-disclosure, might have continued because the FCA rules permitted it and it had not spotted the unfairness. For all that we have some very capable regulators, we have been shown that they are not infallible and they are not legislators—a point we will return to repeatedly as we go through the Bill. From time to time, they hit the barriers of their remits, perimeters and institutional roles.
Our system is not to delegate unconstrained power to regulators. Parliament sets the framework, regulators operate within it and, when necessary, the court interprets. Yet here, we are being asked to legislate for an automated substitution to set in train an unseen process that Parliament can no longer influence, that has no predetermined scope and whereby courts lose jurisdiction. That is constitutionally unsound and unsupportable. I will return to the detail in the next group but the principle is clear. As the noble Baroness, Lady Neville-Rolfe, said, Parliament should not sign away rights and protections without knowing what will replace them.
Baroness Kramer (LD)
It is a great privilege to wind up for the Lib Dems. People will know from Second Reading that I am very strongly of the same mind as the noble Baronesses, Lady Noakes and Lady Bowles, and I think the noble Baroness, Lady Neville-Rolfe, takes a very similar view on this first clause. The others speak with some sense of diplomacy; I will be slightly more direct, because, from my perspective, the Bill, by repealing the CCA, basically removes consumer credit protection from law and moves it to the FCA rulebook with no meaningful accountability and, frankly, little visibility.
Peers will remember that in 2021, many of us in this House and the other place were getting very frustrated with the FCA. It had some very good people but it was definitely neglecting consumer protection, and this House consequently passed an amendment to instruct the FCA to consult on a duty of care. The FCA chose not to consult on a duty of care, despite that direct instruction. It consulted instead on what it said was the equivalent, which was a consumer duty, the key difference being that a duty of care has a meaning in law, with a private right to action. In other words, an individual can turn to the courts if he or she believes that they have been wronged. This is a right that, as we heard from the noble Lord, Lord Blackwell, the FCA, at the behest of the industry, did not want the consumer to have, despite it being a long and very well-established tradition in English law.
The Bill now achieves the wholesale removal of credit protection from the law and into the rulebook of the FCA, and it is obviously an extension of that deliberate process to remove paths to redress for consumers. The Committee will be aware that consumers cannot take civil action against the FCA: it is immune. It is correct that it should be immune from action by those whom it regulates in the market, but it is also immune from action by consumers. As we go on through the Bill, will see that same process of undermining redress in future groups of amendments—very much so when we are dealing with the FOS.
When I have talked to members of the Government on this issue, they seem surprised at my comments because they see the FCA as a real champion of the consumer. Indeed, the industry will say the same thing. However, perhaps I have a longer memory, as does this Committee.
Do Members here remember the issue of payday lenders—the very widespread abuse of individuals who were entering into incredibly high-priced credit and were finding themselves continuously in debt trouble? When the issues were put to the FCA by Members of Parliament, by complainants and by whistleblowers, the only action that the FCA agreed to take was to make some minor adjustments to the rules on rollover. It argued that payday lenders had an important part to play within our credit system. It took action in this House in 2015, when a Minister broke with the Government’s perspective and decided to support a move that had been made from the Labour Benches by the noble Lord, Lord Mitchell. It was the noble Lord, Lord Sassoon, who spoke for the Government, and he decided that enough was enough and that the only way to deal with payday lenders was to shut them down. That action was put into law, and it improved the whole credit environment that we live in today and eliminated a really serious abuse. As I read the Bill, people will lose that opportunity. When people claim that the FCA is a champion of credit, and they cite the consumer duty, they do not realise that it does not incorporate that very traditional English right to turn to the courts.
Even if today one accepted that the FCA, in its currents design and with the relevant people in place, was indeed a consumer champion, that could easily change, because we are relying totally on FCA culture. In the 1990s—I often go back to that decade—the financial regulators demonstrated the most extraordinary degree of deference to the financial sector. Frankly, the 2007 crash could not have happened without that deference. Many of the lessons of that crash are being undermined by this Bill, throughout which there is a return to deference—this time in the name of growth.
Baroness Bowles of Berkhamsted (LD)
I would like to join in this discussion because it is probing thoughts. I shall make a few comments on Amendment 17A, because the issue overlaps with an amendment of mine that comes later in the main FOS group.
Amendment 17A raises an important point about limitation periods and the concept of when a relationship ends. It seeks to preserve the six-year limitation period for unfair relationship claims, running from the end of the creditor-debtor relationship. I understand the intention, but it exposes a deeper difficulty. The end of a relationship is not, or may not be, the same as the end of rights and it is certainly not the same as the end of enforcement powers. In many cases, firms retain continuing benefits or enforcement rights long after the consumer’s remedies have expired. Debts can be sold, pursued, securitised or enforced years after the practical relationship has ended, yet the consumer’s ability to challenge an unfair relationship may already have fallen away. That is an asymmetry.
As I said at Second Reading, while I understand the industry’s desire to get a grip on long-tail risk and liabilities, especially where regulators are interested in it, that cannot be done off the back of consumers. If we are to move parts of the Consumer Credit Act into the FCA rules, at the very least those rules must be required to secure, as far as reasonably practicable, symmetry between the duration of rights, remedies and redress available to consumers and the duration of rights, remedies, enforcement powers or continuing benefits to firms arising from the same act, omission or relationship. Without that symmetry, we risk creating a regime where firms retain long-tail powers but consumers lose long-tail protections. Limitation periods cannot be considered in isolation from the underlying rights. The two must move together or we distort the balance that Parliament intended. That is why the statutory framework has a place.
The FCA has already announced, a year or so back, a shift in emphasis to allow more risk in the interests of growth, which is a recurring theme. That was an important statement by the FCA and it feeds into the need for proportionate regulation and acceptance that there may be more failures, which Parliament must accept, but it cannot mean a bias advantage towards business in ways where firms retain recourse against consumers while consumers lose recourse against firms.
Under that process, companies may enjoy growth by escaping the consequences of some bad actions, but that gain is extracted from consumers and effectively added to the cost of living. Fleecing consumers is not growth, but I fear that this may be the consequence of the asymmetry in rights that could arise under Amendment 17A. I may return to this issue with my own amendment on Report.
Lord Davies of Brixton (Lab)
I just wanted to say that I have a lot to say on the Financial Ombudsman Service but I shall save it all for group 6.
Baroness Altmann (Non-Afl)
My Lords, first, I declare an interest, which perhaps I should have done at the beginning. I am a director of a pension company that is regulated by the FCA. I apologise for not having declared that earlier.
I will reflect on an issue that could arise because the Financial Ombudsman Service is in charge of complaints about pensions. We know that many people who are taking out pensions products may have problems that do not become apparent to them for six or 10 years or beyond. Perhaps we could consider an amendment that would carve out the extent to which the Financial Ombudsman Service deals with a pension complaint in relation to this element of the Bill.
Baroness Kramer (LD)
My Lords, I have only a few comments on this group. As I listened to the comments on Amendment 17A, particularly those of my noble friend Lady Bowles and the noble Baroness, Lady Altmann, I understood what reminded them of mortgage prisoners. In that case, people who held mortgages with banks that failed, and who were rescued by the Treasury, were then sold on to private holders who were not themselves lenders of mortgages. In effect, they lost the ability to refinance, and so they remained imprisoned in very high-rate mortgages at a time when everyone else was able to remortgage. We can see echoes of that in some of the limitations that would be introduced by these amendments. I am therefore always concerned about those time limitations, particularly in situations where assets can be sold on, as they often and increasingly are today.
Amendment 44, from the noble Baroness, Lady Neville-Rolfe, seeks to deal with the issue of consumer redress. If a consumer has been abused in some way and has a moral right to redress—a right in law—should that be lost simply because we have a regulator that fails to act promptly and within a reasonable time? I understand that it is tough for the industry, because it leaves it with uncertainty, but some of these products are life-changing for individual consumers and have life consequences. That is what made me think of mortgage prisoners; their lives were completely ruined by that process.
Where there are such consequences for the individual, it is very concerning to take away the right to redress because there was a delay in the functioning of the regulator. I understand that it means that the industry has to live with uncertainty, but my advice to it is to behave well to your customers. That really is the very best way not to get into these issues.
Lord Stockwood (Lab)
My Lords, I begin by considering Amendments 17A and 44. The Government’s reforms to the FOS are aimed at ensuring that the legislative framework in which it operates supports it to perform effectively the role that it was established to do, providing quick, informal and impartial dispute resolution between financial services firms and their customers.
Given the nature of the FOS and the way it operates, it can be effective at resolving the majority of disputes between customers and financial services firms, but it cannot do everything, and some things are more suited to other routes. The alternative routes include the courts and a consumer redress scheme established by the FCA. These routes are more appropriate when addressing systemic issues, such as widespread mis-selling. The reforms that the Bill makes to Section 404 of the Financial Services and Markets Act 2000 are designed to enable the FCA to act quickly to prevent disruption and uncertainty when it finds that a mass redress event has occurred.
Turning to Amendment 17A, I thank the noble Baroness for raising this important issue. I recognise that there have been questions about the time limits that apply to claims brought under Sections 140A to 140C of the Consumer Credit Act 1974 in the light of the Zedra ruling. The Government understand that there is an interest in and desire for clarity in this area. The noble Baroness, Lady Neville-Rolfe, asked me about the Government’s position following the Zedra ruling and its implications for the Consumer Credit Act 1974. The Government’s position remains that the limitation period runs from the end of the credit agreement. That approach provides legal certainty and reflects the nature of these claims. That understanding is consistent with existing case law, including the Supreme Court’s judgment in Smith v RBS.
Baroness Kramer (LD)
My Lords, there seem to have been two themes in today’s discussion; I will address both because I agree with them both.
The first is on whether we value banking hubs. There have been so many voices that say that we value them, but they are calling for a much-improved framework, including the noble Baronesses, Lady Tyler and Lady Bennett, the noble Lord, Lord Davies, and the right reverend Prelate the Bishop of Manchester. I suspect that there is a universal consensus that we need to think through this issue, which is exactly why the Richard Lloyd review is now anticipated. I think that most people who see the value of banking hubs in their community—most MPs have been asking for banking hubs in their constituencies—very much appreciate the direction of the Lloyd review. On the background and evidence for the need for banking hubs, I will address some of those issues much more when I discuss community development financial institutions in a later group, so I will not repeat all that.
That does not take away from the fact that we have a constitutional issue here. According to its report, the Delegated Powers and Regulatory Reform Committee is very concerned that the problem has not been clearly identified and that a power as extensive as the one provided for here in the Bill severely compromises effective parliamentary scrutiny. The Select Committee asks for the power to be removed from the Bill. I say to the Government that it is important that there will be some real clarity before this hits the Commons—otherwise, this clause will be very much in trouble.
I support banking hubs. I suspect that I will be very pleased when I read the Lloyd review. What is sauce for the goose is sauce for the gander. I cannot just say to Parliament that, if it is something that I like, we do not need oversight, scrutiny and a proper process and that we do not need to consider the role of the regulator versus the democratic decision-making that should be happening in Parliament. This is a very good instance where I suspect that I would be very much in favour of the Lloyd review, but I would be very sad if that is not brought before Parliament for discussion, scrutiny and proper oversight. It is unfortunate that the Bill follows a procedure and process that seems to be completely unnecessary and that does not allow for that oversight. Oversight is valid, whether or not you think you will like what the regulator will do.
Baroness Neville-Rolfe (Con)
My Lords, Amendment 21, in my name and that of my noble friend Lady Noakes, would ensure that any government intervention in the provision of in-person banking services is evidence-based, proportionate and properly balanced. It would require Ministers to consider not only the needs of consumers but the legitimate commercial reasons why firms may reduce their physical banking provision.
More widely, Clause 3 raises two distinct but closely related concerns. Our amendment speaks to the first: banks do not close branches simply on a whim. Consumer behaviour has changed profoundly, more banking is conducted digitally, and maintaining a physical network carries substantial costs. The Government may decide that wider social considerations justify intervention, but they cannot responsibly make that decision while ignoring the commercial realities facing the firms they intend to regulate.
Lord Stockwood (Lab)
I was coming on to that point. The noble Lord asked what the power can do and how that scrutiny can take place. It allows the Government to introduce targeted secondary legislation or to confer functions on the FCA, including the power to make rules in the future. When using this power, the Treasury must have regard to the recommendation made by the Lloyd review.
I think the noble Lord made a point about what legislation could be amended. I can only answer this in part at this time: the Treasury expects to use the power if needed to amend relevant legislation, for example, financial services legislation.
Baroness Kramer (LD)
I would just like to clarify this. Is the Minister saying in effect these powers are going to be one time only? Is that the implication?
Baroness Noakes (Con)
My Lords, the Minister said that they may need the power to change financial services legislation. Since financial services legislation is in the hands of the Treasury, I think we are entitled to a slightly more specific explanation of how the power might be used to change primary legislation. Can he be more specific about which bits of financial services legislation the Treasury will likely use the power for?
Baroness Kramer
“Access to affordable credit(1) The Financial Conduct Authority must—(a) within 12 months of the passing of this Act, establish, publish and maintain a framework for assessing and rating the performance of relevant deposit takers in providing access to affordable credit, and(b) annually publish updated ratings and scores produced by the Authority under the framework.(2) The framework must—(a) assess the extent to which relevant deposit takers serve the credit needs of individuals, households and small businesses, including those who are underserved by mainstream financial services, and(b) enable comparisons to be made between relevant deposit takers.(3) In developing the framework, the Authority must have regard to—(a) the distribution of lending across income groups, geographic areas and customer characteristics,(b) the availability of affordable credit to consumers who may otherwise be at risk of financial exclusion,(c) the provision of affordable credit to small and medium-sized enterprises, and social enterprises,(d) the extent to which a bank supports access to affordable credit through partnerships, referral arrangements and funding agreements, with credit unions, Community Development Finance Institutions or other community-based lenders, and(e) such other matters as the Authority considers relevant to the objective of promoting access to affordable credit.(4) For the purposes of subsection (2), the Authority may—(a) make use of regulatory data already collected by it, including product sales data,(b) require relevant deposit takers to provide such information as it reasonably considers necessary for the purposes of the framework, and(c) make different and proportionate provision for different sizes of business.(5) For the purposes of this section, “relevant deposit takers” are—(a) banks, within the meaning given of section 2 of the Banking Act 2009;(b) building societies, with the meaning of section 119 of the Building Societies Act 1986;which meet an Authority-set threshold for the total volume of personal and small and medium business lending.”Member’s explanatory statement
This amendment requires the FCA to establish a framework assessing banks’ and building societies’ provision of affordable credit, including via partnerships with credit unions and CDFIs. It uses existing regulatory data where possible, with proportionate requirements for firms of different sizes.
Baroness Kramer (LD)
My Lords, Amendments 28 and 29 are in my name. Amendment 30 is in the name of my noble friend Lady Bowles and I am very supportive of it, but I am going to focus my remarks on Amendments 28 and 29.
I thank the Fair Banking for All campaign, a coalition of 38 organisations co-ordinated by Finance Innovation Lab, bringing together civil society organisations, anti-poverty groups, community development financial institutions, fintech researchers and people with lived experience of financial exclusion. Their work on drafting Amendments 28 and 29 assures that these amendments work in law and in practice.
Access to affordable credit, which is the subject of these two amendments, is now one of the biggest challenges we face in the UK. Millions of individuals and businesses are excluded from fair and affordable credit despite being financially viable. More than 3.5 million people are handling this by taking out high-cost credit. The consumer duty on banks does not result in any attempt by banks to fill this market failure, nor have they been directed to do so by the FCA.
My focus has been very much on SMEs, which need credit to grow as the backbone of our communities and the source of new jobs. The Federation of Small Businesses records that more than half of all small businesses rate the availability of affordable credit as poor. When I talk to conventional banks about these customers, they say to me that they are very open to lending to small businesses, then I quickly find that they mean they will offer high-priced loans backed by property, not cash flow, and they want personal guarantees from the owners of the SME. It is a consequence of a change in the business model of the high street banks, as, in many ways, the noble Baroness, Lady Noakes, acknowledged earlier. Local banking as we once knew it has disappeared. Decisions are made by bankers or algorithms which do not know the customers or the businesses except on paper. They do not know that Jo has a convincing expansion plan or that Jane always repays her debts. They are detached from the reality of individual banking that is able to take individual proposals into consideration.
Adding to that, small businesses have become suspicious of the banks. The way the banks behaved to customers following the 2008 financial crisis—I mean small customers—shocked many people. They seized assets even when loans were being paid on time and in full, because various property-to-value or loan-to-value ratios had changed with the fall in property values in that era. Paying on time and in full would seem to me to suggest that you are a viable customer, and finding that your loan was called in and the asset seized was really destructive.
Many people thought that challenger banks and new fintechs would be willing to provide credit where conventional high street banks failed. That has not turned out to be true. The new players market themselves primarily to the same pool of SME businesses that the banks seek to service. Indeed, they have now taken a 60% share of that market, because new challenger banks and fintechs typically offer better products and efficiency. However, the access to finance problem has remained and indeed worsened. It has not been resolved by the entry of these new players.
I am pleased that the Bill makes some small moves to improve the situation by expanding the role of credit unions and mutuals and strengthening open banking but, frankly, it does not begin to touch the scale of the problem. My Amendments 28 and 29 follow the pattern of the United States, which dealt with the issue of exclusion head on with the Community Reinvestment Act 1977. In effect, the Act led to the creation of a layer of community development financial institutions, mostly CDFI banks and credit unions, which tackle the problems of exclusion by the big banks.
In the USA, there are now 1,400 CDFIs extending across the whole nation, which manage more than $450 billion in loans, both to small businesses and to individuals. They provide advice, financial education, patient lending and individual assessment. They are also the backbone of economic success in the United States by providing stability in any economic crisis, making sure that disadvantaged communities, including rural areas, are not ignored and growing the businesses of the future. The big American banks, which so opposed the scheme originally because they were required to fund it to remedy exclusion, are now strong supporters, realising that the CDFIs develop their customers of the future.
We have CDFIs in the UK and the British Business Bank, which is an enthusiast, has an ENABLE fund from the Government of £150 million over two years to expand the sector and an ENABLE growth guarantee scheme to reduce borrowing costs. But we still have only some 60 CDFIs in the UK, lending by different estimates something between £250 million and £400 million a year. That is an important contribution, as CDFIs report that 94% of the businesses receiving their loans have previously been rejected by a bank, but, frankly, it is a pathetic number compared to the US.
The Government have set up a UK community finance partnership taskforce to develop partnerships between banks and CDFIs. It is chaired by Bob Annibale, the former director of inclusive finance at Citibank who is a very strong advocate for this agenda, but frankly, I am fed to the teeth of small steps. My Amendment 28 follows the US pattern and would require the FCA to set up a rating system to measure the performance of banks and building societies in providing affordable credit to individuals, households and small businesses, and rating it against appropriate measures to test for exclusion. Rating systems such as this are not a US invention. Similar set-ups are used in the UK by the care inspectorate and the food and health inspectorate.
Amendment 28 would set up the framework of the rating system. Amendment 29 goes beyond that and would enable the FCA to require a proportionate remedy where any bank or building society falls below the threshold required by the FCA. Benchmarking is critical: the language permits the banks to avoid changing their business model. This speaks in a sense to something that the noble Baroness, Lady Neville-Rolfe, raised earlier, which is that banks have changed fundamentally and we are not asking them to change back. What we are doing with this system is giving them the opportunity to find another way to deal with the exclusion, so the language permits the banks to avoid changing their business model and instead allows them to support other arrangements for affordable credit, including credit unions and CDFIs. As I have said, the model is tried and tested in the United States and is understood by every major bank.
I anticipate that some people will say that this proposal is a burdensome data-gathering exercise for the banks, but it is not. In 2013, this House passed an amendment, drafted by me and my noble friend Lord Sharkey, to set up a voluntary scheme for banks to report most of the relevant data—and by postcode, so it was very granular—to UK Finance. With a few tweaks, the relevant data for the rating scheme proposed in Amendment 28 is already available and in usable format. The problem is that the data has not been used to create a remedy: another example of the way the FCA does nothing in the face of market failure without being dragged kicking and screaming, usually by this House. That is why the remedy amendment, Amendment 29, is so important.
At Second Reading, a number of Peers spoke out in support of CDFIs and credit unions. Many of us recognise that the high street banks will never return to their local roots and that dragging them to lend when it does not fit their business model means poor service. New challenger banks and fintechs have not filled the gap. The Government are committed to a growth agenda. I can think of few measures that would drive growth more rapidly and sustainably across all parts of the country to fix the loss of local and community banking than these amendments. I beg to move.
Amendment 29 (to Amendment 28)
Baroness Kramer
“(4A) Where a relevant deposit taker receives a score or rating below a minimum threshold prescribed by rules made under this section, the Authority must require the deposit taker to take proportionate remedial action to improve its rating.(4B) The Authority may—(a) make such rules or issue such guidance applying to designated persons as appear to the Authority to be necessary or expedient, and(b) give a direction under this section to a designated person if it considers that it is desirable to give the direction;for the purpose mentioned in subsection (4A).”Member’s explanatory statement
This amendment to Baroness Kramer’s amendment gives the FCA a duty to ensure, through rules and guidance, that relevant banks and building societies which fall short of a minimum threshold performance in providing access to affordable credit are required to take proportionate steps to remedy the situation.
Lord Stockwood (Lab)
My Lords, Amendments 28, 29 and 30 are aimed at increasing access to finance and ensuring that the customers of financial services firms are protected. I recognise the intention behind these amendments. However, I do not believe that either solution is workable.
On Amendments 28 and 29, I agree that data on access to finance and holding the sector to account are important. However, these proposals would introduce a new, prescriptive and burdensome framework on the FCA and firms that I am not persuaded would deliver the desired output.
Amendment 28 would require the FCA to establish a framework to monitor, assess and publicly report on certain banks’ and building societies’ performance in providing access to affordable credit. Amendment 29 would require the FCA to take action against firms that do not meet a minimum standard. As the noble Baroness, Lady Kramer, said, this approach resembles the United States’ Community Reinvestment Act 1977, but we should not assume that it would have the same effect here. Our starting point is different: we are working nearly 50 years later, in a digital age, with a far more diversified credit market. In any case, lenders already publish significant data. Chapter 7 of the FCA’s Conduct of Business Sourcebook requires extensive disclosure on personal and business current accounts. We also have the FCA’s Financial Lives Survey, the SME Finance Monitor and the British Business Bank’s annual SME finance publications, among others.
Amendment 29 would require the FCA to act against firms that do not meet a minimum lending standard. Striking the right balance on access to credit has long been a challenge. We want consumers to be able to access credit where it supports financial resilience and businesses to secure the finance needed to grow, but inappropriate credit can lead to overindebtedness, with serious consequences. The amendment could, in effect, compel lending to more vulnerable groups or SMEs. Even a well-designed regime could be a blunt instrument, with a risk of unintended outcomes. It would also represent a significant intrusion into firms’ commercial decisions.
More fundamentally, it is difficult to see how firms could increase lending and take on greater risk without raising prices to reflect that greater risk. If firms do not price risk appropriately, it opens us up to financial stability risks. The FCA would be placed in the invidious position of having to mandate affordable credit, while the mechanism required to expand provision could increase costs and potentially increase risk for the borrower and the firm. That runs directly counter to the intended objective for vulnerable customers and SMEs.
Although I cannot accept these amendments, I stress to noble Lords that the Government are not complacent about financial inclusion or the availability of SME finance. The noble Lord, Lord Altrincham, asked me to set out what the Government are doing, and I am happy that noble Baroness, Lady Kramer, mentioned several of these interventions already. The Government published their Financial Inclusion Strategy last autumn, and we are supporting practical interventions for consumers, including a small sum credit pilot enabling mainstream lenders to test lending to customers outside their usual risk appetite. Monzo was announced as the first participant in the scheme earlier this month.
We have launched a transformation fund for credit unions, alongside common bond reforms in this Bill, to strengthen their lending capacity. We are also advancing targeted SME finance measures to improve competition and supply, including enhancing the consumer credit data sharing scheme through Clauses 41 and 43 of this Bill. We are supporting up to £150 million of lending through the Community ENABLE funding programme over the next two years. We are establishing a CDFI taskforce and working with industry to improve bank referrals. Indeed, tomorrow I am meeting several large asset managers as chair of the place-based impact investment scheme. We will set out next steps on open finance later this summer. This has significant potential to support SME lending across a wide range of providers, alongside broader work with the Bank of England on capital and ring-fencing.
I highlight community development finance institutions, which I know are a priority for the noble Baroness, Lady Kramer. In addition to the CDFI taskforce and the Community ENABLE funding programme that this Government have funded, the sector benefits from Fair4All Finance’s affordable credit scale-up programme, which has committed more than £40 million in social investment in England to date. The financial inclusion strategy further includes measures to strengthen community finance, including promoting partnerships with mainstream lenders. Taken together, these measures support access to finance in the UK in an appropriate and responsible way.
Amendment 30 would introduce a new fiduciary duty on firms when carrying out FCA-regulated activities. It would place specific legally binding requirements on firms. I agree with the noble Baroness that it is vital for firms to act in a way that delivers good outcomes for consumers. However, I believe that FCA regulation is able to achieve this, and I am concerned that this new duty would risk creating overlapping requirements, causing confusion and reducing consumers’ access to finance.
The FCA’s consumer duty is designed to set a high standard of protection for retail customers by requiring firms to act to deliver good outcomes in line with the outcome sought by this amendment. It requires firms to put consumers’ needs at the heart of their business, including by acting in good faith, avoiding foreseeable harm and supporting consumers to pursue their financial objectives. In practice, this means that firms must design products and services that meet consumers’ needs, provide fair value, communicate clearly and offer effective support.
I am concerned that the requirements set out in this amendment would risk making more vulnerable customers more expensive and risky to serve, which would reduce their access to products such as credit and insurance. Introducing a novel statutory fiduciary duty, the precise scope of which would fall to be settled through litigation over a number of years, would create significant legal uncertainty. That uncertainty would carry a cost, which firms would be likely to manage by withdrawing from, or repricing, services for higher-risk customers. I recognise that there is some precedent for a fiduciary duty in trust-based pension schemes. However, the dynamics of the market are very different from wider consumer financial services. Typically, employer pension schemes do not choose which individual customers to serve, and the fiduciary duty applies at the membership level.
I genuinely understand the importance of lending for all parts of the economy, and I understand the need for borrowers to be protected, but I am convinced that the Government are taking the right set of actions, and I am afraid that Amendments 28, 29 and 30 would bring significant unintended consequences. I therefore ask the noble Baroness to withdraw her amendment.
Baroness Kramer (LD)
I thank the right reverend Prelate the Bishop of Manchester for signing Amendment 28 and for speaking so eloquently in this debate. The noble Lord, Lord Massey, and the noble Baroness, Lady Noakes, are both involved in the world of finance and meet international financiers. I will give them a challenge. When they meet American financiers and bankers, whether here or in the United States, will they please raise CDFIs? The noble Lord, Lord Massey, will find that basically everything he said flies completely in the face of the US experience, and I say the same thing to the noble Baroness, Lady Noakes.
Lord Stockwood (Lab)
My Lords, as we have heard today, the Financial Ombudsman Service—the FOS—plays a vital role in providing quick, informal and impartial dispute resolution between customers and their financial services providers. It offers an accessible route for dealing with complaints that is designed to act as an alternative to resolving cases through the courts, which can be costly, lengthy and a process that often does not work for firms and consumers. The Government are clear that an effective ombudsman provides consumers with confidence in our financial services sector and is a key element of an effective system.
The Government’s review of the FOS found that, although the FOS fulfils its role in the majority of cases, in a small but impactful minority of cases, it has acted as a quasi-regulator. That conclusion was supported by the Financial Services Regulation Committee, chaired by the noble Baroness, Lady Noakes, in its report, Growing Pains: Clarity and Culture Change Required, which was published in June 2025. It recognised that the FOS’s
“actions have regulatory impacts by creating precedents that the FCA requires firms to follow”,
and that this
“generates an unacceptable level of uncertainty for firms, stakeholders, and investors”.
I want to be clear that the review was not suggesting that the FOS was acting improperly; rather, it concluded that the way in which the legislative framework operates made such issues unavoidable by creating a disconnect between the FCA’s rules and the FOS’s decisions, giving rise to unpredictability and a lack of certainty across the regulatory environment. That unpredictability is damaging for everyone and harms consumers’ confidence in the financial services products and services they rely on, as well as firms’ confidence to invest and innovate in the UK.
There is a large number of amendments before us. I will start with Amendment 31. This proposal would substantially extend the timeframe for bringing complaints to the FOS and would require the FOS to spend even more of its time and resources investigating, considering and attempting to resolve historic cases than it does today. We know from current experience that this would substantially increase costs while delivering comparatively limited increases in redress awarded. Further extending the timeframe beyond 10 years in an open-ended way to accommodate a complainant’s reasonable awareness of an issue would increase uncertainty for firms around historic liabilities, reducing appetite to invest in the UK’s financial services businesses.
The Treasury’s analysis of data from the FOS on historic cases is clear: they are more likely to be withdrawn or abandoned and have lower success rates than the average, often due to limited evidence and information being available. The Government’s analysis concluded that complaints to the FOS that are over 10 years old cost firms, on average, more than £18 million per year in case fees but deliver only £600,000 per year in redress for consumers. This is not a proportionate or balanced approach, nor is it consistent with the FOS’s quick and simple purpose. Extending the timeframes would slow down the FOS’s resolution of cases that are more recent and have a higher chance of being upheld, delaying consumers access to the redress they are owed.
Turning to Amendment 32, the Government considered carefully the options for different time limits to be set in legislation, including a six-year limit, and published their analysis in the impact assessment. Although this is a matter of judgment, the Government concluded that a 10-year time limit would strike the appropriate balance between consumer protection and providing certainty to firms, with a six-year limit resulting in too many people losing access to redress. However, I assure the noble Baroness and the noble Lord that the new limit introduced by the Bill is designed to act as a backstop to the existing limits set in rules made by the FCA. In most cases, the time limit will remain at the existing six years, with the 10-year backstop kicking in for cases where the customer could only reasonably have become aware of the problem at a later date.
On Amendments 33 and 35, the Government agree that, where the cause for complaint may take longer to come to light, such as with pensions, it is important that complaints can continue to be brought to the FOS. This is why the Bill gives the FCA discretion to make exceptions to the time limit in specified circumstances, where it is appropriate to do so. The Government carefully considered their approach to defining these exceptions and determined that the FCA is best equipped to develop proportionate and fair exceptions and to define these in its rules, given the FCA’s supervisory role and oversight of the sector and the level of technical detail that is required for the definitions.
The noble Lord is right to recognise the careful balance needed between ensuring that we do not undermine the certainty that this reform is intended to deliver while maintaining consumers’ trust and confidence that they will have access to redress when things go wrong. The Government are working closely with the FCA as it develops these exceptions and the FCA will set out its proposals in due course.
Amendment 34 relates to cases where there is an ongoing relationship between the consumer and a firm. Some complaints may be about acts or omissions that continue to occur or have effect in the context of an ongoing relationship between a consumer and a firm. The Financial Services and Markets Act 2000 does not place a restrictive definition on “acts” or “omissions”, so there is no reason why such an ongoing act or omission could not be the basis for a complaint within the time limit. The Government’s reforms in the Bill will not change the FOS’s discretion to identify the act or omission to which a complaint relates for the purposes of applying relevant time limits. It will continue to be for the FOS to make those judgments, based on the circumstances of the case and in line with the rules set by the FCA.
I will now explain the Government’s purpose behind Clause 8 and why it should stand part of the Bill. The noble Lords, Lord Davies of Brixton and Lord Sharkey, asked about the evidence base behind the Government’s policy. The Government’s review found that, in a small but significant minority of cases, the FOS has acted as a quasi-regulator. This means that, in some cases, the FOS has held firms to a standard that is different from those set by the FCA. The majority of responses to the Government’s consultation on the proposals to reform the legislative framework in which the FOS operates were broadly supportive of aligning the FOS’s fair and reasonable test with the FCA rules.
Baroness Kramer (LD)
Can the Minister clarify something? Is he saying that, provided you comply with an FCA rule, you are then always fair and reasonable? That is what I am taking away from this. I can list so many examples, such as Libor and mini-bonds—all kinds of things—where the perpetrators ticked every single compliance box. I am curious to know.
Lord Stockwood (Lab)
I apologise for taking a moment to ask my officials a question; I want to make sure that I give the right answer. Where the FOS has complied with the FCA rules, it still has the discretion to make judgments, as long as it believes them to be fair and reasonable.
Lord Stockwood (Lab)
Certainly. We are trying to align the FOS’s “fair and reasonable” test with the FCA rules, but it retains some discretion.
I apologise for taking another moment to consult my officials. For clarity, where the FOS has aligned with the FCA rules, it has to believe that that is the case, and that determination has to be upheld.
Baroness Kramer (LD)
For absolute clarification, “fair and reasonable” must be interpreted by the FOS as a standard that is met if there is compliance with FCA rules. I just want to understand because we can then go back historically and see where FCA rules might not have been perceived as fair and reasonable. It is interesting.
Lord Davies of Brixton (Lab)
To pursue that, are we being misled by the use of the word “rules” here? There is guidance as well as rules. The principles are not rules, but the principles have to be followed, and they include things such as treating the customer properly. Is that right? There are some general principles within what the FCA lays down—
Baroness Kramer (LD)
I am not sure that is what the legislation says; I think it says “rules”.
Lord Davies of Brixton (Lab)
As one always says in this situation, I will read what the Minister said with care. I have to admit that I was a little disappointed on the “fair and reasonable” test, but on close analysis it may prove to be better. In particular, I hope I will have a copy of the letter. It is clear that the rules include the principles, such as:
“A firm must observe proper standards of market conduct”.
Is it the ombudsman who would decide what was the proper standard of market conduct, or is that one of the issues that will have to be referred to the FCA? I am not expecting an answer now, particularly as—
Baroness Kramer (LD)
I have a question for the noble Lord, Lord Davies. My understanding of the principles is that they sit at the top, and the rules are derived from them. But this is a focus on the rules, so it is only as derived. I do not know, and we will get an answer.
Lord Davies of Brixton (Lab)
That is what the Minister will need to make clear in the letter. I urge him to make that point clear. Who decides whether the principles have been followed—or is that one of the issues that have to be referred to the FCA under Clause 7?
On time limits, I am disappointed that the Minister did not address the specific cases that I addressed. Some figures were provided—I will start a war on people providing figures in this sort of debate, because they whistle past your ear and it is very difficult to make a quick assessment. The problem is the counterfactual: if the existing system did not exist, would those same figures apply? The Minister has effectively said that, under this change of rules, some people who previously would have received compensation will not do so. That is absolutely clear from the Minister’s statement, and that is reasonable because the providers will save an even larger sum of money. But of course that is under the existing system. We have to think about what those figures would be under the new system.
Again, I hope the Minister will write to me about the specific examples, which could be large sums of compensation—in the case of inappropriate personal pensions, £13 billion was paid in compensation. Would that have been possible under the revised rules? I say that because £13 billion is quite a figure to miss out on for ordinary policyholders. I beg leave to withdraw the amendment.
Baroness Kramer
“Reimbursement of fraud: liability of technology companies(1) The FCA must make rules providing that, where a person is to be reimbursed in respect of losses arising from an authorised push payment fraud, the cost of that reimbursement is to be borne, in whole or in part, by any relevant technology company on whose service the fraud was initiated, facilitated or communicated.(2) Rules under subsection (1) must provide for—(a) the apportionment of the cost of reimbursement between relevant technology companies and payment service providers, by reference to the extent to which each contributed to the fraud occurring,(b) a process by which a payment service provider that has reimbursed a victim may recover the apportioned cost from a relevant technology company, and(c) the information that a relevant technology company must provide to the FCA and to payment service providers for the purposes of the rules.(3) In making rules under this section, the FCA must have regard to the principle that the cost of reimbursing victims of fraud should fall, so far as is reasonable, on the persons best able to prevent the fraud.(4) In this section—“authorised push payment fraud” means a transfer of funds executed by a payment service provider on the instruction of a payer, where the payer was deceived into giving that instruction;“relevant technology company” means a person who provides—(a) a user-to-user service or a search service within the meaning of the Online Safety Act 2023,(b) an electronic communications service, or(c) any other online service by means of which an authorised push payment fraud may be initiated, facilitated or communicated.”Member’s explanatory statement
This new Clause would require the FCA to make rules placing liability for the cost of reimbursing victims of authorised push payment fraud, in whole or in part, on the technology companies on whose platforms the fraud originates, rather than solely on payment service providers, and to apportion that cost according to who is best able to prevent the fraud.
Baroness Kramer (LD)
My Lords, I will take that as an encouragement to speak only to my amendment, so I shall just say that the other amendments in the group from the noble Lords, Lord Faulks and Lord Hunt, make a great deal of sense to me, but mine is slightly different. They are dealing with the issues of reporting, review duties and requirements; I am addressing the same underlying issue of authorised push-payment fraud, coming from the perspective of who needs to act to prevent that and be on the hook when there is abuse.
The tech firms—and it is primarily the US tech giants—are now major players in the payments system. They are not merely an inanimate part of the plumbing; the way that they set up and police their systems, or fail to, makes them significantly responsible when their platforms are used to initiate, facilitate or communicate fraud. With AI, the risks become yet greater for ordinary people unless proper guardrails are put in place, so we have to look ahead, not just put in place protections for current circumstances and the past.
The financial incentive for tech firms to ignore fraud is huge. Some analysts have estimated that in 2025, in the UK alone, scam ads generated income of £3.8 billion for the tech companies. My amendment dealing with authorised push-payment fraud deals with a sector of that, but a huge one: authorised push-payment fraud in the UK exceeds £576 million a year. Under present legislation, victims are reimbursed most of that money by the banks, but the techs who have provided the mechanisms are off the hook. I think that is preposterous, because the techs are typically best placed to prevent the fraud.
Amendment 46 would require the FCA to apportion reimbursement by reference to which part each player contributed to the fraud occurring. I strongly suggest that, if passed, this amendment would lead to the tech companies suddenly finding that it is in their interest to prevent APP fraud. As I said, I have great respect for the other amendments in this group, but the payment system is a complex one. There are now many new participants and everybody, not just the banks, should be playing their appropriate role in providing both protection and reimbursement. I beg to move.
Baroness Kramer (LD)
My Lords, the noble Lord, Lord Vaux, and the noble Baroness, Lady Neville-Rolfe, both gave far better speeches then I could, and covered the whole area substantially. I am grateful to them, but this gives me a few moments to reply.
Did the Minister say that the financial responsibility that will fall on tech platforms is the cost of prevention, detection and removal, and does he consider that all they need to do? He did not answer the question on shared liability or full reimbursement, and I find that reasonably preposterous, to tell you the truth. If these firms were effectively putting in place prevention, detection and removal, we would not have very much APP fraud, and therefore they would not be making very much reimbursement. We are not asking them to double up what they pay but to pay effectively.
There is a lot more that the Government need to take note of on this. They must also remember that the victims are among the most vulnerable people in our society, as well as others who think of themselves as capable and then find they have fallen for a scam.
I suggest that something far more vigorous is required, and it must be effective in making the tech companies respond, because, as the noble Lord, Lord Vaux, said, the history is that tech companies simply absorb the various requirements on them and make little move to act, because of the income that comes when they simply look the other way.