Financial Services Bill

Debate between Baroness Kramer and Lord Lucas

Report stage
Wednesday 14th April 2021 Lords Chamber

[Lord Lucas (Con) [V]]

My Lords, I shall speak to Amendment 16 and I thoroughly support its intent. I have been chair of the Enforcement Law Reform Group for more years than I care to remember, and for all that time I have been aware that every side of the industry wants statutory regulation. It is not a suitable case for voluntary regulation. You need the powers that go with being set up by statute to deal with all the difficulties and conflicts that are inherent in the business of getting money out of people who do not want to give it to you.

I fully understand the Government’s caution about the drafting of the amendment, but I very much hope that everyone involved in it will hold their feet to the fire to get a suitable alternative through as soon as possible. I have one piece of advice for the Government on the amendment as drafted. It is important that whatever we create can bite on creditors. A lot of the problems in this industry have their roots in the delinquency and bad behaviour of creditors and in the disorganisation of the systems that they operate. The privilege of being able to use a bailiff should be granted only to creditors who are well set up, who have done their preparatory work, who know who is vulnerable, who have found out the right addresses, who have properly offered payment holidays or plans before involving the very expensive, onerous and sometimes distressing option of a bailiff.

When we come to have this in statute, we need some way in which a local authority, for instance, which is trying to recover debt due on council tax must demonstrate that it has done what it should in order to be allowed to use the bailiff system. There may be some other way of doing it—but not to have that connection through to creditors and think that you can regulate just by putting pressure on bailiffs would be a considerable mistake and would, in the end, result in the system not working.

[Baroness Kramer (LD)]

My Lords, I think my noble friend Lord Addington put his finger exactly on the problem here. These are a series of amendments, all of them good and strong, that tackle really significant issues that seem to affect a particular selection of our population who find themselves constantly recognised but pushed into the long grass, so that we do not get regulation of the underlying problem. I hope that today we can collectively as a House ginger up the Government to say that this really must be dealt with—not just given to working groups or consulted on yet again but put on a track to get resolution quickly.

On Amendment 16 in Grand Committee we discussed bailiffs and the need to improve their behaviour and get it within the right statutory context, so I will not add more, other than to say that with Covid and the consequences for so many people who will find themselves out of work or in debt, this becomes more urgent than ever. The noble Baroness, Lady Meacher, should know that, if she finds an appropriate vehicle, we would be very willing to support on this. It must be dealt with. It would be lovely if it were in the form of a government amendment, but somebody will have to move on this very quickly or a lot of people will be paying a sad price.

On Amendment 26, in the name of the noble Lord, Lord Leigh, sometimes a personal experience leads to identifying a real problem, and he has put his finger on another problem. If I were a regulator, I must say that anyone who could get my attention and show me that we are getting abuse and misbehaviour within the financial services sector ought to be welcomed. If the definition of eligible customers makes it difficult or impossible to use as broadly as it should be, a look at that definition is urgent. If I were the ombudsman or the FCA, I would certainly want to know that someone was out there attempting to scam the public. I can assure the Government that the scammers know all the loopholes and weaknesses in the definitions, so plugging them as rapidly as possible makes obvious sense.

--- Later in debate ---

[Lord Lucas (Con) [V]]

My Lords, it is clearly acknowledged that there is a problem. It is evident to me that this is exactly the sort of problem that the Government ought to sort out because, as my noble friend Lady Noakes said, we have no business landing this on the lending community. It is our responsibility. The Bill is an opportunity to make sure that something is done, and I very much hope that we take it.

[Baroness Kramer (LD)]

My Lords, I think the case has been extremely well made. I usually really respect the opinions that the noble Baroness, Lady Noakes, puts forward, but it seems to me that she completely fails to understand the circumstances that led these people into being mortgage prisoners. They took out loans under credit checks and it was entirely appropriate, but the banks from whom they borrowed the money crashed in the 2008 financial crisis, largely through poor regulation, which lies at the Government’s door, not the door of those who took out mortgages. People with absolutely identical credit profiles who took out their mortgages with a bank which did not crash have had many opportunities to refinance, which is normal in the life of the mortgage. A standard, typical bank knows that it will vary the characteristics of its mortgage over the life if that option is sought by the mortgagee.

The group of people who took out their mortgages with banks that crashed in many cases found that those mortgages were stripped out as part of the asset rescue process that the Government went through, and the Government then sold those mortgages to completely inappropriate buyers under inappropriate terms in order to get the maximum return. I understand their motivation—maximum return for taxpayers—but they removed all of the normal relationships and embedded rights in those relationships that a mortgagee has when they take out a mortgage with a viable financial institution.

The noble Baroness treats many of those mortgage prisoners as people who are now of poor credit. These are people who have aged—we all do that. The mortgage that we take out at the age of 30 is not the same one that we would be able to take out at the age of 55, because we have got older and our career profile is different. Some of them have become ill, and therefore had reduced earning capacity. Any standard bank dealing with a mortgagee in those circumstances makes adjustments. Mortgage prisoners are not able to seek such adjustments and they have been left in dire circumstances.

The fault lay with the Government when they sold mortgages under inappropriate terms to inappropriate buyers to manage them. It treated them as though they were abstract assets, rather than a special category which has a lot of convention embedded in it, in order to maximise their sale. I very much hope that the Government will realise that they have a responsibility. They took those additional revenues, they took the benefit of selling off those mortgages under terms and conditions that they should never have permitted, and they now need to offset that by stepping forward and making sure that those mortgage prisoners can have the same access to flexibility that would have been theirs had they taken that loan out with a financial institution that did not collapse in 2007-08.