Financial Services Bill

Debate between Lord Bishop of St Albans and Lord Leigh of Hurley

Report stage
Wednesday 14th April 2021 Lords Chamber

[Lord Leigh of Hurley (Con) [V]]

My Lords, I congratulate my noble friend the Minister on Amendment 14, as I raised that issue at Second Reading and it was very good to see it today. It shows that the Government are listening, which is very welcome. I thank him for his kind opening remarks on a number of Peers’ appearances: it was very perceptive of him. I will not repeat the sorry tale that he heard last time around, which is the reason for this amendment. He will recall that it was in response to an attempt to commit a fraud by sending me a credit card I had not requested, and that I was unable to progress matters with FOS because I was not a customer of the credit card company concerned. I had a letter from FOS, which says the following:

“The Financial Ombudsman Service must follow the rules stipulated by the Financial Conduct Authority handbook. The relevant section concerns dispute resolution—DISP—and DISP states that there are limitations to when FOS may investigate a complaint.”


This is the rule that stipulates that FOS may look at complaints only from “an eligible complainant”, and DISP 2.7.3 states:

“An eligible complainant must be a person that is … a consumer”.


The regulations go on to say that FOS may investigate a complaint from a consumer or “a potential consumer”, and that this consumer or potential consumer must have a relationship with the regulated busines. There is a full explanation set out in DISP 2.7.3 and 2.7.6 of the FCA handbook. As I did not genuinely attempt to make a credit application, I did not fit the description of consumer or potential consumer in the handbook. In his reply to me at Second Reading, the Minister said that

“it is already the case that potential customers of a firm can seek redress through the FOS scheme under the FCA’s existing rules, notably the FCA dispute resolution handbook rule. The relevant rule states that, to be an eligible complainant, a consumer must be, or have previously been, a potential customer, payment service user or electronic money holder of the firm that they are raising a complaint against”.—[Official Report, 8/3/21; col. GC 552.]

This is completely contrary to the email sent by FOS, and there is clearly misunderstanding and confusion.

My noble friend the Minister was kind enough to suggest that I could report this matter to Action Fraud, and reports received by Action Fraud are then considered by the National Fraud Intelligence Bureau. Frankly, none of that need have been necessary or would be necessary in future if my Amendment 26, the only amendment I will speak to, were adopted. I seek for it to be adopted so that, from here on in, FOS can take action against credit card companies which do not seek to verify recipients of credit cards before they are sent out. At the moment, there is no redress for anyone who receives a credit card and no one for them to complain to. I do not think they can complain to Action Fraud because the fraud was never consummated, as it were. I very much look forward to listening to his remarks at the Dispatch Box later this afternoon, given that the Government are in listening and action mode.

[The Lord Bishop of St Albans [V]]

My Lords, I shall speak to Amendment 16 and then address my own Amendment 27. The introduction of a regulatory body to oversee the rules governing the behaviour of bailiffs would greatly strengthen complaints handling for the victims of practices that fall outside the national guidelines. The FCA reported in its Financial Lives 2020 Survey that 3.8 million people in the UK are currently experiencing “financial difficulty”. It is a terrible situation that takes a significant toll on people’s health and relationships. This amendment seeks to address an important concern: the fair treatment of people by enforcement agents who collect debts, often from vulnerable people who are in grave financial distress.

The absence of an independent regulator means that, when breaches of national standards occur, any complaints will be dealt with through the company or a trade association, before possibly being passed on to an ombudsman. This is an arduous process that prevents complaints from being adequately actioned. Furthermore, these national standards are not legally binding, which obscures the extent to which an individual can seek redress. No industry is exempt from poor practice. While most enforcement agents will probably abide by national standards, nevertheless we need to make sure that they are properly regulated.

Breaches do occur, and I will quote one example provided by the charity Christians Against Poverty of a single mother of two children. This woman was living under police protection and was a regular at a food bank, and her abusive former partner had taken out £20,000-worth of debt in her name. All of this was compounded by the fact that she was caring for her critically ill mother. When visited by a bailiff on account of a parking fine that had escalated, she attempted to contact CAP so that it could explain the situation to the bailiff. At this point the bailiff became intimidating, aggressive and threatening. That is a breach of rule 21 of the national guidelines, which states:

“Enforcement agents must not act in a threatening manner when visiting the debtor”.


We need to get a balance of powers that allows enforcement officers to undertake their tasks while also protecting debtors and ensuring they have significant mechanisms to air complaints impartially and without fear.

Debt charities are already reporting rising numbers of people in financial crisis and behind on household bills such as rent and council tax because of the Covid pandemic. Given the possible upturn in the number of individuals being referred to bailiffs in the near future, now is a suitable time to explore how we can introduce a regulatory body. I hope the Government will look closely at the content of this amendment and work to correct the current imbalance.

I now turn to Amendment 27 in my name. I am grateful to the noble Lord, Lord Sikka, and the noble Baroness, Lady Bennett of Manor Castle, who have also signed it. I tabled this amendment because I believe in the positive difference that gambling blockers can make in reducing gambling harms and empowering individuals to control their own addictions. The amendment would mandate the providers of debit and credit accounts to offer opt-in gambling blockers to block gambling transactions.

As things stand, gambling blockers have widened coverage over the past three years, currently reaching around 90% of current accounts and 40% of credit card accounts. This is an achievement in its own right and should be welcomed as a positive technological aid to reduce problem gambling. While there is a still a need to close that 10% in debit card coverage, the majority of which will come from smaller banks and building societies, it is of secondary concern to the far larger gap that exists in the credit account market, where 60% of accounts are not covered by blocking options.

In April 2020, the Gambling Commission banned the use of credit cards for gambling purposes, but this is only enforceable on licensed operators. The lack of gambling blockers on credit accounts is particularly problematic as it can provide a back door for individuals suffering from gambling-related harms to use credit cards on unlicensed sites. This undermines the Gambling Commission’s own rules and unfairly benefits unlicensed operators. Even more worryingly, this blind spot provides a direct avenue for the expansion of harmful and addictive behaviour, and the accumulation of gambling debt that would not ordinarily be allowed.

With the Government’s gambling review ongoing, the emphasis should be on preventing harm, and provisions for gambling blockers would be a welcome aid in achieving this goal. Admittedly, they are not perfect; they rely on accurate merchant categorisation codes to identify gambling transactions. But this should not discount the positive part they can play. Furthermore, through greater co-operation between account providers and payment processors, a robust and data-driven system of reporting could be developed to identify unlicensed operators hiding behind incorrect merchant categorisation codes to block future transactions. With no legal requirement to provide blockers and no obligation on payment processors to diligently review the merchant categorisation codes of unlicensed operators, gambling blockers will suffer from pitfalls that could be effectively remedied through either a legislative or regulatory approach.

There are also issues this amendment does not directly deal with but deserve highlighting. Due to the entirely optional provision of blockers, there are currently no minimum standards for functionality. This is an issue when it comes to the so-called “cooling-off” or “friction” period—the time between deactivating the blocker and once again being allowed to transact for gambling purposes. As a tool that assists those suffering from gambling addiction, the ability to activate and deactivate at will renders a blocker redundant.

Of the gambling blockers currently on offer, friction periods range from instant reactivation to 48 hours. The results offered by Monzo highlight the success of stricter cooling-off periods. Its blocker, with a 48-hour cooling-off period, block around 585,000 gambling transactions per month and is active on nearly 300,000 accounts. According to its data, once it is activated, fewer than 10% of customers deactivate it. Monzo, driven by its own success, has called upon the Government to mandate that banks provide blockers and would no doubt support this amendment. However, as I have shown, it is not merely their provision that renders them successful but their architecture. A minimum cooling-off period of 24 hours would make them far more effective tools to deal with addictions.

Finally, I will add that, in a data-driven world fuelled by digital payment systems rather than the cash we used in the past, individuals should have more autonomy over how they spend their money. Aside from their benefits in combating addiction and containing the unlicensed market, gambling blockers are an example of giving customers control over their own transactions. Actions and decisions are increasingly dictated by data that is controlled, analysed and dissected by global corporations and increasingly removed from the individual. Optional transaction blockers such as those related to gambling re-empower individuals and give them a stake in this new data-driven environment.

I thank the Government for their helpful work in encouraging the major banks to introduce gambling blockers—an endeavour that has been very successful in relation to debit cards. I know from discussions I have had with the Government that they see the benefits of blockers and continue to support a voluntary rollout. This is very encouraging and I hope that as they move forward with these efforts they will take on board some of the comments made here and find ways to promote greater data sharing between payment service providers and processors to tackle the unlicensed market. However, I remain of the opinion that for products as potentially harmful as gambling there should be not only a statutory obligation to provide opt-in blockers, as stated in this amendment, but minimum design requirements so that the positive results provided by Monzo can be emulated by other account providers.