Financial Services Bill
Lord Kennedy of Southwark Excerpts(12 years, 1 month ago)
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Baroness Kramer
My Lords, I will speak very briefly to this amendment, with which I have great sympathy.
I understand that the Government are carrying out a review of payday lending. I have two concerns. First, we really need to nail the banks, frankly, because I suspect that if the various fees charged for unauthorised overdrafts were translated into an APR, they might not be so different from that charged by Wonga. Secondly, we need to understand this dynamic between companies like Wonga and the kind of loan sharks that come after their clients with a baseball bat, because the last thing any of us want would be to see people driven back to those illegal lenders and subject to their violent and aggressive behaviour.
Would the noble Lord, Lord Mitchell, not agree that the most important way to combat this kind of exorbitant charging is to make sure that there is a proper alternative for individuals, whether it is through a credit union, community development banks—which we do not have this in this country—or some other mechanism where there is a legitimate provider that serves this particular market? Would he not agree that one of the frustrations with much of the language in this Financial Services Bill is that it is not taking the necessary actions to promote those kinds of organisations coming forward and to provide regulator backing to ensure that the alternatives are in place so that people do not have to resort to Wonga or to banks charging exorbitant fees for unauthorised overdrafts?
Lord Kennedy of Southwark
My Lords, I thank my noble friend Lord Mitchell for his very welcome amendment. The time has come to deal with this issue. All of us, I am sure, are greatly concerned that those in poverty or on a low income, with a poor credit rating, actually pay the most for financial services—those who can least afford it pay the most, and that is wrong.
Like the noble Lord, Lord Mitchell, I think it is outrageous that people pay 2,000%, 3,000% or 4,000% for credit. It is a great concern to me that on the streets of Walthamstow and Southwark, where I come from, you see these payday loan companies offering these services. If you are at home watching daytime television, you are bombarded with them then and at other times. It is outrageous. The Government should look to create an environment that enables people to pay a fair price for the credit they need. The noble Baroness, Lady Kramer, spoke about the credit union movement. I am a big supporter of it as well and it certainly has a role to play in finding part of the solution to this problem. The Government have got to help it. I know it had some welcome support from the Government, with £38 million from the development fund. That is great, but it needs additional support to enable it to offer some of the services discussed here today. It may also be time for the banks to do something. We often talk about the problems we have had with the banks in recent years. They could earn some credit by working to help people in this sector. These are often the people the banks do not want to lend money to. They all have charitable arms and trusts, though, so why can they not work to help those whose business the banks would not otherwise want, to access credit elsewhere? The banks should step up to the mark and look at this.
As my noble friend said in introducing this amendment, there is no attempt to stop these firms trading, but it gives power to the FCA to set the interest rate they charge. That is very welcome. My noble friend also said that the cost is displayed as an annualised rate, but it is so small, it is hard to read. What should happen is that the print is like that on a packet of cigarettes, with a great big sign saying what it costs. We should see it clearly so that if we borrow £1,000 or £2,000, we know without dispute what we are actually paying. I am delighted to support my noble friend and look forward to the response of the Government.
Lord Flight
My Lords, I shall make two brief points. First, when I started my career there was a money-lending licence. You could not be in the business unless you had one and if you did, the interest rate that you could charge was limited by law. Secondly, wearing my hat as a commissioner of the Guernsey Financial Services Commission, Guernsey has refused to allow such companies to register or operate within the States of Guernsey.
Financial Services Bill
Lord Kennedy of Southwark Excerpts(12 years, 2 months ago)
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“29 After paragraph 22 insert—
“Part 5Complainant representativesIntroduction23 This Part of this Schedule applies to a complaint under the compulsory jurisdiction, the consumer credit jurisdiction or the voluntary jurisdiction in respect of which the complainant has entered into an agreement with a complainant representative.
24 A “complainant representative” is a person who has entered into an agreement with a complainant with respect to a complaint pursuant to which any fee has been, will be or may be paid by the complainant.
Complainant representative rules25 The scheme operator must make rules, to be known as “complainant representative rules”, which are to set out requirements applicable to complainant representatives and to complaints falling within paragraph 1.
26 Complainant representative rules may, among other things—
(a) require that a complainant representative disclose to the scheme operator the agreement referred to in paragraph 2 when a complaint within paragraph 1 is made;(b) require a complainant representative to take reasonable steps to obtain from the complainant, and as appropriate to supply to the ombudsman, such information as an ombudsman might reasonably require to determine a complaint;(c) provide for the consequences if a complainant representative does not comply with complainant representative rules or other applicable legal or regulatory requirements, including requiring or enabling the ombudsman not to consider any complaint or to consider a complaint only if conditions specified by the ombudsman have been satisfied;(d) enable the ombudsman to dismiss a complaint without consideration of its merits where the complainant representative has not cooperated with reasonable requests made by the respondent, including not providing adequate information as to the true nature of the complaint.27 Complainant representative rules shall not require the disclosure to the ombudsman scheme of any material which is legally privileged.
Consultation28 If the scheme operator proposes to make any complainant representative rules it must publish a draft of the proposed rules in the way appearing to it to be best calculated to bring them to the attention of persons appearing as likely to be affected.
29 The draft must be accompanied by a statement that representations about the proposals may be made to the scheme operator within a time specified in the statement.
30 Before making the proposed complainant representative rules, the scheme operator must have regard to any representations made to it under paragraph 7.
31 The consent of the Authority is required before any complainant representative rules may be made.””
Lord Kennedy of Southwark
My Lords, in moving this amendment I am seeking to get a proportionate framework in place that is good for consumers, but which is also good for the financial institutions complained about and the responsible claims management companies that take up complaints on behalf of consumers. That will move us all on from the unsatisfactory situation we find ourselves in at the moment.
A number of CMCs do not adhere to best practice and the consumer has little redress. My amendment would improve that situation for them with the drawing up of claimant representative rules, which are long overdue. Between April 2011 and March 2012, CMCs operating in the PPI sector generated 74% of consumer complaints overall. Of these, the majority related to some 15-20 CMCs. The source for these figures is the Ministry of Justice claims management regulation unit, so they are government figures.
I am very clear that in the mis-selling of PPI, the banks and other financial institutions behaved very badly. It is right that consumers have proper redress and compensation for their loss. I agree with my noble friend Lady Hayter that the banks could have done much more much sooner to deal with these issues.
However, the bombarding of financial institutions with claims from people who have never had any sort of relationship with the financial institution is bad practice. It is a fishing expedition that wastes the time and the money of the institution, and it clogs up the system for people who have a legitimate claim, making them wait even longer for redress.
Why is this done? Because there are huge sums of money to be made in fees. Who has not had an unwanted text message or phone call? While there are regulations already in place and mechanisms to deal with these breaches, we all know that they are not enforced and it is the consumer that suffers. An example of this is the Hinckley and Rugby Building Society, which revealed that 97% of the PPI-related complaints it has received in the three months to September 2012 were from people who are not members of, or have any relationship whatever with, the society. While that figure is lower for banks, there is still a huge number of pointless vexatious claims. Last year 69% of all PPI cases went to the ombudsman via CMCs. A small number of CMCs which are not playing by the rules are making an unfortunate situation even worse. They are not acting in the consumers’ interests. My amendment is an attempt to find a positive way forward, good for consumers, good for the financial institutions and good for the responsible claims management companies.
I hope that the noble Lord can give us a full response so that we can understand where the Government are on this matter. While I have no intention of pressing this to a vote, I hope that the noble Lord will agree to my meeting the relevant Minister outside the Chamber as I want to use this process to improve the lot for consumers, and the time has come for the Government to act.
Lord McFall of Alcluith
My Lords, I support my noble friend Lord Kennedy in his proposal, not least because, on my way down on the train today, I received a call from 0843 5600827. They wished to talk to me about my PPI claim of £3,350. Notwithstanding that, I received a text message saying that “time is running out”. I have never taken out a PPI policy.
This is an example of the instability which the industry is suffering at the moment because of this situation. I did chair a committee with consumer and industry representatives two months ago, in order for them to approach the MoJ to try to sort this issue out. Given these demands that have been made on the industry, the £8 billion that has been put aside for PPI mis-selling will surely increase. Let us not forget that we have interest rate swaps. On one of the sub-committees of the Parliamentary Commission on Banking Standards, of which I am a member along with the noble Lord, Lord Lawson, I asked an expert on interest rate swaps about the £8 billion. He said that that mis-selling could dwarf the £8 billion for PPI.
So this issue is current and will have a destabilising effect on the industry for the next few years, and also on consumers’ confidence. I do not think that the Government can escape their responsibilities on that by saying that this is not really a financial services matter, but for the MoJ. It is most certainly having an impact on financial services at the moment. Therefore, as a matter of urgency, the Government should take note of my noble friend Lord Kennedy’s amendment so that they can look at this issue in the cold light of day, outwith this Chamber, and get an adequate and decent solution, both for the industry and for the consumers who are suffering.
Lord Newby
My Lords, I share the concerns behind the amendment about the activities of CMCs in relation to financial services products. Like all noble Lords, I have been approached by them with the most spurious and ridiculous arguments about why I should give them details about my financial affairs in return for some often unspecified benefit. We start off by sharing that concern.
I would be more sympathetic to the amendment if I did not think that the Government were already doing something about it. I am very happy to meet noble Lords who would like to discuss the matter, along with colleagues from MoJ, to see what might be done to expedite effective action. But I do not think that it is necessary or appropriate to expect the FOS to step in as a quasi-regulator and make its own conduct rules. The role of the FOS should be to act as an independent dispute resolution service and not to act as a quasi-regulator of CMCs. It is just the wrong organisation to do that.
As I have said, I am sympathetic to what the noble Lord is seeking to achieve and I give an undertaking to set up a meeting to discuss it further. On that basis, I hope that the noble Lord can withdraw his amendment.
Lord Kennedy of Southwark
I thank the noble Lord for his response. I certainly think that we need to work on something. I know he says that things are in place but it is fair to say that they are not working well at the moment and that we need to do much better. On that basis, I beg leave to withdraw the amendment.
Businesses: Tax Liability
Lord Kennedy of Southwark Excerpts(12 years, 6 months ago)
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Lord Kennedy of Southwark
To ask Her Majesty’s Government what is the normal notice period that HM Revenue and Customs gives to businesses in relation to changes in their tax liability.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, changes in tax law are normally confirmed at least three months before the tax year in which they come into effect or the publication of the Finance Bill in which they are to be included. The Government normally announce such changes at Budget for enactment through the following year’s Finance Bill. The Government also consult on most changes to tax law, unless they are straightforward changes, revenue protection measures or areas where there is a risk of forestalling.
Lord Kennedy of Southwark
On 18 May, HMRC issued new guidance concerning the tax rates to be charged to the waste industry with immediate effect. It resulted in a 2,500% tax increase and put jobs and businesses at risk. I raised it in the House on 29 May. The Government then did a U-turn—the official line was that they clarified their position. The problem is that half the industry does not accept the veracity of the clarification of the Government’s guidance. Does the Minister accept that we have a serious problem and will he agree to facilitate a meeting between me, my good friend the Member of Parliament for Mitcham and Morden and the relevant Treasury Minister with a representative of the industry to sort out this shambles of all shambles?
Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2011
Lord Kennedy of Southwark Excerpts(13 years, 1 month ago)
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Lord Kennedy of Southwark
My Lords, today is International Credit Union Day and the theme for the celebrations is “Credit Unions Build a Better World”. It celebrates the important economic and social contributions credit unions make to their communities worldwide. I am vice-chair of the All-Party Parliamentary Group on Credit Unions and it is wonderful that we are debating and approving this statutory instrument today of all days.
As the noble Lord said, credit unions are financial co-operatives owned and controlled by their members. Credit unions in the UK manage over £600 million on behalf of over 900,000 people. The order before us today makes some very welcome changes. It was originally laid in similar form by the last Labour Government, as the noble Lord said, and I was delighted when the present Government sought to carry forward these much needed reforms. The order makes a number of sensible changes, such as allowing credit unions to pay interest on savings rather than a dividend. It allows them to provide services to community groups, attract investments and extend the services that they offer. That is all very welcome. I congratulate the Government on what they have done.
However, this is only one of a number of steps that the Government should be taking. Although the credit union sector in the UK is growing, it is still relatively small. With the right support, the potential for major expansion is all too evident. That expansion and growth would be of benefit to communities up and down the country. We must also remember that it is a sad fact that some of the most financially excluded citizens have to pay the highest price for credit, which we should all regret and want to work to eliminate. We have seen organisations on the high street that are little more than legal loan sharks which charge people 2,000, 3,000 and 4,000 per cent interest to borrow money. Expansion of the credit union sector gives people who are financially excluded the opportunity to become financially included and to pay a fair price for the credit that they need.
The big society seems to have disappeared a bit from the vocabulary of the Government in recent months, but initiatives like this, which enable people to help themselves, are what I understand by the big society and are very welcome.
Baroness Kramer
My Lords, let me join others in welcoming this order laid before us. Like others, I think that the only regret is that we had not seen it perhaps a little sooner, but I am delighted that it has come now. I am also delighted to be able to look at it in the context of the Government’s commitment to credit unions. A project is now under way between the Post Office and ABCUL—a sort of industry spokesperson for credit unions more broadly—to find ways for the Post Office to be the front-door platform for many people to access their accounts through the Post Office structure. That would have been inadequate were these other steps not being taken to expand the capacity of credit unions.
I am particularly delighted that we now have a new definition of the common bond, which will take a real constraint away from credit unions and their capacity to build membership and to serve the community. The United States has long had much greater flexibility. Whereas in the UK the figures from ABCUL suggest that the current amount of assets under credit union management is £790 million, in the United States—even allowing for the difference in population size—some $900 billion of total assets come within the credit union structure. We are looking at a completely different dimension, which I hope the UK will be able to move towards. As the noble Lord, Lord Kennedy, has said, many people who are financially excluded can see a route into financial inclusion through credit unions that they would not find in the high street banks.
I also am encouraged by the expansion of the groups which a credit union can serve to include corporate bodies, partnerships and unincorporated associations. We have many small businesses which once again cannot find a satisfactory financial relationship through existing high street banks. They need other sources and mechanisms. Again, if we look at the United States, it is interesting that the ability to serve small business has long been part of the credit union framework. In 2011 alone, the Obama Administration are using that credit union network to push $300 million in additional credit directly to small and very small business in a way in which we have no capacity to do here in the UK. For the kind of activity that we are seeing through credit easing—obviously, that is a much broader programme—in the United States that is able to happen far more easily and fluidly through mechanisms such as the credit union and the much wider world of community development banks. We can now begin to move towards having that potential here in the UK.
With the new classes of shares and the ability to deepen investment, we are coming now to the point where there is a recognition that more diversity and provision that focuses on people who are financially excluded, and on businesses that are micro and small, is all to the positive for the growth that we need in our economy.
I join others in welcoming this order laid before us by the Government today. I express apologies from my noble friend Lord Newby, who had expected to be standing here but, because of the time, unfortunately could not cancel another commitment. I welcome this move by the Government.
Credit Unions
Lord Kennedy of Southwark Excerpts(13 years, 9 months ago)
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Lord Kennedy of Southwark
To ask Her Majesty’s Government what plans they have to support the development of credit unions in the United Kingdom.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, the Government are bringing forward legislative reforms to help modernise the way in which credit unions do business and to remove barriers to their development and growth. We have recently announced funding of up to £73 million for the expansion of credit union services. The Government also intend to bring Northern Ireland credit unions under FSA regulation to give their members access to the Financial Services Compensation Scheme and the Financial Ombudsman Service.
Lord Kennedy of Southwark
I thank the Minister for his response. Does he agree with me that, today of all days, the Government must pledge themselves to urgent action to deal with illegal loan sharks, who in some cases revert to physical and sexual violence against women as they bully and threaten families to pay interest rates of hundreds of thousands of per cent? Will he agree to meet a delegation from the Association of British Credit Unions to discuss a link-up between credit unions and the Post Office, as a way of providing cheap, affordable credit to all?
Lord Sassoon
My Lords, I am certainly happy to confirm that credit unions play an important part in the Government’s priority to see diversity and choice in financial services and to support financial inclusion, given that in areas of the highest economic and social deprivation credit unions are able to achieve the most impact. The credit union movement is growing significantly, with government support and following the support of the previous Government. We will certainly work to do whatever is reasonable to continue with that growth of the credit union movement.