(1 day, 19 hours ago)
Lords ChamberMy Lords, I declare an interest in that my wife was, before she retired, a construction lawyer, and I have discussed the Grenfell disaster with several of her former colleagues and clients.
I thank my noble friend the Minister for his introduction to this debate and, as so often in this House, it has become a debate of high quality. We may be few in number, but we have certainly covered most of the issues in some depth and with great concern and care for the events that they led to. I am sure I am not the only one who would have liked to hear the noble Lord, Lord Porter of Spalding, vent his spleen a bit more about some of the issues that he was touching on. He was too shy; perhaps on another occasion we can learn a little more of what he can bring from his ground-level knowledge of some of the issues that we are talking about.
I have read most of the reports and commentaries on the fire, and we are certainly not short of material to read about it. They may in some cases be otiose and in some too detailed, but they certainly give us the material that we want to form future policy. The Grenfell Tower Inquiry: Phase 2 Report, published in September, made 58 recommendations, and they are certainly very punchy and worth a lot of consideration. I am sure the department will be working very hard on making sure that they are implemented.
There are also, of course, two other reports. Dame Judith Hackitt’s report, concentrating on the building regulations and fire safety, was published in May 2018, and the Government indicated that they would accept all her recommendations. As far as the design and construction process is concerned, the Building Safety Act 2022 has provided powers for secondary legislation to bring forward new duties of care, competence and compliance, and these duties were indeed brought into force in October 2023.
However, in the meantime, evidence emerging in the public inquiry exposed apparently widespread malpractice in the marketing of construction products, including some that were found to be a principal reason for the spread of the fire within the building—many speakers have referred to this. Unfortunately, the secondary legislation in respect of construction products, which, under the original timetable, was due to be implemented by October 2023 alongside the other secondary legislation, has still not appeared. This may be related to the lack of response so far to the recommendations of the third report, the Morrell Day report, which maps out the complexity and opacity of the current construction product regime, sets out proposals for reform, and proposes principles by which decisions on alternative proposals might be made.
Dame Judith Hackitt says in her foreword to the Morrell Day report:
“We must move from a state where: up to two-thirds of products are unregulated, there is lack of clarity around purpose of testing, the fitness for purpose of current standards is questioned and there is no enforcement to implement a process that delivers quality and confidence”.
That is rather a damning indictment of where we currently stand. It is this package of reforms that is missing. It seems to me that the Government need to come forward quickly with secondary legislation on this important set of proposals. If that is still in process and there is time to look at them, I hope that they will bring into their thinking the Morrell Day report recommendations of principles, which I think are very appropriate for this discussion and future thinking about how we do this. The report says that
“it is for product manufacturers to develop products that do the job expected of them, and to market them honestly, making no false claims … it is for Conformity Assessment Bodies to test and assess those products against defined specifications, impartially and independently, so that those who must rely upon performance claims can do so with confidence … it is for designers to choose products with the performance that is fit for purpose, and then design them into the works so that the performance can be achieved … it is for constructors to bring everything together with the same objective in mind”.
These are not matters which are always followed. The report goes on to say that
“it is not for regulators or enforcement authorities to act as the industry’s quality assurance department and take responsibility for every infraction, but it is … vital … to keep a watchful eye out for non-compliance, and to aid compliance … it is also for regulators and enforcement authorities to see that regulations are enforced where necessary—and particularly where they are wilfully ignored or carelessly disregarded; and … that all of the above depends upon clear regulatory requirements and standards that deliver the desired outcome”.
These are the ones that we are awaiting.
As we have heard, this year alone there have been several tower block fires, and we have also been told that no building is really safe. It has also been reported that more than 4,000 buildings across the country remain partially or wholly covered with unsafe cladding. Is this a situation that can continue? I do hope not. I end by asking my noble friend the Minister: given the critical role that inappropriate or mis-sold products played in the rapid spread of fire in the Grenfell Tower tragedy, and noting that the original intention was to bring in new regulations by October 2023, when do the Government intend to make proposals for reform along the lines I have outlined?
(4 years, 4 months ago)
Lords ChamberMy Lords, I support Amendments 46, 47 and 48 and regard all three as exceedingly important. I will start by picking up on an issue described by my noble friend Lord German. We know now that the major banks, which have been able to participate in the bounce-back scheme because they have been provided with cheap funding from the Bank of England under its term funding scheme, have failed in what I was told was an obligation to also pass that cheap money through to the fintech industry and other alternate lenders, so that a broad and diverse coterie of lending institutions would be involved in bounce-back schemes and a mechanism to ensure that qualifying small companies would be able to find a source, even if it was not from one of the major banks. We now know that that funding process has not taken place and that relatively few bounce-back loans are being provided by alternate lenders because they cannot find cheap enough funding, since they have no direct access to the Bank of England scheme.
The reason I mention this is that it describes to us the culture of major banks today. Many of us had hoped that after the 2008 crisis we would see a dramatic change in culture among the major high street banks. We have certainly seen some changes, and some are better than others, but we are still dealing with a group of institutions that, frankly, if given a loophole will use it. Amendments 46 and 47 are designed to close off two major sets of loopholes to make sure that proper consumer protection continues to be provided to SMEs that use the bounce-back schemes and to make sure that these do not become mechanisms that enable them to be taken advantage of in ways that they never anticipated. Therefore, Amendments 46 and 47 are vital to limit any potential for abuse.
Amendment 48 is important because it will help us track exactly what is happening under the Bounce Back Loan Scheme arrangements. We have all heard anecdotally that the big banks are cherry picking those to whom they make bounce-back loans. Some of them choose only existing customers because they do not want to overexpand their balance sheets; others pick from within those customers. As I understand it, the whole spirit of the bounce-back scheme is anathema to cherry picking, but it is taking place.
Amendment 48, in the name of the noble Lord, Lord Stevenson, would very rapidly make clear how many people are applying and who is rejected, and it would give us the ability to try to track exactly what is happening under this scheme. I know that something like £30 billion has already been lent through bounce-back loans but, frankly, that is well below the level that the Government expected. Those loans are a lifeline for many companies and we really cannot allow this scheme to be abused. If we are not careful, by the time we intervene, many businesses will already have closed their doors.
My Lords, I have added my name to Amendments 46 and 47, moved and spoken to respectively by the noble Baroness, Lady Bowles of Berkhamsted, and I support the points that she has made. I also welcome the expert contributions from the noble Baroness, Lady Altmann, the noble Lord, Lord German, and the noble Baroness, Lady Kramer.
The Consumer Credit Act 1974 has long been criticised because of its extensive, complex information disclosure requirements. These are a problem in their own right but they can make it problematic for lenders to be flexible in cases where they might, for example, wish to offer forbearance to consumers experiencing difficulties in making repayments or to those suffering from unmanageable personal debts, as many do. Clearly, if small businesses are being affected by Covid-19 issues, it makes sense to ensure that their access to bounce-back loans is not hampered by requests for unnecessary evidence and detail or by extensive time delays in processing such data.
However, as the Explanatory Notes make clear, SI 2020/480 changed the rules for small loans to individuals and small partnerships so that they are no longer regulated credit agreements. However, as the noble Baroness, Lady Bowles, pointed out, the SI does not affect Sections 140A to 140C of the Consumer Credit Act 1974—the so-called unfair relationship provisions. The problem identified by the noble Baroness seems to be important. In a laudable attempt to simplify the processes, the Government might, perhaps inadvertently, have removed the statutory underpinning of Sections 140A to 140C, which, for example, through the courts protect borrowers from any subsequent attempts by lenders to act unfairly. That can often be the case, as we have heard this evening.
I believe that this issue might need to be reviewed separately once we are through the pandemic. Perhaps when she comes to respond, the Minister will agree that it needs further work. I hope that she will also be able to reassure us that our concerns are unfounded. I have my doubts but am willing to be convinced. The change in law needs to be securely attached only to bounce-back loans and the Covid-19 pandemic. We also need to know that the application of this disregard is proportionate and appropriate to lenders.
Turning to Amendment 48 in my name, I am grateful for the support of my noble friend Lady Uddin and the noble Baroness, Lady Kramer. I hope that the Minister recognises that the amendment covers ground raised in the powerful comments made at Second Reading by the noble Earl, Lord Shrewsbury, who shared his personal experience of the wide variability of responsiveness by the individual banks and lending institutions authorised by the British Business Bank to issue bounce-back loans.
My amendment calls for regular reports. I appreciate that there are confidentiality issues here, but this is also about transparency. If a private company such as MoneySavingExpert can do a survey which reveals that a substantial number of bounce-back applicants suffer delays, rejections and unrelated credit checks, surely the Government can do better. It is true that the MSE report is based on a sample, albeit a large one, but it shows that consumers have had variable responses from the major banks, and some of the smaller challenger banks had very high rejection rates. The transparency which the amendment looks for may improve that situation. I hope that the Minister can offer some movement on this issue, which would help with the task of getting bounce-back loans out to those who can use them. She said in her response to an earlier group of amendments that the Government were constantly reviewing and improving the Bounce Back Loan Scheme. I hope that she recognises that to do that without the sort of information that my amendment proposes might be otiose.
I thank the noble Baroness, Lady Bowles, my noble friend Lady Altmann and the noble Lords, Lord Stevenson and Lord German, for tabling these amendments.
On Amendments 46 and 47, the noble Baroness, Lady Bowles, made important points around the ongoing treatment of borrowers by lenders under the bounce-back loan scheme. My noble friend Lady Altmann and others referred to memories of previous unscrupulous practices by lenders. It is important to acknowledge the significant changes that the industry has been subject to over the past decade. All the major lenders have now signed up to the Lending Standards Board’s standards of lending practice, ensuring that banks treat their customers fairly and responsibly. The Financial Conduct Authority can now take enforcement action against individuals through the senior managers and certification regime and the new conduct rules, which apply to all employees of those firms and not just to senior managers.
I assure the noble Baroness, Lady Bowles, and all noble Lords who have spoken on the amendment that, while the Bill removes bounce-back loans from the Consumer Credit Act provisions, it does not remove protections from borrowers under the scheme. Under the terms of the guarantee agreement entered into by lenders with the British Business Bank that backs the bounce-back loans, lenders must provide clear information to borrowers before the credit agreement is entered into and during the lifetime of the loan. Lenders must make it clear to borrowers that the loans are not subject to the usual protections under the Consumer Credit Act. However, under the agreement entered into by lenders with the British Business Bank for the guarantee, there are other protections.
Where a borrower encounters financial difficulty, lenders must provide information on assistance available, including sources of free, independent advice. Where a borrower misses payments under the scheme, the lender will give them a reasonable period to remedy any breach of the agreement and will not treat that breach as a default if it is remedied within that period. Finally, lenders must not require borrowers to pay any lender-levied fees of any description, including on default, or any default interest. If a borrower defaults on the loan, the guarantee agreement prevents their primary residence and primary vehicle forming part of the debt recovery. Should a lender not comply with these terms, they risk not being able to call on the guarantee. This provides a strong incentive for lenders to treat borrowers fairly.
Furthermore, the Government have retained Financial Conduct Authority oversight for debt collection, meaning that lenders must comply with the Financial Conduct Authority rules on arrears, default and recovery. Recovery procedures must also comply with the Lending Standards Board’s standards of lending practice. As the noble Baroness, Lady Bowles, mentioned, the Government are working with accredited lenders under the scheme to ensure that they understand the requirements on collections and recoveries for the loans. I will write to her on whether the result of those discussions will be published.
Finally, the jurisdiction of the Financial Ombudsman Service has been maintained for bounce-back loans, meaning that eligible borrowers are able to access this convenient and effective means of resolving disputes with their lender without having to go to court.