Payment Accounts (Amendment) (EU Exit) Regulations 2018
Debate between Baroness Drake and Lord Bates(6 years ago)
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The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, as in the previous debate, this statutory instrument is part of the Treasury’s legislative programme which aims to ensure that there continues to be a functioning UK legislative and regulatory regime for financial services in the unlikely event that the UK leaves with neither a deal nor an implementation period.
The statutory instrument will fix deficiencies in UK law in the Payment Accounts Regulations to ensure that they continue to operate effectively post exit. The payment accounts directive had three main objectives: first, to improve the transparency and comparability of fees related to payment accounts; secondly, to facilitate the switching of those accounts; and, thirdly, to ensure access to payment accounts with basic features. The Payment Accounts Regulations 2015 transposed the directive into UK law.
Many noble Lords will be familiar with payment accounts, as they are the day-to-day bank or building society accounts that we use to hold funds, to make and receive payments, and to withdraw and deposit cash. In the UK, the most common form of payment account is a current account.
In a no-deal scenario, the UK would be outside the European Economic Area and the EU’s legal, supervisory and financial regulatory framework. The Payment Accounts Regulations 2015 therefore need to be updated to reflect this to ensure that the provisions work appropriately in a no-deal scenario.
The draft regulations are concerned mostly with removing references to the EU. Therefore, the impact on customers and businesses will be minimal. However, I will go into more detail on three changes to which it may be helpful to draw the Committee’s attention.
The first is that this draft instrument transfers the responsibility for making technical standards for customer documents setting out fees and charges associated with a payment account from the European Banking Association to the Financial Conduct Authority.
Secondly, the draft instrument removes the requirement for payment service providers to facilitate the cross-border opening of payment accounts. This means that payment service providers will no longer be required to provide certain information relating to a customer’s payment account—for example, direct debits or closing balance—or transfer a balance to an EU payment service provider when the customer wants to switch from a UK payment account to an EU payment account. Repealing this provision does not affect the ability of UK customers to open payment accounts abroad.
Lastly, the SI makes changes to the regulations governing payment accounts with basic features, which are more commonly known as basic bank accounts in the UK. For those who may not be familiar with this financial inclusion product, a basic bank account is a fee-free bank account, with no overdraft facility but which otherwise has the same features as a standard current account. The nine largest current account providers in the UK must offer these accounts to those who are unbanked in the UK or who are ineligible for a standard current account.
As the UK will no longer be a member of the EU’s single market for financial services after exit day, the instrument removes the requirement on the nine providers to offer these products to customers resident in the EU or to offer EU currency services on any basic bank account as standard. It will therefore be at their discretion whether to continue to offer basic bank accounts to customers resident in the EU after exit day or keep existing accounts of EU residents open.
The Secondary Legislation Scrutiny Committee was concerned that, should the nine providers choose to make use of these changes and close the basic bank accounts of customers resident in the EU, customers would be placed into financial difficulty as a result. I assure the Committee that this is unlikely to be the case because the nine providers must give customers at least two months’ notice in writing if they plan to close the account, which should give customers adequate notice to open another account.
Furthermore, a customer’s right to a basic bank account is EU-wide, so these customers should be able to open a basic bank account in the member state in which they reside. The nine providers have also signed a 2014 agreement with the Treasury that makes clear that basic bank accounts are designed to help the less affluent and most vulnerable in our society. The Government therefore expect that providers will have due regard to the spirit of this agreement when making any changes to its basic bank account policy.
In summary, this Government believe that the proposed legislation is necessary to ensure that the Payment Accounts Regulations 2015 will continue to function appropriately if the UK leaves the EU without a deal or an implementation period. Most importantly, this means that fee-free basic bank accounts, which are a key financial inclusion product, remain available and robustly regulated to customers legally resident in the UK who are unbanked or ineligible for other payment accounts. I hope this introduction will have been helpful to noble Lords, and I commend the regulations to the House.
Baroness Drake (Lab)
My Lords, this SI is part of the series providing contingency planning for the no-deal Brexit scenario. The Payment Accounts Regulations 2015 established a right of access to a basic bank account with basic features for customers legally resident in the EU, which were fee-free for services in sterling, with EU currency services provided at a reasonable fee. The Explanatory Memorandum advises that this SI seeks to ensure that those regulations operate effectively in the UK in the event of no deal and continue to deliver the existing three main objectives of, first, transparency and comparability of fees on day-to-day payment transactions such as cash deposits, withdrawal and card payments; secondly, the facilitation of account-switching; and, thirdly, ensuring access to accounts with basic features for EU residents. Paragraphs 2.2 and 2.12 of the Explanatory Memorandum set out what I have just described.
Privacy and Electronic Communications (Amendment) (No. 2) Regulations 2018
Debate between Baroness Drake and Lord Bates(6 years ago)
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The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, for most people in the UK, their largest financial asset will be their pension, which unfortunately makes pensions an attractive target for fraudsters. As I am sure the House is aware, pension scams have had devastating consequences. Scams can leave people to face retirement with limited income, unable to rebuild their pension savings. Cold calling is not only a nuisance but the most common method used to initiate pension fraud. I am aware of the strength of feeling on tackling cold calling from recent debates in this House and in Committee. According to Citizens Advice, the most recent statistics show that 97% of pension fraud cases brought to it originated from a cold call. That is why the Government are taking action to ban pensions cold calling.
Before we discuss the legislation I will present to the House today, allow me to briefly explain how the current system works. Currently, the Privacy and Electronic Communications Regulations 2003, or PECR, permit firms to cold call consumers for marketing purposes, subject to a couple of exceptions: where the consumer has notified the caller that they do not wish to receive such calls, or has listed their number on the telephone preference service. The current regime therefore permits cold calling unless a consumer has proactively opted out.
The purpose of the legislation under discussion today is to amend PECR in order to much more tightly restrict firms from cold calling consumers on their pensions. It does so by creating an explicit opt-in regime prohibiting all such calls unless one of two tightly drafted exemptions applies. Importantly, the exemptions do not apply to so-called introducers. Introducers are the marketing firms which seek to establish “leads” which they pass to financial advice firms. It is introducers who undertake the majority of pensions cold calling.
The ban will make it clear to consumers that any pensions cold call they receive from an unknown caller is illegal and likely to be a scam call, so they should hang up. To help future-proof the regulations, the definition of,
“direct marketing in relation to pension schemes”,
in the SI has been drafted widely. This will help to ensure that we capture new activities which may evolve in future, as well as activities that we know scammers already use today.
So that the ban does not have an unnecessary or disproportionate impact on legitimate activities, the Government have provided two narrowly defined exemptions. The first is where the consumer has given consent to a caller to receive direct marketing calls on their pensions. This exemption has been included so that consumers seeking information on pension products are able to do so. The SI is fully in line with the GDPR, which sets a high standard for consent.
The second exemption is where the consumer,
“has an existing client relationship with the caller”,
such that they would expect to receive such calls. This is so that individuals are able to receive information about investment opportunities from firms with which they have a client relationship. Crucially, the exemptions apply only where the caller is authorised by the Financial Conduct Authority or is the trustee or manager of a pension scheme. This means that there are no circumstances in which introducers, as defined, are permitted to call consumers on their pensions.
As many noble Lords will be aware, a similar ban on cold calling by claims management companies was implemented through the Financial Guidance and Claims Act 2018, which was skilfully taken through your Lordships’ House by my noble friend Lord Young, who joins me on the Front Bench this evening. The present SI has been drafted so as to achieve a consistent approach to both bans. The ban will be enforced by the Information Commissioner’s Office, a world leader in the protection of information rights. The Information Commissioner’s Office has tough enforcement powers, which include fining offenders up to £500,000. From 17 December 2018, directors of companies making unlawful calls may be personally liable for penalties of up to £500,000.
The Government are working with partners across the public, private and charity sectors to ensure that news of the ban reaches as many people as possible. To support the industry to keep within the law, the Information Commissioner’s Office will publish updated guidance when the ban comes into force. I will take this opportunity to thank stakeholders across the industry and the third sector for their helpful comments on the drafting of the regulations through consultation over the summer. As a consequence, I am pleased to say that we have a set of regulations which our stakeholders can get behind.
In summary, the Government believe that the proposed legislation is necessary to tackle the scourge of pension scams and help protect customers and consumers from pension fraudsters. I hope that noble Lords will join me in supporting these regulations and I commend them to the House.
Baroness Drake (Lab)
My Lords, I welcome these regulations, which restrict firms in cold-calling individuals regarding their pension schemes. The Explanatory Memorandum was clear and helpful in setting matters out. This was a point of considerable concern during the passage of the Financial Guidance and Claims Act 2018, when the Government gave a commitment to ban cold calls on pensions. It is pleasing to see the product of that commitment in these regulations.
As we all know, the threat of pension scams—in fact, the threat of financial scams—is a growing problem. The scale of these unsolicited calls and the number of people impacted is alarming. The estimates from the Money Advice Service indicate that there are 250 million scam calls per annum. Most cases involving pension scams start with cold calling and if someone is scammed out of their pension savings, the effect can be not only devastating but lifelong and irreversible. Scams can originate from sources other than onshore cold callers—for example, from social media and offshore callers—but these regulations will make a significant contribution to protecting individuals. I acknowledge that there are many positives in the regulations. The definition of direct marketing set out in paragraph (5) of new Regulation 21B in relation to pension schemes has been drafted widely, which is helpful. Organisations which breach the ban may be liable to pay compensation to the victim, be subject to enforcement activity by the Information Commissioner’s Office and, as the Minister referred to, face a penalty of up to £500,000.
Financial Services and Markets Act 2000 (Claims Management Activity) Order 2018
Debate between Baroness Drake and Lord Bates(6 years ago)
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Lord Bates
That is something that I think the FCA would be liaising on. If it felt that its activities were aligned with a CMC then, as I mentioned earlier, that would mean it would have to continue to be regulated by the FCA. On the specific point, unless there is any inspiration on its way, I will write with clarification to the noble Lord.
The noble Baroness, Lady Kramer, asked if any action had been taken on CMCs doing their due diligence on data under GDPR. The FCA is in the process of updating and publishing its rules for the CMC regime. It will be working closely with the Information Commissioner’s Office, which is responsible for the oversight of data protection laws, to ensure that CMCs comply with the order, FCA rules and data protection legislation.
The noble Baroness asked whether the SRA was an effective regulator. The MoJ is responsible for the oversight of the SRA. The FCA and the SRA are currently reviewing their memorandum of understanding, and their conclusions will be published in due course. I think that covers most of the points.
Baroness Drake
Could the Minister clarify a point from one of my questions? Where an existing claims management company, authorised under the previous regime, transfers across to the FCA on the due date in April and is then subjected to the reauthorisation process but is not reauthorised, what happens in that instance to the caseload that it has been managing?
Lord Bates
They will be given 30 days to wind down their business in the event that that happens. I can write to the noble Baroness when I write to the noble Lord, Lord Tunnicliffe, and expand on that point if that would be helpful.
Baroness Drake
It is more about the consumer protection aspect that a group of people would be caught up in that, and I wondered who would carry on managing their cases. I am happy for the noble Lord to write to me about that.