Financial Services Bill

Baroness Hayter of Kentish Town Excerpts

Wednesday 24th October 2012 Lords Chamber

[Lord Flight]

My Lords, I hope that all sides of this House would at least agree with the objectives of my amendment. It seems self-evident that a healthy banking system should be competitive, and an important ingredient of that is to make it as easy as possible for individuals and businesses to move their bank accounts from one bank to another. Historically the hassle in doing so obstructs and constrains people from moving their bank accounts easily. Members will know the issues with transferring direct debits, standing orders and standard remittances, and the most tedious of the lot, the anti-money-laundering requirements. I think that the wrong territory has been addressed here. It should be focusing on money flows, not having hundreds of millions of people filling out these pieces of paper.

When I put down this amendment, I was not aware that in September 2011 the Payments Council—a collaboration between banks—had approved a £650 million project to design and implement a new and much easier account-switching service for bank customers. This is supposed to be operative by September 2013, with a guarantee that the customer process for switching will be completed within seven days. That means the customer will receive whatever they need to operate the new account within seven days, and the new bank will arrange for all their incoming and outgoing payment instructions to be redirected from the old bank to the new one. The customer’s balance will be transferred, and any payments sent to the old account on or after the seventh working day will be automatically caught and moved to the new account. The customer will not suffer if there are any bank errors and the old current account will be closed at the end of the process. My amendment includes specifically the grandfathering of anti-money-laundering requirements, which I suggest is an important ingredient of the whole process.

I should perhaps have started by declaring an interest as a director of Metro Bank. Metro Bank has cracked the whole issue of people needing to get passports endorsed and provide originals of bills. Within the legal requirements we can obtain all the evidence we want from someone’s driving licence, and they can open an account within a 15-minute period.

There are two issues within the Payments Council proposals which potentially need some degree of FCA involvement. The first is that there is no automatic agreement from all banks to participate in this scheme. I understand that 97% have said they will participate, but others that have not. Whether they will or not remains to be seen, but for it to be really efficient it seems it should be universal, with all banks participating. Secondly, there is the issue of costs. I understand from HSBC—a major participant in the Payments Council initiative—that to make switching accounts straightforward it is proposed that there will not be any charges, but there is no agreement or requirement across the board. My amendment is essentially a probing one, although I would like to see its objective implemented, so does the Minister feel that the FSA needs to be given some degree of statutory power to ensure that all banks participate, and that with regard to charges there is a level playing field or no charges at all?

[Baroness Hayter of Kentish Town]

My Lords, I welcome this amendment. As the noble Lord, Lord Flight, has said, competition should mean that the standards of banking are driven up by consumers walking with their feet—taking their chequebooks elsewhere. We need to change a lot of banks’ behaviour, not least because they seem to be the only organisations in the world that can take money from your account without sending an invoice. They can decide on a charge and take it from your bank account without your agreement. This is behaviour we need to change but, as consumers, we can only do this if we can move easily.

I particularly feel this as I am in the middle of trying to switch accounts. After 28 years with one bank, they refused a cheque that was made out to “Baroness Hayter” instead of “Dr Hayter”. I would have thought they could have worked out it was the same person, but there you are. What is really interesting is that First Direct would not take my account unless I showed all my resources and assets—not that there are a lot—the sources of my assets and how I had paid off my mortgages. This was just to open a current account. Needless to say I complained and, when I did, the answer was that it was anti-money-laundering—this from a bank whose big owner has maybe done rather less about big anti-money-laundering on the other side of the world, yet is worried about my tiny bank account. My suspicion is that it wants this information to find out what else it could sell me.

If those of us who find it easy to argue and complain still find it difficult to change our accounts, how can ordinary consumers use the power and drive up standards unless moving is made easy? It is difficult with direct debits and it is even harder with payments in. I am an old-age pensioner, so I now have to find out who in the DWP pays my pension so that they can change it to a new bank.

I know that the Government are very unlikely to accept this amendment, but it raises a really important issue about whether we can leave it to the banks to reach a voluntary agreement themselves. It seems the answer is no. The noble Lord, Lord Flight, has told us that the banks say they will do this voluntarily, but my own experience suggests that they will not without a firm crack of the whip. We will be looking to the new FCA for a bit of muscle on this. We look forward with interest to the Minister’s response to this amendment.