Financial Services Bill

Christine Jardine Excerpts

Monday 26th April 2021 Commons Chamber

[Anthony Browne (South Cambridgeshire) (Con)]

I will keep my remarks short, because I know it is late and we have a lot of work to do.

There are many amendments to welcome from the other House, particularly the regulation of “buy now, pay later” by the Financial Conduct Authority, where there is clear risk of consumer harm. The Proceeds of Crime Act 2002 is a remarkably ineffective piece of legislation but it is right that it is extended to e-money, as there is a clear loophole there. On cashback without purchase, there is no risk of consumer detriment there and we need to increase access to cash. It is right that it is brought outside the FCA’s remit.

On Lords amendment 1 and the duty of care, I spent five years of my life trying to get the banking industry to improve the care given to vulnerable customers, and clearly many consumer harms carry on. I launched schemes, actually in this House, for the banking industry to help customers with cancer and customers with Alzheimer’s. I am very attracted to the idea of some sort of blanket duty of care, but I do not support this amendment, for two reasons. The first is that, as written, it is so wide-ranging that there would clearly be massive unintended consequences, which even vulnerable customers would live to regret. The second is that, as the Minister said, the FCA already has very wide-ranging powers, almost certainly enough to deal with all the consumer harms that need to be dealt with. I very much welcome the Government’s move, through their amendment, to push the FCA to look at how to reduce consumer harm and implement an effective duty of care.

On Lords amendment 8, mortgage prisoners absolutely need help. They have suffered massively, through no fault of their own, losing tens of thousands of pounds, if not more. We have rehearsed all the arguments tonight for and against this measure. We agree that we need to help these people, but the question is: how do we do that? The cap of interest rates is, as people say, a sticking plaster—even its supporters say that. I can see the appeal of it, but this sticking plaster comes at great cost: Parliament would be setting out interest rates in primary legislation. That could lead to huge unintended consequences in lots of ways—for example, through the impact on financial stability that we heard about earlier on some of the firms. It would also set an extraordinary precedent, with the Government doing price controls in that way. One does not have to be an historian of the 1970s to know of all the dangers of price controls.

It is also really not the solution we need. Where someone is trapped in a horrible prison with their guards abusing them and they are very uncomfortable, would they want that prison to be made more comfortable and the guards to behave themselves, as this cap in effect proposes, or would they want to get out of the prison? They would want to get out of the prison. We need to make sure that mortgage prisoners can move to other mortgage providers. That should apply to all people who are mortgage prisoners, including those who are in arrears, for the reasons that my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) set out. This is very complicated stuff. There are lots of reasons why people cannot move, whether it is their loan-to-value ratio or their income stream, or because they are in arrears. It is absolutely right that they should be helped to go to regular mainstream mortgage lenders that are offering other suppliers, and I very much welcome the Government move to really push on that, working with the FCA. I take on trust their commitment to really push in that direction and get a solution to that for all the mortgage prisoners.

For those reasons, I am happy to vote against Lords amendment 8, so long as the Government do everything they can to help those prisoners.

[Christine Jardine (Edinburgh West) (LD) [V]]

I, too, will keep my remarks brief. In the debate tonight I, on behalf of the Liberal Democrats, will be opposing the Government’s motions to disagree with Lords amendments 1 and 8.

In particular, I would like to focus my comments on Lords amendment 8. This amendment would offer significant relief, I believe, to thousands of so-called mortgage prisoners caught in a vicious cycle of debt through no fault of their own. We have already heard the arguments rehearsed and some terrible stories of what they have been through. All that has been the result of the original decision, after the collapse of the mortgage providers, to sell off those mortgages to investment funds, and that has left as many as a quarter of a million homeowners trapped in spiralling mortgage costs for more than a decade now.

It is a situation that the Government have failed to address, even though there is clear evidence that it is jeopardising wellbeing. A recent study found that mortgage prisoners experienced higher rates of physical and mental health problems, and that they are up to 40% more likely to default as a result of coronavirus. The significance of this amendment is that it would finally unlock this trap and offer an escape from the nightmare of the past decade. Significantly, it would lower interest payments through a cap on the standard variable rate of interest for mortgage prisoners who are borrowing from a firm that no longer lends to new customers. The cap would be no higher than 2% above the Bank of England base rate, which is currently a mere 0.1%. It would also require lenders to offer mortgage prisoners new fixed interest rate deals in certain circumstances—for example, if they have kept up with payments in the past 12 months, if they have an outstanding loan amount of over £10,000, or if they have not received consent to let the property.

The misery caused to tens of thousands over the past decade and the continuing threat it poses demand that we act. We have heard tonight why. To me, it seems simple. It seems the correct thing to do, and therefore I strongly urge the House to reject the Government’s motion to disagree with this amendment—Lords amendment 8 —as well as with Lords amendment 1.

[Duncan Baker (North Norfolk) (Con)]

There is a famous saying, is there not, that an Englishman’s home is his castle, but the problems born out of the banking crisis in 2008 still persist. Indeed, there are a quarter of a million households with mortgages affected by lenders who suffered at that time. They are with inactive lenders, and in simple terms their mortgages are stuck with non-lending asset management funds.

We know that the Government have looked at many of those borrowers to try to help them so that they can switch lenders. Many of them can—almost half of them—and they can benefit largely from doing so, but it is the remaining half that are our real problems, the so-called mortgage prisoners. Their rates, as they came off the original term deals, moved on to the standard variable rate we have heard about tonight, leaving them paying such disproportionately high repayments. Their lender’s debt was sold on, and as such they cannot remortgage or switch, leaving many families struggling immensely to manage each month. Lords amendment 8 would require the FCA to introduce a cap on those standard variable rates and ensure that mortgage prisoners can access new fixed interest rate deals.

I know there are huge amounts of work going on to try to help these people, not least by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake)—I thank him for all the work he has done—but also by the Minister, who has been a tower of strength. He has been talking to me far too much about how we can help these people, and I thank him greatly for that. It is an absolute must that we do keep helping these people.

First, the 70,000 mortgage prisoners who are in arrears, would—for many reasons, unfortunately—potentially not be a better position if they were in the active market, as borrowers are unlikely to be able to switch within the market, given the very stringent risk criteria there are today. The Government are trying to support these householders with the initiatives we have heard about, such as the breathing space scheme.

It is the remaining 55,000 who have kept up their repayments that I particularly want to make sure the Treasury can really help and work on solutions for. I know there are again attempts to modify the affordability criteria assessment to try to move those people on to a new lender. Notwithstanding such efforts, those solutions are not the final answer. So what is the answer? Is it Lords amendment 8? Do we interfere with a market?