Draft Mortgage Credit (Amendment) (EU Exit) Regulations 2019 Draft Financial Services (Distance Marketing) (Amendment and Savings Provisions) (EU Exit) Regulations 2019

Jonathan Reynolds Excerpts

Monday 11th March 2019 General Committees

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship this evening, Mrs Moon.

Once again the Minister and I are here to discuss statutory instruments that make provision for a regulatory framework after Brexit in the event that we crash out without a deal—[Interruption.] On each of those occasions, I and my Labour Front-Bench colleagues have spelt out our objections to the Government’s approach to the process and the use of secondary legislation.

Today we are here to discuss two different instruments that have been grouped together, no doubt in an effort to clear the significant workload that still remains to complete the statutory instruments that are necessary in the event that we crash out without a deal and with which we have been engaged since October—[Interruption.]

[The Chair]

Order. I will not have Members muttering from the Back Benches. If you wish to be heard, you ask to be heard. You do not mutter from a sedentary position. I do not intend to make that remark again.

--- Later in debate ---

[Jonathan Reynolds]

Thank you, Mrs Moon.

I was about to thank the Minster for his detailed explanation. On the draft mortgage credit amendment regulations, will he give us some clarification? In the explanatory policy note on the regulations, the paragraph on amending the territorial scope of the application of regulated consumer buy-to-let lending covers various changes that are not altogether obvious. First, it notes at the bottom of page 4:

“Lending relating to land in the EEA outside the UK that was entered into after the implementation of the Mortgage Credit Directive but before exit day, and which is currently supervised under the consumer buy-to-let regime, will continue to be covered by FCA regulation under that regime.”

Can the Minister guarantee that the FCA will still have the right to apply the regulations to do that? Is it not the case that local rules would apply at that point?

The explanatory policy note also stipulates that the regulatory perimeter for owner-occupiers will be amended under a separate statutory instrument relating to the Financial Services and Markets Act 2000. Can the Minister confirm whether that was included in the version of FSMA that we have already debated? If not, when will it come to Committee?

I am sure that I do not need to remind the Minister that, at the end of this week, we will be just two weeks away from exit day, so we have an extremely short amount of parliamentary time. If anything, owner-occupiers will need more certainty than buy-to-let owners, given that we are more likely to be talking about their actual homes than a rented holiday home. I confess that I do not have a place in the sun in Europe, but many Britons do, and they will need clarity as they seek to make retirement plans or decide where their family will be located in future.

The explanatory policy note also notes that the Treasury is conferring another power

“to make regulations modifying the remarks and assumptions which accompany the formula for the calculation for the annual percentage rate of charge (a standardised calculation of cost of credit), where they are out of date or do not create a uniform result.”

Could the Minister give us some further explanation about the scope of those remarks and their typical impact? Given that no impact assessment has been prepared on the statutory instruments, we are somewhat in the dark as to the exact ramifications of the proposals.

The second set of regulations provide important consumer protections in the UK and the Opposition support onshoring them in principle. Again, however, I would like to clarify some points with the Minister. First, the explanatory policy note states that

“references to the European Consumer Credit Information Form have been replaced with references to the Pre-Contract Credit Information (Overdrafts) Form.”

Has a full assessment been undertaken of where deficiencies might arise as a result of the switch between those documents?

Secondly, the European Union is undertaking a review of the regulations, as announced by the publication of an evaluation and fitness roadmap consultation in December 2018. Will the Treasury pay any heed to the outcome of that consultation, if it identifies issues with the regulations that we are attempting to onshore?

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

My hon. Friend is making an important speech. Am I correct that he just wants clarity about whether there will be any effective reduction in the amount of consumer protection that will apply to UK consumers as a result of the regulations?

[Jonathan Reynolds]

I am extremely grateful to my hon. Friend for that question. That is exactly the type of concern that we on the Front Bench have sought to outline. As she knows, we need not only to onshore some regulations, but to prepare for the legislation that will be passed in the European context between exit day and the end of any transition. We are all particularly interested in the impact on consumer protection, the overall regulatory burden and the function of the regime, and the Minister has sought to provide clarity on those issues.

Those two specific points are all I wished to say about the second set of regulations.