Financial Services and Markets Bill [HL]

Lord Altrincham Excerpts

Committee stage
Monday 22nd June 2026 Grand Committee

[Baroness Lawlor (Con)]

My Lords, I hesitate to follow the noble Lord, Lord Carlile, who, although he is not a specialist in this area, is a lawyer. I will speak in support of this group of amendments; I would have done the same for the first group, had I been here. It is important that businesses and consumers alike have the protection of a law that is predictable and transparent and where no doubt arises about its interpretation. Many doubts have arisen around the judgments and rulings of the FCA and its lack of consistency. Therefore, I am sympathetic to the wish of the noble Baroness, Lady Bowles, to have something done on paper, so that we can see something before putting it through.

Both businesses and consumers are used to having a legal surround for such transactions. They go back to the 1850s in the Bills of Sale Act 1854, which was modernised throughout the end of the 19th century and then followed by the Money-lenders Act 1900, obliging the registration of moneylending and allowing the courts to be involved. It is important that we have judicial oversight, not just by updating the process—although I agree with noble Lords on that—but with a legal framework that is transparent and consistent and that allows people to see what is expected.

I am also concerned about the impact of rushing through legislation to empower an as yet uncertain regime of rule-making, about which nothing of substance is known. The FCA appears to be as unprepared for this as others. In its response last month to the Treasury’s announcement of the reform of the Consumer Credit Act, the FCA said that such reform

“is an important step towards a more flexible regime that supports effective competition and innovation, while maintaining appropriate consumer protection both now and in the future”.

It acknowledged that it would put

“greater emphasis on FCA rules and guidance rather than prescriptive requirements set out in legislation”.

It states that it intends

“to consult on the key elements of the … framework … set out in legislation”.

One problem with being flexible—or moving to what the FCA calls

“a more flexible regime that supports effective competition and innovation, while maintaining appropriate consumer protection both now and in the future”—

is that flexibility can be inconsistent and lack transparency. What is appropriate for one firm may not be so for another. It brings doubts into the minds of businesses. We have heard of businesses being concerned about the arrangements run by the FCA. For example, given that many of the requirements to disclose information in the CCA and associated regulations are to be repealed, how transparent will the rules be? How consistently will they operate? Will the FCA’s rulings be published? If they are to be less prescriptive and more in line with the FCA’s consumer duty principle, how certain can businesses be about what counts as being in scope?

Before closing, I would like to mention another concern: the considerable compliance costs. Most of the disclosure of information obligations on the CCA, and in the linked regulations being repealed and replaced by FCA rules, will bring costs. I am grateful to Addleshaw Goddard LLP for its analysis, published on its website, which suggests:

“Reforms in relation to arrears, default notices & in-life information are likely to create major operational impact for collections and arrears handling. Given the high litigation risks attached to these requirements firms should carefully consider these changes and monitor how these requirements will be re-designed in FCA rules”.


Here, we should think of the start-up costs for this new system, along with the continuing compliance costs, which will be considerable. Take, for instance, the information requirements. How will they affect the estimated 30,000 firms that will have to amend documentation that does not align with the consumer duty?

With those thoughts, I support the thinking behind the stand part notice in the name of the noble Baroness, Lady Bowles, with its question mark around the wholesale transfer of such powers without any information on how they will be operated or regulated—or, indeed, what they will be now.

[Lord Altrincham (Con)]

My Lords, I declare my interest in South Molton Street Capital, which is regulated by the FCA.

The amendments in this group reflect concerns similar to those raised in our previous debate. As the noble Baroness, Lady Bowles, and my noble friend Lady Neville-Rolfe have argued, it is for the Government now to set out a compelling case for moving Consumer Credit Act provisions into the FCA rulebook. This is a serious new precedent and they must meet it with an equally serious explanation. Regulatory flexibility, or, as we have heard from my noble friends, the living instrument arguments, may be appropriate for matters of form, process and technical detail. However, that flexibility comes with risks. Consumers, firms and the courts all benefit when substantive rights and remedies are stated clearly in law. Notwithstanding the comments made by the Minister, moving them into regulatory rules may reduce their visibility, create uncertainty about their permanence and make their enforceability less clear. I hope that the Minister will be able to assure us further on how the proposal before us will avoid that issue.

There is an important constitutional principle at stake. If rights established by Parliament can, in effect, be rewritten through regulator-made rules, Parliament’s role in determining the proper balance between consumer protection and regulatory proportionality is diminished. More broadly, public confidence depends on protections being visible, accessible and readily understood. This is particularly important in consumer credit, where people may be making difficult or significant financial decisions while facing difficult or vulnerable circumstances. Rights are of limited value if consumers cannot identify or understand them and cannot be confident about how they will be enforced.

Fundamentally, we need a lot more clarity on this process and on what the Minister described as the orderly transition. We shall listen carefully to his response on this group, in addition to his previous reply.

--- Later in debate ---

[Lord Altrincham (Con)]

My Lords, I am grateful to the noble Baronesses, Lady Kramer and Lady Bowles, for bringing these amendments—and to the right reverend Prelate for his reference to scripture. They raise important questions and will facilitate a useful debate about access to finance, the responsibilities of financial institutions and the right way to support small businesses and underserved communities.

I will begin with Amendments 28 and 29 in the name of the noble Baroness, Lady Kramer, and in the case of Amendment 28 also in the name of the right reverend Prelate the Bishop of Manchester. These amendments seek to require the FCA to establish and maintain a framework for assessing and rating banks’ and building societies’ performance in providing access to affordable credit, including for underserved groups. Amendment 29 would go further and require firms falling below a minimum performance threshold to take proportionate remedial action.

Access to financial services and appropriate credit is of course extremely important. That is particularly true for small and medium-sized businesses, micro-businesses and those parts of the country where access to finance can be more difficult. If we can improve the flow of capital to productive businesses, we can simulate growth, increase employment, allow firms to develop and generally improve the health of our economy. Many of the most successful businesses in this country began as small enterprises. They require confidence, access to working capital and a banking system willing to support their growth. When credit is unavailable or available only on unreasonable terms, good businesses can be held back, investment delayed and opportunities for employment and innovation lost.

However, my concern is with the mechanism proposed. I am not convinced that this can or should be done from a centrally mandated position. Banks and building societies have to make lending decisions on the basis of risk, affordability, regulatory capital, commercial judgment and the circumstances of the borrower. They are complex assessments, not straightforward public policy levers that can simply be pulled from the centre. If banks are going to make these decisions on the basis of their commercial interests, in many cases they will already have done so. Where lending is not happening to the extent that the noble Baroness would like, there is a reason for that. It may relate to risk appetite, capital requirements, information gaps, the lack of security, regulatory burdens, compliance costs or wider economic uncertainty, but the answer, it seems to me, is to work out why that is the case and then address those underlying barriers.

The answer should not be to move towards a system in which the Government through statute begin to direct the lending priorities of banks from the centre. Once we go down that road, we risk blurring the line between commercial banking and public policy allocation of credit. That is not a small step. It could have unintended consequences for financial stability, risk management, and ultimately for consumers and taxpayers. This would also send a worrying signal that the UK is a jurisdiction in which private interests are essentially subordinate to political objectives.

I support efforts to promote investment into SMEs, micro-businesses and underserved communities, but I do not think the right mechanism is one enforced by the Government in statute through ratings, thresholds and mandatory remedial action. I would therefore be grateful if the Minister could explain what work the Government are doing with banks and financial service providers to improve access to affordable credit, particularly for SMEs and underserved groups. I hope he can reassure the Committee that this work is being done with those organisations rather than over them.

I turn briefly to Amendment 30, in the name of the noble Baroness, Lady Bowles, and follow the words of my noble friend Lady Noakes. This amendment would introduce a fiduciary duty requiring firms to act in the best interests of retail customers, including small businesses. It would include duties around avoiding exploitative practices, ensuring suitability and fairness and taking reasonable steps to prevent foreseeable harm.

I understand the concern that sits behind this amendment. We all want financial services to treat customers fairly, we all want to prevent exploitative practices and we all want suitable products, clear terms and proper regard to foreseeable harm. Those are important principles. However, I am against imposing a broad fiduciary duty of this kind across regulated financial services. The concept of fiduciary duty carries with it a particular legal character and a potentially very wide set of implications. If applied broadly to all retail customer relationships, including small business relationships, it could create significant uncertainty about the legal obligations of firms, the interaction with existing FCA rules and the extent to which ordinary commercial relationships are being recast as fiduciary ones.

We are also concerned that this step could lead to a serious increase in the regulatory and compliance burden, which would fall on firms that are already struggling. Indeed, there is already a substantial framework governing conduct, consumer protection, fairness, suitability and foreseeable harm. The question for the Government and the FCA should be whether that existing framework is operating properly and proportionately, not necessarily whether a new overarching fiduciary duty should be imposed on top of it.

My concern is that such a duty could invite litigation, uncertainty and defensive behaviour. It might also make firms more reluctant to serve marginal or higher-risk customers if they fear that any adverse outcome could later be characterised as a breach of fiduciary duty. That would be the opposite of what many of us want to achieve in this group, which is broader and better access to financial services. Indeed, it would make providers and regulators more risk-averse.

These amendments raise an important debate about access to credit, the treatment of customers and the role of financial institutions in supporting growth. I support the objective of improving access to finance for SMEs, micro-businesses and underserved communities and hope to hear support for this from the Minister, but we should not seek to achieve that by central direction of lending decisions or imposing broad new legal duties whose consequences would be uncertain and work against the Government’s broad objective of simplifying regulation and reducing burdens.

[Lord Stockwood (Lab)]

My Lords, Amendments 28, 29 and 30 are aimed at increasing access to finance and ensuring that the customers of financial services firms are protected. I recognise the intention behind these amendments. However, I do not believe that either solution is workable.

On Amendments 28 and 29, I agree that data on access to finance and holding the sector to account are important. However, these proposals would introduce a new, prescriptive and burdensome framework on the FCA and firms that I am not persuaded would deliver the desired output.

Amendment 28 would require the FCA to establish a framework to monitor, assess and publicly report on certain banks’ and building societies’ performance in providing access to affordable credit. Amendment 29 would require the FCA to take action against firms that do not meet a minimum standard. As the noble Baroness, Lady Kramer, said, this approach resembles the United States’ Community Reinvestment Act 1977, but we should not assume that it would have the same effect here. Our starting point is different: we are working nearly 50 years later, in a digital age, with a far more diversified credit market. In any case, lenders already publish significant data. Chapter 7 of the FCA’s Conduct of Business Sourcebook requires extensive disclosure on personal and business current accounts. We also have the FCA’s Financial Lives Survey, the SME Finance Monitor and the British Business Bank’s annual SME finance publications, among others.

Amendment 29 would require the FCA to act against firms that do not meet a minimum lending standard. Striking the right balance on access to credit has long been a challenge. We want consumers to be able to access credit where it supports financial resilience and businesses to secure the finance needed to grow, but inappropriate credit can lead to overindebtedness, with serious consequences. The amendment could, in effect, compel lending to more vulnerable groups or SMEs. Even a well-designed regime could be a blunt instrument, with a risk of unintended outcomes. It would also represent a significant intrusion into firms’ commercial decisions.

More fundamentally, it is difficult to see how firms could increase lending and take on greater risk without raising prices to reflect that greater risk. If firms do not price risk appropriately, it opens us up to financial stability risks. The FCA would be placed in the invidious position of having to mandate affordable credit, while the mechanism required to expand provision could increase costs and potentially increase risk for the borrower and the firm. That runs directly counter to the intended objective for vulnerable customers and SMEs.

Although I cannot accept these amendments, I stress to noble Lords that the Government are not complacent about financial inclusion or the availability of SME finance. The noble Lord, Lord Altrincham, asked me to set out what the Government are doing, and I am happy that noble Baroness, Lady Kramer, mentioned several of these interventions already. The Government published their Financial Inclusion Strategy last autumn, and we are supporting practical interventions for consumers, including a small sum credit pilot enabling mainstream lenders to test lending to customers outside their usual risk appetite. Monzo was announced as the first participant in the scheme earlier this month.

We have launched a transformation fund for credit unions, alongside common bond reforms in this Bill, to strengthen their lending capacity. We are also advancing targeted SME finance measures to improve competition and supply, including enhancing the consumer credit data sharing scheme through Clauses 41 and 43 of this Bill. We are supporting up to £150 million of lending through the Community ENABLE funding programme over the next two years. We are establishing a CDFI taskforce and working with industry to improve bank referrals. Indeed, tomorrow I am meeting several large asset managers as chair of the place-based impact investment scheme. We will set out next steps on open finance later this summer. This has significant potential to support SME lending across a wide range of providers, alongside broader work with the Bank of England on capital and ring-fencing.

I highlight community development finance institutions, which I know are a priority for the noble Baroness, Lady Kramer. In addition to the CDFI taskforce and the Community ENABLE funding programme that this Government have funded, the sector benefits from Fair4All Finance’s affordable credit scale-up programme, which has committed more than £40 million in social investment in England to date. The financial inclusion strategy further includes measures to strengthen community finance, including promoting partnerships with mainstream lenders. Taken together, these measures support access to finance in the UK in an appropriate and responsible way.

Amendment 30 would introduce a new fiduciary duty on firms when carrying out FCA-regulated activities. It would place specific legally binding requirements on firms. I agree with the noble Baroness that it is vital for firms to act in a way that delivers good outcomes for consumers. However, I believe that FCA regulation is able to achieve this, and I am concerned that this new duty would risk creating overlapping requirements, causing confusion and reducing consumers’ access to finance.

The FCA’s consumer duty is designed to set a high standard of protection for retail customers by requiring firms to act to deliver good outcomes in line with the outcome sought by this amendment. It requires firms to put consumers’ needs at the heart of their business, including by acting in good faith, avoiding foreseeable harm and supporting consumers to pursue their financial objectives. In practice, this means that firms must design products and services that meet consumers’ needs, provide fair value, communicate clearly and offer effective support.

I am concerned that the requirements set out in this amendment would risk making more vulnerable customers more expensive and risky to serve, which would reduce their access to products such as credit and insurance. Introducing a novel statutory fiduciary duty, the precise scope of which would fall to be settled through litigation over a number of years, would create significant legal uncertainty. That uncertainty would carry a cost, which firms would be likely to manage by withdrawing from, or repricing, services for higher-risk customers. I recognise that there is some precedent for a fiduciary duty in trust-based pension schemes. However, the dynamics of the market are very different from wider consumer financial services. Typically, employer pension schemes do not choose which individual customers to serve, and the fiduciary duty applies at the membership level.

I genuinely understand the importance of lending for all parts of the economy, and I understand the need for borrowers to be protected, but I am convinced that the Government are taking the right set of actions, and I am afraid that Amendments 28, 29 and 30 would bring significant unintended consequences. I therefore ask the noble Baroness to withdraw her amendment.