Financial Services Bill

Lord Blunkett Excerpts

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Monday 22nd February 2021 Grand Committee

[Baroness McIntosh of Pickering (Con) [V]]

My Lords, I am delighted to follow the noble Lord. I would like to support the case for introducing a duty of care and look forward to hearing from my noble friend as to why in the Government’s view it may not be needed.

I will focus my remarks on Amendment 72, so ably moved by the noble Baroness, Lady Bowles, and in particular on subsection (2) of the proposed new clause. It concerns me greatly that there is still a huge area of unregulated provision of financial services here, in particular in the case of young people who, after they have graduated and are looking to pay off their student loans, will be relying on their banking facilities. It does seem that we need either a duty of care or, as the noble Baroness, Lady Bowles, set out in subsection (2) of the proposed new clause, some means by which we indicate to potential consumers and customers exactly what the situation is. I find that this area is compellingly in need of greater regulation—or, if not that, then the pointing of actual customers or potential future customers towards acting in this regard.

I find it extraordinary what information is provided to any of us, and in particular to young people. The noble Lord, Lord Sharkey, did a great service in setting out not just PPI but a number of other irregularities—at the very least—that have come to light in the last five or 10 years that need some form of redress in order to close this particular loophole.

We are in an extraordinary situation where there are a number of non-regulated financial services. In particular, Amendment 72 would seek to redress this. But also, Amendments 1 and 4 imposing a duty of care have many strengths to commend them. I look forward to my noble friend in summing up giving the reaction of the Government to the proposal for such a duty of care in the circumstances set out therein.

[Lord Blunkett (Lab) [V]]

I am very pleased indeed to join in this important debate. The noble Lord, Lord Sharkey, set out the situation in the macro field extremely well and I am pleased to support the speeches that have already been made by a number of noble Lords.

I will concentrate on two things. The first is the issue of protection from exploitation with the development of cybercrime. I hope we will be able to come back to this in Committee and on Report with respect to the risks that people are put into because of the lack of care within the whole of the financial services sector. Secondly, very small businesses and partnerships are excluded from redress, as the noble Baroness, Lady Bowles, mentioned. This is also is relevant to Amendment 129, moved by the noble Lord, Lord Holmes of Richmond.

On the first issue, in relation to cybersecurity, there is a growing trend that those who are affected keep quiet rather than reveal what has happened. This is a real danger. If, as I hope, we come out of the present dip in relation to financial services globally because of Brexit, we will be able to present to the world a marketplace which is both effective and forward looking—and is also secure. A duty of care to both individual customers and to small and medium-sized enterprises is a critical element in taking this Bill forward and strengthening the measures that exist there. I will not egg the measures that I think are necessary this afternoon, because there will an opportunity to come back to them. But I will just say that this is a growing area of real concern. An improved mandate for those operating in the financial services sector from the FCA would be very welcome indeed.

On the issue of small and medium-sized businesses and small partnerships, and the relationship between them and individual consumer, it is little known that access to the Financial Ombudsman is confined to individuals rather than small businesses and partnerships. What was said by the noble Lord, Lord Holmes, and also the noble Baroness, Lady Bowles, was highly relevant here. It backs up the need for clarity in terms of how we deal not only with prevention but with redress.

I give one small example, which I took up the with the noble Lord, Lord O’Shaughnessy, when he was at the Department of Health. To his credit, he saw the wisdom of trying to bring about change. As the noble Lord, Lord Holmes, has described, it was not received well at the time because of the struggle that was going on post the Brexit referendum and because of the difficulties the Government were facing. We have dealt with banks and financial services, but we need to concern ourselves with insurance as well. Perhaps now is an opportune moment to deal with the situation where an insurance company is taken over and the new provider offers a slightly revised agreement which is sent out without highlighting the key changes that have been made.

For instance, in cover for physical ailments and physical damage because of accident, there is no change, but in terms of absence from work and insurance by a partnership with more than 10 partners insuring together, the mental health clauses are changed to make any payment dependent on having to gain, within 12 weeks, the sign-off of a psychiatrist and a clinical psychologist. Anyone with any knowledge of this area will know that that is an impossible ask. Had it been highlighted to the partnership, it would have been able to look elsewhere for an insurer that was not going to exploit the market as this company did.

The partnership could not go to the ombudsman. It would have been entitled to if each individual partner had insured themselves, but because there were more than 10 of them signed up to the insurance contract, that was not possible. We need to put right nonsense of this kind and ensure that those making enormous amounts of money, which they will continue to do, do not do so at the expense of individuals or small and medium-sized enterprises.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a pleasure to follow the noble Lord, Lord Blunkett. I very much support his call for a financial sector that is secure, that does not threaten the security of all of us and that does not exploit people who are forced to use its services.

I speak chiefly to Amendment 1 in the name of the noble Lord, Lord Sharkey, also signed by the noble Baroness, Lady Kramer, and me. It was ably introduced by the noble Lord. I speak to this amendment because it is a subject close to my heart and one that I referred to at length in my speech at Second Reading. This group fits together nicely when we look also at Amendments 72 and 129, which I also support. We are talking about a huge imbalance of power in the interactions between the financial sector and its customers. As the noble Lord, Lord Sharkey, said in his introduction, when talking about this we often focus on banks, but we have seen some truly outrageous behaviour from insurance companies during the Covid-19 pandemic, something that I have referred to previously in the House.

When thinking about this amendment I reflected on being a 19 year-old in Australia, many years ago, buying a studio flat. It was cheaper then to have a mortgage than to pay rent. My father stood as guarantor and met the local bank manager—they knew each other personally. This was before the financial deregulation that allowed the massive boosting of prices, as the excellent 2016 New Economics Foundation report The Financialisaton of UK Homes laid out. That was what made it possible.

However, the banking sector then was no ideal model. It was undoubtedly paternalistic, patriarchal and discriminatory, against people from BAME and certain socioeconomic backgrounds and on the basis of gender. I am not sure whether my father was forced to be guarantor because I was a single female and a strange type of person to be taking out a loan, or just because of my youth, but there was in the local bank manager an individual knowledge and understanding, and the hope that if something went wrong, an individual would know your circumstances and do their best to help you.

That is not the situation that we have now. We have a “computer says no” approach. Anyone with a problem can expect to encounter an endlessly changing rota of call centre staff reading from scripts. We could hope for a locally based institution serving the needs of local communities, something that other parts of the world, such as Germany, still expect from their financial sector. That would be a financial sector that served as a utility, not as a generator of maximum profit. Care would then be built in and we might not need an amendment such as the duty of care amendment, but we have to start from where we are.

Financial Services Bill

Lord Blunkett Excerpts

Report stage
Wednesday 14th April 2021 Lords Chamber

[Baroness Coussins (CB)]

My Lords, I support Amendment 16, in the name of my noble friend Lady Meacher and others, and I remind the House of my association with the debt advice charity the Money Advice Trust.

Anyone who has been involved with debt policy knows that the issue of bailiff regulation is a long-standing concern. Bailiffs have significant powers, including being able to enter people’s homes and take possession of their goods. Unfortunately, despite plenty of good intentions and existing voluntary national standards and codes of practice intended to govern bailiff behaviour, widespread problems remain in practice. These include bailiffs misrepresenting their powers, the failure to offer affordable repayment plans, and unfair treatment of vulnerable people or people in vulnerable circumstances. As my noble friend Lady Meacher has outlined, independent oversight would be an enormous step forward in helping people in debt to cope with, manage and overcome their predicament without unnecessary and unjustifiable additional pressures.

Noble Lords will be aware of the promising discussions currently taking place between representatives of the debt advice sector and the enforcement industry, facilitated by the Centre for Social Justice, to explore the potential for an independent oversight body. The aim of such a body—which would be funded by the bailiff industry—would be to address these problems and to raise standards. For the first time, both the bailiff industry and the debt advice sector are agreed that, for such an oversight body to be effective in raising standards, it must have statutory underpinning.

The amendment in the name of my noble friend Lady Meacher and others provides an opportunity to do just this. Of course, there are challenges to the parliamentary timetable, and relevant Bills in which to include issues such as this can be few and far between. The perverse and worst-case scenario would be to have a fully developed and agreed proposal for an independent oversight body which could not be put in place because the Government did not have the necessary powers. If the Government miss the opportunity to take action in this Bill, meaningful change is likely to be delayed much longer, with harsh consequences for people in debt.

So would it not be better for the Government to be proactive now and to accept this amendment—or, at the very least, come back with a similar version of their own at Third Reading? We cannot escape the fact that, despite the welcome support that has been put in place, debt problems will increase as a result of the pandemic. More people may face the prospect of bailiffs at their door and it is only right that the industry is properly governed and regulated, as other debt collection companies are. The Government have previously stated that they want to see practice in this sector improved and regulation strengthened. This amendment gives them the opportunity to do so. I hope that the Minister will accept it, or commit to coming back at Third Reading with something just as good or better.

[Lord Blunkett (Lab)]

My Lords, this group of amendments contains issues of profound importance. It is not surprising, therefore, that our progress this afternoon has somewhat slowed. I can be blissfully short, because the noble Lord, Lord Young of Cookham, spelled out in his usual eloquent and detailed fashion why Amendment 37C should be taken very seriously and that a solution must be found to the challenge that he laid out. Like the noble Baroness, Lady Altmann, I pay tribute to the noble Lord for his dedication and commitment. I have been proud to work alongside him. One of the great pleasures of this House is that it is possible to work effectively—I hope effectively—across party. The case that he made this afternoon, which he has been making for the last few months, is in my view unanswerable. The issue, therefore, is what progress can be made and what can be done.

The noble Lord, Lord Wolfson, has taken this issue seriously and to heart since he joined the House and took up his present position. Forgive me if I call the noble Lord, Lord Young, my noble friend. As he has spelled out, it is surely not beyond the wit of woman or man—working groups that do not meet or address issues aside—to be able to unlock funds that are essential, albeit small, for those for whom they were intended. My noble friend kindly indicated my history in this area. It was blighted by not having spotted that the Mental Capacity Act, which succeeded the decision to introduce child trust funds, would inadvertently lead to those funds being blocked for the most vulnerable.

I still regret very strongly that the early part of the coalition Government abolished child trust funds—driven, it has to be said, by the then Chief Secretary and not by the leading party in the coalition. But that is water under the bridge. The paradox of course is that, had the child trust funds continued and been delivered in the way originally intended—including continuous top-up funding—we would have been in a more difficult position in releasing these funds for those with learning disabilities, because the funds would have been much greater. Sometimes there are twists in life which you do not see and sometimes there are those you wish you had not.

This is a simple issue here, whether it is about Holly who was highlighted by my noble friend Lord Young, or Mikey, highlighted by the noble Baroness, Lady Altmann. I originally heard Mikey’s father outlining these issues on “Money Box”. He was also mentioned by the now leader of the Liberal Democrats in the other place. Those young people demonstrate the wider issue of access to modest but important funding that can help them at a crucial time of transition into adulthood, as was originally intended. There is also the profound issue of the growing capital asset divide in our country. With house prices accelerating as they are now, this divide will increase still further.

So I will make a very simple appeal. The noble Lord who is leading on this amendment will not press it to a vote. However, I think that the feeling of this House—both on the numerous previous occasions on which the issue has been raised and again this afternoon by noble Lords both online and present in this Chamber —is that a solution must be found, and found quickly. My experience during eight years in the Cabinet was that there were very good civil servants who explained, quite rightly, why something could not be done. I always valued them because they prevented me putting my foot in it more often than I did. But the best civil servants were the ones who highlighted the problem and then came up with a solution.

[Viscount Trenchard (Con)]

My Lords, the noble Baroness, Lady Meacher, spoke powerfully in favour of her similar Amendment 136F in Committee on 3 March. The noble Baroness has now brought forward Amendment 16 with the same purpose. It is supported by the noble Lord, Lord Stevenson of Balmacara, my noble friend Lady Morgan of Cotes and my friend the right reverend Prelate the Bishop of St Albans. I support all their arguments.

There is a weight of evidence of unreasonably aggressive behaviour by enforcement agents even before the onset of the pandemic. Your Lordships should be pleased that the Ministry of Justice launched a call for evidence as part of its second review of the reforms introduced by the Taking Control of Goods (Fees) Regulations 2014. It is understandable that that review is taking longer than expected in current circumstances. My noble friend Lord True explained that resources had to be moved to bring about the passage of the Corporate Insolvency and Governance Act, which was intended to help businesses survive the lockdowns. I would be interested to hear from my noble friend the Minister whether the Act is working as the Government intended, and how many companies have successfully applied for moratoria under the Act.

As the noble Baroness explained, her amendment allows the FCA to outsource the powers it would assume under this amendment to another unspecified person or body. I think this is far from satisfactory, and that the FCA should not be burdened with responsibilities in this area. The FCA is going to be busy enough with its new regulatory responsibilities and with what will rightly be an onerous system of oversight by your Lordships’ House and another place.

The FCA is not the right regulator to become involved with issues relating to non-payment of utility bills, for example. I am surprised that the noble Baroness is apparently unwilling to accept the assurance of my noble friend that the Government’s response to the review of bailiff regulation will be issued within this year. I expect that the Government will recognise that something needs to be done to control overaggressive behaviour by bailiffs, balancing such control against the need to retain an effective enforcement process. In view of my noble friend’s assurance, I am unable to support this amendment.

However, the FCA is the right regulator to protect potential customers of regulated financial services firms as well as contracted customers. Every contracted customer is a potential customer before entering into a contract to purchase supplies from a supplier, or to purchase services from a supplier, and thereby becoming an actual customer. I therefore support Amendment 26 in the name my noble friends Lord Leigh of Hurley and Lady Altmann.

The right reverend Prelate the Bishop of St Albans has made a powerful case for his Amendment 27, requiring debit and credit card providers to offer an opt-in option for gambling blockers. Research by GambleAware published in July 2020 found that only eight financial services firms offered blockers on certain products and ranges, estimated to cover 60% of personal current accounts. The research also examined the effectiveness of blockers currently available and found that they needed to be improved. Of the eight banks that offered blockers, three banks’ blockers could be immediately turned on and off, meaning that they functioned more like a light switch than a lock. I would like to ask my noble friend the Minister whether he agrees with GambleAware’s recommendation that the FCA, in its guidance, should require banks to include gambling blockers as standard on debit and credit cards.

The FCA already recognises that all banks’ customers are capable of becoming vulnerable, but it does not recognise that those with a gambling addiction are included in the categories it already recognises, such as those who have a cognitive impairment, low resilience to financial shocks or poor numeracy skills. It is of course very difficult to define what is a gambling addiction, and it also begs the question of how far we want the state to go in protecting us from all the risks we may encounter in our lives. However, the right reverend Prelate’s amendment calls for an opt-in option and therefore has some merit. I look forward to hearing the Minister’s views.