Financial Guidance and Claims Bill [HL]

Lord Deben Excerpts

Committee: 3rd sitting (Hansard): House of Lords
Monday 11th September 2017 Lords Chamber

[The Lord Speaker (Lord Fowler)]

My Lords, I should inform the Committee that if this amendment is agreed to, I cannot call Amendment 50 by reason of pre-emption.

[Lord Deben (Con)]

My Lords, I point the House to my declaration of interests. I want to underline something that the noble Lord has just said about the danger of having conflicting areas of advice.

I am sure that my noble friend will be able to explain this, but it is already true in the financial services industry, and elsewhere, that often there are serious conflicts between the decisions being handed down, for example by the Financial Services Authority, the way that such decisions are interpreted by the ombudsman and the way that things come together. That is now a major incubus on the best companies in the field; therefore it is crucial for us to know in advance that what is being done here will not be yet another different series of things that people have to bring together. That is not to defend anybody who is doing wrong or to excuse people who have not bothered, but merely to say that the better the firm, the more important it is for it to be clear what governance it should be concerned with, what guidance means, and ensure that the opportunities for contradictions are eliminated before we start.

[The Earl of Kinnoull (CB)]

My Lords, I rise briefly to speak to Amendment 56, which is in my name. I note that the clause on setting standards, which is only 11 lines long, has eight amendments. That underlines its importance.

The origins of Amendment 56 are my concerns with the behaviour of the Financial Conduct Authority; I have been regulated by it and its predecessors for the whole of my commercial career. I realise that the single financial guidance body will only be a client organisation of it, but I am concerned about FCA ethos leaking down to the SFGB.

Perhaps I should explain further. When a regulated client rings up the FCA with a specific question, asking for help in the interpretation of its rules, the FCA, in my direct experience, simply says, “We can’t give you any help in interpreting those rules”. That is quite unlike regulators in other jurisdictions in other places—I originally wrote down “competitor regulators”. That is very unhelpful, but while it is unhelpful in the financial services world, firms are usually big enough to afford advice from big firms of solicitors. Here we are often dealing with very small charities that do not have access to £1,000 per hour for Allen & Overy, so it is important that the SFGB offers that advice.

It has been said to me that there is a big problem concerning resourcing. I think that that is quite a difficult position to maintain. First, other similar regulators in other jurisdictions do not perceive those resourcing problems. In fact, most of the questions that come up, such as on a drafting issue, do so repeatedly and the same question will be asked by many of those being regulated. Secondly, just thinking about one particular bit of FCA regulation because I know about it—the regulation of insurance brokers—the FCA and those that are being regulated bear the cost of that regulation, which is more than twice as expensive as Ireland, Bermuda and Hong Kong. That multiple is far bigger than for France and Germany. I do not therefore think that good regulation has to be expensive.

The amendment is aimed at trying to ensure that that sort of behaviour is not replicated and that the SFGB remains friendly and helpful in interpreting the regulations that it will impose on those that it regulates.

--- Later in debate ---

[Baroness Buscombe]

I thank noble Lords for their scrutiny of Clause 6, which requires the body to set standards from time to time for the delivery of its information, guidance and advice services. It also requires the body to obtain the FCA’s approval prior to finalising the standards and to publish the standards. I understand that there has been concern among the debt advice sector that the body’s standards will apply to all debt advice providers. I reassure the Committee, and others, that the single financial guidance body is not a regulator. These standards will apply only to the body itself and its delivery partners.

I turn first to Amendments 49 and 54, tabled by the noble Lord, Lord Stevenson, which set out an alternative to setting standards for service delivery. Amendment 49 would require the body to publish a commissioning framework against which it would test the competence of service providers when delegating any of its functions. Amendment 54 would require the body to consult on this framework and to obtain the approval of the FCA.

The setting and publication of standards, and their monitoring and enforcement, provided for in Clause 7, are designed to give assurance to members of the public that the information, guidance and advice services provided by the body meet robust criteria. These standards will apply only to the body itself when it is delivering these services directly, and to any delivery partner organisations it engages to deliver these services on its behalf.

The noble Lord proposes to replace the requirement for the body to set standards with a commissioning framework, but there is a difference between these two. The proposed commissioning framework would only set out requirements that the body’s delivery partners must meet to enable bidders for contracts or grants to understand what the expectations were. The standards will set out the requirements that both the delivery partners and the body itself must meet. The standards will play an important role in enabling members of the public to have confidence in the services provided by or on behalf of the body, and both could not and should not be replaced by the proposed commissioning framework.

When contracts are above a certain value, the body will be required to comply with the Public Contracts Regulations 2015, the regulations that govern public procurement, including the requirement to advertise its requirements and undertake a competitive tendering exercise. Where the size of the contract is below the thresholds cited in the regulations or where the body will be making grant arrangements, we would expect it to follow similar principles.

If the body decides to delegate any of its guidance or advice functions and procure services from other providers, we would expect it to publish its requirements, including any technical requirements, with adequate time for delivery partners to prepare their propositions. It is unnecessary to be specific about this in legislation, as we would expect the new body to build on the good practice of existing organisations. For example, the MAS already has a commissioning framework for debt advice.

Amendments 50 and 55, tabled by the noble Lords, Lord McKenzie and Lord Stevenson, would require the single financial guidance body to consult on the standards. The body will be able to set different standards for different types of information, guidance and debt advice. One size will not fit all. For example, standards for an online service such as the body’s website would of necessity differ from standards for a face-to-face guidance appointment. In addition, the body may need to develop standards if new services come online or if the nature of the service provision changes. We would expect the body continuously to review its service standards. This will be important to the body’s board in ensuring that its services remain customer focused.

In developing and updating the standards, we would expect the body to work closely with a range of stakeholders, including delivery partners—large and small; I stress that to the noble Earl, Lord Kinnoull—devolved authorities and consumer representatives, to ensure that the standards it sets are robust, cover a range of qualitative and quantitative measures and can be properly monitored. The noble Lord, Lord Stevenson, asked how the body would set its standards and what they might be, and about the consultation with the FCA. We would expect the standards broadly to cover delivering the guidance, advice and information, professional standards, communications systems and controls, complaints management and content of the guidance session.

Prior to anything being published, the body is required to gain the approval of the FCA. The FCA will add value by providing independent scrutiny, and the standards will benefit from the FCA’s expertise in relation to financial services and the debt advice sector, and its experience in setting the standards for Pension Wise. Having the input of the FCA will also ensure that the body’s standards complement the FCA’s debt advice authorisation process. As my noble friend Lord Deben has stressed, it is important that there be clarity.

Should the body consider it valuable to conduct a consultation exercise before setting or revising its standards, it could do so. However, I do not consider it necessary or proportionate to require in legislation that the body undertake a formal consultation process, particularly as this would apply even to very minor revisions of the standards.

Amendments 51 and 52, tabled by my noble friend Lady Altmann, return to the debate on earlier amendments to Clauses 2 and 4. There, I made the case that “debt advice” is the appropriate term to use in the functions of the body. I have also written to my noble friend with further explanation of the terminology used in the Bill. The Government believe that it remains the right term here. I apologise for going over old ground with these arguments, but I want to do justice to my noble friend’s amendments.

First, “debt advice” reflects a broader set of activities than “debt counselling”, and this broader set is what the new body will have a duty to deliver. Secondly, similar to independent financial advice, debt advice is an activity regulated by the FCA. Using the term “counselling” may mislead customers who are actually receiving regulated advice. I hope that this is a further response to my noble friend Lord Deben. It is particularly important that we do not confuse customers by introducing other terminology. We should be very clear here on the vital service this body will provide. It will fund and co-ordinate—

[Lord Deben]

I thank my noble friend for referring to me. I do not want her to believe that I do not agree with my noble friend Lady Altmann. The fact is that we have had far too much trouble in the past with the word “advice” being used wrongly. “Advice” should be used only when it consists of somebody who is on your side and giving you advice personally and individually. That is not what we are talking about here; “counselling” or some other word should be used. I hope the Minister will not include me in her supporters on this particular point. This is really serious and we ought to think again.

[Baroness Buscombe]

I hear what my noble friend is saying. I hope he read in Hansard what I set out in detail on day 2 of Committee and what I wrote to all noble Lords. I commit here to spend more time between Committee and Report trying to persuade noble Lords of the reasons why we feel it right to stick with the current terminology regarding the difference between debt advice and guidance, not least because this is already set out in regulations, at the FCA and so on. We are very keen to avoid confusion or duplication. We also very much take on board the experience and expertise we have heard from those who have given this guidance and debt advice for more than 30 years. They said they had never had a problem with this. However, I hear what my noble friend said and can see that I must do more to persuade some, though not all, noble Lords—there is great support for what the Government are trying to do. I can only stress the number of consultations we had prior to introducing the Bill to ensure that we are doing the right thing to the best of our ability, particularly in our focus on the consumer.

Most people who access debt advice have lived with debt problems for more than a year before doing so. They may be facing up to something they have avoided for a long time. They seek help because they do not know what to do. They turn to services such as the Money Advice Trust, Citizens Advice and StepChange, which are all MAS delivery partners, for urgent help with getting out of their immediate crisis. Although there is a clear difference between debt advice and the advice given by independent financial advisers to those lucky enough to have some extra money to pay for it, the advice given by debt advice is still regulated by the FCA.

Debt advisers help people identify the steps they need to take, recommend a course of action, represent people at court facing repossession and, crucially, build their clients’ confidence to deal with their creditors themselves. Under FCA rules, these excellent advisers are required to make it clear that they are giving a customer regulated advice. These individuals need help to work through their problems. They want advice on how to get out of the situation. The labels we use to describe the service on offer must reflect the way these customers use and understand the service. For these reasons, I maintain that debt advice is the most appropriate term to use.

Amendment 53, tabled by the noble Lord, Lord McKenzie, would require that the standards include measures of outcomes for members of the public as well as measures of outputs for the body and its delivery partners. The noble Lord raises an important issue but I do not agree that attaching this requirement to the standards is the right approach. I reassure the noble Lord that assessing the body’s success in improving the ability of members of the public to make informed financial decisions will be very important for both Her Majesty’s Treasury and the Department for Work and Pensions.

The Committee discussed during debate on Clause 1 the business planning process for the single financial guidance body. Part of that process will be for the body to agree a range of key performance indicators with Her Majesty’s Treasury and the DWP. These will be set out in the body’s corporate strategy and business plans. The corporate strategy and business plans will be published, and will include how the indicators will be measured. It is too soon to set out exactly what the performance indicators will be for the body but, as an example, Pension Wise is testing its customers’ knowledge of the pensions freedoms and comparing it with that of a group of non-users of its service. This research seeks to ascertain what difference Pension Wise is making to people’s understanding of their options under the pension freedoms. This evaluation is also recording customers’ intentions shortly after their Pension Wise appointment and any actions they have taken about three months after their appointment.