Financial Services Bill

Lord Holmes of Richmond Excerpts

Report stage
Wednesday 14th April 2021 Lords Chamber

[The Minister of State, Cabinet Office (Lord True) (Con)]

My Lords, the Government have brought forward Amendment 14 to ensure that buy now, pay later products can be brought into scope of regulation in a way that is proportionate to the risks that they pose to consumers. As noble Lords will recall from previous debates, to which the Government listened carefully, on 2 February following the publication of the Woolard Review into the unsecured credit market, the Government announced their intention to regulate interest-free buy now, pay later products. Following that announcement, the Government have been working at pace to ensure that this can be done in a proportionate and timely manner. Amendment 14 is the next step in this process. Many noble Lords were keen to see progress on the issue, so I hope that they will welcome the amendment today.

The Government recognise the concerns that exist with these products as the market continues to grow in the United Kingdom. We are therefore acting decisively to address the risk of detriment to consumers. The Government intend to bring buy now, pay later products within the scope of the regulatory framework, which includes the application of the Consumer Credit Act 1974. However, as noble Lords have previously heard, it is important to note that those products are interest-free, and thus are inherently lower-risk than most other forms of borrowing. Used properly, they can provide a lower-cost alternative to mainstream or high-cost credit. The Government’s view is that they can therefore be a useful part of the toolkit for managing personal finances and tackling financial exclusion, a topic that I will return to later in the debate. It is therefore essential that when buy now, pay later products are brought into regulation, it is done in a way that provides robust consumer protection, while ensuring that it is viable for firms to continue to offer these products. Amendment 14 will ensure that that can be done.

Some of the provisions of the Consumer Credit Act could be disproportionate, given the short term, interest-free nature of buy now, pay later products. They could also materially impact the way in which consumers are able to access these products. As a result, this amendment seeks to provide the Government with the power to ensure that the provisions of the Consumer Credit Act 1974 that will apply to buy now, pay later products are proportionate to the risks that the products present. This will allow the Government to apply only the provisions of the Act that have been determined to be proportionate to the risks posed by buy now, pay later products.

The Government intend to publish a consultation later this spring where the views of consumers, buy now, pay later providers and the retailers that offer these products will be sought on this matter. We will carefully consider these views to inform our approach to creating a proportionate regime, including decisions on which provisions in the Consumer Credit Act should apply to buy now, pay later agreements. Following this, we will take forward the necessary secondary legislation to bring buy now, pay later agreements into regulation. That secondary legislation will be subject to the affirmative resolution procedure, meaning that noble Lords will have the opportunity to further scrutinise and comment on the Government’s proposals. I therefore ask that your Lordships support this amendment to ensure that the regulation of buy now, pay later can proceed both at pace and in a proportionate manner. I beg to move.

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to follow the Minister. In doing so, I declare my financial services interests as set out in the register. I would like to be the first to offer my support for Amendment 14 and what it seeks to achieve. I congratulate my noble friend on the decision to use the affirmative procedure to bring these powers into force.

I will now speak to Amendment 35 in my name. The thinking behind it is quite straightforward: financial exclusion has dogged our nation for decades, ruining individual lives and putting down potential. Solutions exist and thousands of people are working so hard in this area, but we need to do more and we need more innovation: hence the two elements in Amendment 35. It seeks to give the Bank of England—our central bank—a more significant role when it comes to financial exclusion. The Bank has an enviable brand, respected right across the UK and revered around the world. This brand could be well put towards solving the problem of financial exclusion.

The first part of Amendment 35 seeks to give the Financial Policy Committee of the Bank of England an objective to monitor financial exclusion. As noble Lords know, the FPC is responsible for financial stability in the UK. I believe there are 407 billion new reasons to take this opportunity to reconsider financial stability and include financial exclusion within the remit of the FPC.

The second limb of the amendment seeks to suggest the opportunity for the Bank to offer basic bank accounts to those who find themselves financially excluded. The take-up of bank accounts for those financially excluded is not just a measure of what is currently available from retail providers. The history of those individuals also plays a key part, so, again, the brand and the central place of the Bank could play a critical role here. If we considered some of those accounts potentially being digital accounts—perhaps central bank digital currency accounts or digital pound accounts—the Bank might play a critical role in addressing digital as well as financial exclusion.

The Old Lady of Threadneedle Street could be not just lender of last resort but potentially, through Amendment 35, provider of first support for those individuals en route to financial inclusion. Provider of first support is certainly worth a thought. Does the Minister agree?

[Baroness Noakes (Con)]

My Lords, I shall speak only in respect of Amendment 35. My noble friend’s amendment is very well intentioned, covering financial exclusion and basic bank accounts. Despite basic bank accounts having been in existence for nearly 20 years now, there remain problems with take-up. The know-your-customer rules, about which my noble friend Lord Holmes of Richmond raised concerns in Committee on this Bill, also make life difficult for individuals trying to access them. It is no secret that the banks regard basic bank accounts as a costly burden that they have to bear, which is probably at the heart of some of the issues.

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[Lord Sikka (Lab) [V]]

My Lords, it is a great pleasure to participate in this Bill. I strongly support Amendment 27. In view of the passionate speeches by the right reverend Prelate the Bishop of St Albans and the noble Lord, Lord Foster, my contribution will be relatively short, as they have said almost everything that I wanted to say.

In this technological age, it cannot be very difficult for any provider of bank accounts, credit cards, debit cards, store cards and other electronic payment systems to offer customers an opportunity to block payments to certain providers of services. As has already been said, the blockers actually increase consumer choice. The blockers would be of enormous help, as has been said, to those addicted to gambling or other ruinous addictions—of course, gambling is not the only one. It would certainly help their families too, because it would safeguard the family budget, which then cannot simply disappear by the swipe of a card or the click of a computer key.

I would urge that such blockers should be a necessary condition of the authorisation to trade in financial services in the UK. Other regulators, such as the Gambling Commission, should also insist that anybody who is licensed provides such facilities. The blockers obviously would not prevent people from indulging in gambling and other ruinous addictions. Nevertheless, they would really help vulnerable people in our society and I completely support this amendment.

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to take part in this group of amendments and I declare my interests as set out in the register. I will speak to a trio of amendments and I will endeavour to do it in a trice.

First, I very much support the intention behind Amendment 16. I ask my noble friend the Minister, over and above what is set out in the amendment, what reports the Government have received of bailiffs entering properties during the Covid period, both in breach of their guidance and the Covid regulations, and what action all relevant authorities will be taking in this respect.

Secondly, on Amendment 26, I very much support my noble friend Lord Leigh of Hurley, who set out the arguments perfectly and succinctly. Would my noble friend the Minister agree that there is clearly a loophole, and what will the Government do effectively to close said loophole?

Thirdly, and perhaps most importantly, I give full-throated support to Amendment 37C, so perfectly introduced by my noble friend Lord Young of Cookham. It seems one of those amendments where, for want of a small legislative change, a huge material difference could be made to so many people’s lives. It is a funds-releasing, anxiety-relieving amendment. I ask my noble friend the Minister: if not this amendment, will the Government bring forward one of their own at Third Reading? If not this Bill, what Bill?

[Lord Addington (LD)]

My Lords, while sitting here listening to this debate, I could not help but get the feeling that there had been a drawing of lots in the Government Whips’ Office when they were preparing to take on these amendments and the noble Lord, Lord True, lost. All of the issues here are good and real issues. If these amendments were accepted and brought forward, they would probably make our lives that little bit better.

Before I bring my full attention to the amendment brought forward by the noble Lord, Lord Young, I will say that we deserve to hear at least about a plan of action to deal with all these issues. If the Minister cannot provide that now, giving some idea of when they will be considered is very important. They are real issues; please deal with them. That is what we are here for. The only justification for us being in this Chamber is to deal with them, so can we hear about that?

When the noble Lord, Lord Young, first raised the issue in his amendment, I said that he had put his finger on an absurdity. I have not changed my mind. I think that the noble Lord, Lord Blunkett, basically said that the cock-up school of history is alive and functioning. The rest of us who were in Parliament at the time and involved in those Bills take our share of the blame because we did not spot it either. Can we change this?

The noble Lord, Lord Young, made about half a dozen arguments in his speech for why the amendment should be accepted or acted on. The most convincing one was that, for a comparatively modest sum of, say, £3,000, you have about four or five days-worth of paperwork. That is paperwork that you might not be very good at and which you might have to repeat, over and again, to get the money out—and usually the person doing the paperwork to get the money to support the child put that money in the bank in the first place. This is beyond belief; it is Kafkaesque. Will the Minister make sure that the people who put the money in to support a child can take it out to do so? What method are the Government taking? The law does not allow it at the moment, but we change the law all the time—we are doing it now. Please can he give us a plan of action on this?

The noble Lord, Lord Young, said that he did not expect to vote on this. The ball is of course firmly in his court on this one, but, dependent on what the Minister says, I hope the noble Lord will decide whether that is the correct approach here. I know it will annoy the Whips if we have a vote on this, but if the Minister cannot give him something that is at least in some way positive, I will certainly herd my colleagues through to support it.

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[Baroness McIntosh of Pickering (Con)]

It gives me great pleasure to follow the noble Lord, Lord Stevenson of Balmacara, and lend my support, with my co-signing, to an important follow-through from the Law Commission’s conclusions and recommendations. I echo the remarks I made in my support in Committee, and I believe the contribution from the noble Lord, Lord Stevenson, has been modest today. We are seeking reassurances, and I echo his concern about a definitive timescale.

It is interesting to note, as a non-practising Scottish advocate, that bills of sale do not apply in Scotland, so the Act does not extend to Scotland, and the provisions only really apply to England and Wales in this regard. Bills of sale, being mainly used for logbook loans, relate mostly to vehicles. But this is an opportunity, in supporting the amendment before us this afternoon, to probe my noble friend and the Government a bit further about what their plans are to review the recommendation.

Law Commission reports do not come along that often, and they come along often at the invitation of the Government. I would like to ask my noble friend about his intentions to give effect to the recommendations of the Law Commission report of 2017. In the consultation paper, it was proposed that the Bills of Sale Acts should be repealed in their entirety and replaced with new legislation to regulate how individuals may use their existing goods as security while retaining possession of them. Out of the 32 consultees who expressed their views, 24—75%—agreed to that.

I entirely endorse the Law Commission’s opinion that:

“The Bills of Sale Acts are written in obscure, archaic language, using words such as ‘witnesseth’ and ‘doth’.”


That sounds a bit like “the Leith police dismisseth us”. In the interests of modernising the legislation and making it more transparent, the purpose of Amendment 17 is entirely clear, and I take this opportunity simply to nudge and press my noble friend on what the Government’s intentions are now, four years on from the Law Commission’s recommendations.

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to follow my noble friend Lady McIntosh, and to congratulate the noble Lord, Lord Stevenson of Balmacara, on all his efforts in this respect. The Law Commission’s recommendations seemed pertinent and on point in 2017; four years on, they seem similarly pertinent and on point. Will my noble friend the Minister set out the pathway and the timetable for consideration of those arcane statutes, and tell us what issues and other legislation, which he alluded to, may also be under consideration along that pathway?

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[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to take part on this group of amendments. I declare my financial services interests and say just this: the borrowers are not to blame, but they bear the burden. Does my noble friend the Minister agree?

In agreeing to a large extent with my noble friend Lady Noakes, with regret I am not convinced that these are necessarily the amendments to resolve the issue. Can the Minister set out what action he believes the Treasury and FCA are taking in this area? There clearly is an issue even if we accept that the numbers may be disputed, or that there are different categories and specific circumstances. These are all important points to be considered, but they still leave issues to be addressed. Will the Minister set out anything he can about what actions the Treasury will take and what the approach of the FCA will be to address these points?

[Baroness Bryan of Partick (Lab) [V]]

My Lords, it is a great honour to participate in this group of amendments, and particularly to support the noble Lord, Lord Sharkey, who has worked tirelessly to support mortgage prisoners. I feel I am in a similar place to my noble friend Lord Griffiths of Burry Port when he spoke in Committee. I will speak as someone inexperienced in high finance but who understands the importance of having a home—not as a financial asset or investment, but as somewhere safe and secure to live. To make this most basic need a pawn in the machinations of greed-driven financial transactions, as demonstrated by the financial crash of 2008, is an absolutely unacceptable face of capitalism.

Every Government since 1979 have encouraged people to see home ownership as a sign of virtue. When the noble Lord, Lord Heseltine, was Secretary of State for the Environment, he said:

“Home ownership stimulates the attitudes of independence and self-reliance that are the bedrock of a free society.”


But for many people, the period of their mortgage is a rollercoaster ride of anxiety, always dependent on matters far outside their control. The day the mortgage is paid off must rank among the best days of people’s lives. Many mortgage prisoners fear they will never see that day.

The FCA reported in July 2020 that around a quarter of a million people have their mortgages held by inactive firms. The majority of these people were up to date with their payments and, in any other circumstances, would have been able to adjust their mortgages and repayment patterns to suit their individual needs. No one would choose to remain on the SVR for years on end, so to compare their entrapment on that rate to those who may be on it temporarily, while they seek an alternative, is disingenuous. These people have been denied that opportunity, not through any decision they made or any fault on their part, but because of the way the Government chose to sell off mortgage loan books. It was not just people’s mortgages that changed hands, it was people’s lives—they were being bought and sold.

This Bill was viewed with real optimism among some mortgage prisoners. They thought amendments relating to SVR would help transform their lives, but how often have they been here before? Last year, there was hope that the FCA’s more lenient affordability checks would help some escape, but very few succeeded. For many more, their lives were made even more difficult by the impact of Covid-19. The report from the LSE in November 2020 makes the point that the FCA has now reached the limit of its powers. This means that only the Government can help to free mortgage prisoners. Instead, while Parliament was considering amendments aimed at protecting mortgage prisoners, the auctions continued. All the warm words and expressions of concern from Ministers meant nothing. The Treasury’s sole concern was that these people must deliver value for money for the Government.

These amendments are considered and cautious. Their implementation would not undermine capitalism or fundamentally damage the whole system of mortgage delivery, but would give some safeguards to a specific group of mortgage prisoners who have struggled for more than 10 years as victims of the failure of the very system the Government are defending. If it is not to be these amendments, what help will the Minister offer? Unless there is a clear alternative, I hope we will be given the opportunity to vote on at least one of them. I would be very pleased to give my support.