Financial Services Bill

Lord Lucas Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 28th January 2021 Lords Chamber

[Lord Lucas (Con) [V]]

My Lords, I very much welcome this Bill. As the chair of the cross-industry Enforcement Law Review Group, I will concentrate very much on Clause 34, which I and many others welcome. I anticipate that there will be a number of amendments trying to get to the bottom of exactly how the Government see it operating, and I should be enormously grateful if the Minister could circulate to me the current draft of the regulations, so that we shall be talking to each other off the same hymn sheet, as it were, in Committee.

I very much encourage the Government to bring forward these regulations swiftly, and I encourage the Opposition to support the Government. There will be an obvious need for them as we come out of Covid, and I do not believe that, given the state of the debt advice industry, there is any quick perfectibility on offer. It would be far better to get something up and running, to review it pretty swiftly—perhaps after six months—and to produce a better version then and a better version a year or two after that. This is something that the industry will learn to work with, and we should aim at the start not for perfection but for something practical and effective.

Financial Services Bill

Lord Lucas Excerpts

Committee stage & Lords Hansard
Wednesday 3rd March 2021 Grand Committee

[Lord Lucas (Con) [V]]

My Lords, my amendments in this group are all a result of my chairmanship of the Enforcement Law Review Group. They reflect the concerns of members of that group—it has representatives from all sides of the debt management business, from creditors to debtors and others—about the breathing space regulations. I would be quite content if my noble friend wrote to me or discussed these matters afterwards, but I am grateful for the opportunity that the Bill affords to pick them up before the arrangements themselves go live.

Amendment 56 asks whether the 60 days of the breathing space moratorium can be extended. There is concern, particularly from the debt management side, that the whole business of processing a benefit claim can run beyond 60 days and make it necessary that the period should be longer. They want to see either that there is flexibility or that there will be some way of managing situations where a longer period is needed.

Similarly, Amendment 57 looks at the need to report in the middle of the 60 days and, if there has been no change, to ask whether the requirement of the report might be omitted.

Amendment 58 looks at situations where the debts owed include those where it would be really difficult to inform the creditor of what was going on, in terms of obtaining a breathing space, because the creditor is in a position to upset the debtor’s life substantially. Examples might be having children in a nursery, a car in to be repaired or a landlord who is in a position to evict the debtor from their house. It would allow debt management agencies the flexibility to manage a debtor’s life in a way, at the same time as they are helping them with their debts, and not push them into trouble because they have involved more commercial creditors in a breathing space scheme.

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[The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)]

I call the next speaker, the noble Lord, Lord Rooker.

[Lord Lucas (Con) [V]]

My Lords, I am still going—I have a number of other amendments. Is the Committee not hearing me?

[The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)]

Please continue—sorry. It was a pregnant pause.

[Lord Lucas (Con) [V]]

Amendment 62 looks at joint debt situations, for instance between a wealthy husband and an impoverished wife where it is the wife who has the breathing space moratorium. Under those circumstances, it is not obvious that the wealthy husband should have the benefit. The amendment therefore asks whether, under some circumstances, the moratorium should not apply to all parties to a debt.

Amendments 63 and 64 are really just opportunities to ask the Government whether this scheme is ready to go. A lot of pressure has been placed on the Insolvency Service and the courts in the course of Covid. Are we actually in a position to launch a working system? If not, should there not be some arrangement to allow delay to ensure that, when the launch comes, it is successful?

Amendment 65 looks at situations where a debtor gets the benefit of a breathing space but then just does nothing and does not engage with the breathing space process in any way. It asks: should there not, under those circumstances, be some incentive—something that the debtor loses by not engaging with the process?

Amendment 66 looks at the situation of a creditor that has taken its debt to the point of commencing legal action and then faces a breathing space process. That is fine, but should not the position that the creditor has got into be finalised so that things can be picked up again afterwards if they need to be, rather than having to be started again at considerable expense to the creditor? Should not the system recognise—[Inaudible.]

I appreciate that these are complicated and detailed amendments. As I said, I would entirely accept written correspondence, and I shall be grateful for anything the Minister says today. However, they reflect an industry that is looking to make a success of both sides of the breathing space initiative but is concerned that some details are not provided for in the regulations as they exist at the moment.

Now I have finished.

[The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)]

Thank you for the clarification. I call the next speaker, the noble Lord, Lord Rooker.

Financial Services Bill

Lord Lucas Excerpts

Report stage
Wednesday 14th April 2021 Lords Chamber

[Lord Naseby (Con) [V]]

My Lords, Amendment 37C is an issue of fundamental importance to young people who are disabled and have taken up child trust funds. The amendment before us is key. We had a thorough and competent speech from my noble friend Lord Young of Cookham, but I have just listened to another speech from the noble Baroness, Lady Finlay of Llandaff, and we have to find common ground between the two.

I declare a past interest as, when I joined the Commons in February 1974, I took an interest in the friendly society movement, which I continued until I left in 1997. I was then asked to become chairman, which I was from 1998 to 2005, of the Tunbridge Wells Equitable Friendly Society. That interest was declared at that point. In the days of the child trust fund, the Tunbridge Wells Equitable Friendly Society traded under the brand of the Children’s Mutual. It is my recollection that the Children’s Mutual was a brand leader, and we put a huge amount of effort into it. We liaised with the authorities involved at the time—not just the Government of the day but others. I am saddened and disappointed that, somehow or other, this issue got through the net. Unfortunately, the coalition Government tragically decided—George Osborne was one of the key players, of course—to wind it up. That was a great error, in my judgment.

We come to the current position, and I am pleased to hear the industry’s concerns, but I am disappointed that there has been no mention of the Association of Friendly Societies. I am sure that the majority of child trust funds were sold by the friendly societies, and I would advise those involved to make sure that the Association of Friendly Societies is involved now. On my own initiative, I will contact the Tunbridge Wells Equitable Friendly Society to suggest that it helps and is involved.

I am not sure why we have the same problem with junior ISAs. I declare an interest here, because I contribute to the junior ISAs of my four grandchildren, who are eligible. I am disappointed, although I was not involved in the legislation on junior ISAs in depth, that the same problem appears. I do not want to add to the concerns of my noble friend on the Front Bench, but, until recently, a large number of grandparents had been buying National Savings certificates, and I wonder whether the same problem is lying there and has not been raised by anybody else.

This is a serious problem. I have faith in my noble friend on the Front Bench, and I hope that he and those involved will look at it seriously. If there is anything that I can do to help resolve this issue, I will do my best to, because it is important.

[Lord Lucas (Con) [V]]

My Lords, I shall speak to Amendment 16 and I thoroughly support its intent. I have been chair of the Enforcement Law Reform Group for more years than I care to remember, and for all that time I have been aware that every side of the industry wants statutory regulation. It is not a suitable case for voluntary regulation. You need the powers that go with being set up by statute to deal with all the difficulties and conflicts that are inherent in the business of getting money out of people who do not want to give it to you.

I fully understand the Government’s caution about the drafting of the amendment, but I very much hope that everyone involved in it will hold their feet to the fire to get a suitable alternative through as soon as possible. I have one piece of advice for the Government on the amendment as drafted. It is important that whatever we create can bite on creditors. A lot of the problems in this industry have their roots in the delinquency and bad behaviour of creditors and in the disorganisation of the systems that they operate. The privilege of being able to use a bailiff should be granted only to creditors who are well set up, who have done their preparatory work, who know who is vulnerable, who have found out the right addresses, who have properly offered payment holidays or plans before involving the very expensive, onerous and sometimes distressing option of a bailiff.

When we come to have this in statute, we need some way in which a local authority, for instance, which is trying to recover debt due on council tax must demonstrate that it has done what it should in order to be allowed to use the bailiff system. There may be some other way of doing it—but not to have that connection through to creditors and think that you can regulate just by putting pressure on bailiffs would be a considerable mistake and would, in the end, result in the system not working.

[Baroness Kramer (LD)]

My Lords, I think my noble friend Lord Addington put his finger exactly on the problem here. These are a series of amendments, all of them good and strong, that tackle really significant issues that seem to affect a particular selection of our population who find themselves constantly recognised but pushed into the long grass, so that we do not get regulation of the underlying problem. I hope that today we can collectively as a House ginger up the Government to say that this really must be dealt with—not just given to working groups or consulted on yet again but put on a track to get resolution quickly.

On Amendment 16 in Grand Committee we discussed bailiffs and the need to improve their behaviour and get it within the right statutory context, so I will not add more, other than to say that with Covid and the consequences for so many people who will find themselves out of work or in debt, this becomes more urgent than ever. The noble Baroness, Lady Meacher, should know that, if she finds an appropriate vehicle, we would be very willing to support on this. It must be dealt with. It would be lovely if it were in the form of a government amendment, but somebody will have to move on this very quickly or a lot of people will be paying a sad price.

On Amendment 26, in the name of the noble Lord, Lord Leigh, sometimes a personal experience leads to identifying a real problem, and he has put his finger on another problem. If I were a regulator, I must say that anyone who could get my attention and show me that we are getting abuse and misbehaviour within the financial services sector ought to be welcomed. If the definition of eligible customers makes it difficult or impossible to use as broadly as it should be, a look at that definition is urgent. If I were the ombudsman or the FCA, I would certainly want to know that someone was out there attempting to scam the public. I can assure the Government that the scammers know all the loopholes and weaknesses in the definitions, so plugging them as rapidly as possible makes obvious sense.

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[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.

[Lord Lucas (Con) [V]]

My Lords, it is clearly acknowledged that there is a problem. It is evident to me that this is exactly the sort of problem that the Government ought to sort out because, as my noble friend Lady Noakes said, we have no business landing this on the lending community. It is our responsibility. The Bill is an opportunity to make sure that something is done, and I very much hope that we take it.

[Baroness Kramer (LD)]

My Lords, I think the case has been extremely well made. I usually really respect the opinions that the noble Baroness, Lady Noakes, puts forward, but it seems to me that she completely fails to understand the circumstances that led these people into being mortgage prisoners. They took out loans under credit checks and it was entirely appropriate, but the banks from whom they borrowed the money crashed in the 2008 financial crisis, largely through poor regulation, which lies at the Government’s door, not the door of those who took out mortgages. People with absolutely identical credit profiles who took out their mortgages with a bank which did not crash have had many opportunities to refinance, which is normal in the life of the mortgage. A standard, typical bank knows that it will vary the characteristics of its mortgage over the life if that option is sought by the mortgagee.

The group of people who took out their mortgages with banks that crashed in many cases found that those mortgages were stripped out as part of the asset rescue process that the Government went through, and the Government then sold those mortgages to completely inappropriate buyers under inappropriate terms in order to get the maximum return. I understand their motivation—maximum return for taxpayers—but they removed all of the normal relationships and embedded rights in those relationships that a mortgagee has when they take out a mortgage with a viable financial institution.

The noble Baroness treats many of those mortgage prisoners as people who are now of poor credit. These are people who have aged—we all do that. The mortgage that we take out at the age of 30 is not the same one that we would be able to take out at the age of 55, because we have got older and our career profile is different. Some of them have become ill, and therefore had reduced earning capacity. Any standard bank dealing with a mortgagee in those circumstances makes adjustments. Mortgage prisoners are not able to seek such adjustments and they have been left in dire circumstances.

The fault lay with the Government when they sold mortgages under inappropriate terms to inappropriate buyers to manage them. It treated them as though they were abstract assets, rather than a special category which has a lot of convention embedded in it, in order to maximise their sale. I very much hope that the Government will realise that they have a responsibility. They took those additional revenues, they took the benefit of selling off those mortgages under terms and conditions that they should never have permitted, and they now need to offset that by stepping forward and making sure that those mortgage prisoners can have the same access to flexibility that would have been theirs had they taken that loan out with a financial institution that did not collapse in 2007-08.