Financial Services Bill

Lord Naseby Excerpts

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

[Lord Naseby (Con) [V]]

My Lords, this is one of the key Bills of this Parliament. Thankfully it is in the hands of a team who we all respect, as does the country at large. I too welcome our two new colleagues, my noble friend Lord Hammond and the noble Baroness, Lady Shafik, and look forward to hearing them again.

Just by way of background, I have chaired two quoted companies and have chaired the Tunbridge Wells Equitable Friendly Society. I am a firm believer in mutuality and successfully piloted through the Private Member’s Bill that became the Mutuals’ Deferred Shares Act 2015. I also spent 12 years on the Public Accounts Committee in the other place.

Other speakers have covered a huge spectrum this afternoon and this evening, so I just want to mention, in the macro, three issues as regards the City. First, coming from the Public Accounts Committee, I think that scrutiny of regulation is absolutely vital. I have listened to a number of noble colleagues—my noble friend Lord Blackwell, in particular— and I agree on the need for a Joint Committee. I will not say any more than that; it seems to me absolutely fundamental.

Secondly, economic crime is an increasing market—if I may use that phrase. Thankfully, we have the City of London Corporation which has its own police authority; it is the national lead for economic crime and supports calls by industry bodies for increased funding to fight economic crime. Over a third of all crime is economic or cyber, but only 2% of total police resources are allocated to policing this type of crime. Frankly, we need to look at this very closely and find some increased resources.

Finally, on the macro side, I was talking to the remembrancer in the City, and the City of London Corporation is an enthusiastic supporter of the greening of the economy. The City of London Corporation supports work by the Green Finance Institute including, for example, the plan to launch the UK’s first sovereign green bond; work to identify and remove investment barriers to wide-scale decarbonisation of the UK’s heating; and work on the development of a market for financing net-zero carbon properties. As I said, colleagues have mentioned a great many other things about the City.

I also want to look at one macro challenge that I have known about for years: payday loans. Every family in the UK needs access to credit. Historically, the average working-class family has used what is called home-collected credit. This is not new; it has been used across the UK for well over a century. I first came across it in the 1960s, when I was a councillor and alderman in the London Borough of Islington, and more recently in Northampton. A customer takes out a small short-term cash loan and the repayments are collected by the company agents who visit the customer at home each week. One single charge for the credit covers everything: the interest, the home-collection service, the cost of bad debts, company overheads and so on. There are no additional or penalty charges. If a customer cannot pay, the term of the loan is simply extended and the customer does not pay a penny more. It is 100% flexible and forgiving. However, home-collected credit is now under threat and, if that threat materialises, society will lose something very important.

If that happens, it will simply be because we have regulatory indifference. The authorities—the FCA and the FOS—are currently flouting their statutory remit to decide each case on its own merits. Historically, the regulator had a sound understanding of the product and how it worked in harmony with the budgeting cycles of these customers. Customers who use this methodology borrow only three or four times a year to cover the usual family expenses—at Christmas, Easter, back-to-school times or whatever. Now, the FCA sees this annual pattern as problematic—as re-lending, rather than sensible budgeting. In doing so, it fails to differentiate between payday lending, which is extremely harmful, and home-collected credit, which is not. The FCA and Financial Ombudsman Service are targeting the exact same re-lending patterns on affordability grounds, and their judgments act as a magnet to dubious claims management companies, which are just piling in.

When we reach Committee, we need to look very long and hard at this area. We, as legislators, need to hold the FCA and the FOS to account, because millions of working-class consumers up and down the country will be badly affected if this system of home-collected credit, which has been running for decades—for over a century, as I said earlier—comes to an end. It works well and it must be protected. Somehow or other, we have to sort out the terrible payday lending organisations.

We have had a long day and I know that we are looking forward to hearing the Minister wind up.