Financial Services: Cold Calling
Debate between Lord Newby and Baroness Hayter of Kentish Town(9 years, 7 months ago)
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Lord Newby
My Lords, the regulation of cold calling is split between the FCA, the Information Commissioner’s Office and Ofcom. The Nuisance Calls Action Plan was issued by the Government earlier in the year, one of the key parts of which is to bring these components together and to work with equivalent bodies in other parts of the world from where people make cold calls. In addition, a consultation is currently under way, which recommends that it should be much easier in future for the Information Commissioner’s Office to take action and to enforce penalties against people who are breaking the rules.
Baroness Hayter of Kentish Town (Lab)
My Lords, next week we will have our amendment to the Consumer Rights Bill to deal with nuisance calls. It would make it compulsory for every marketing call to reveal its number, either for blocking purposes or to enable action to be taken. Will the Minister ask his friends in BIS to support that amendment when it comes to the House next week?
Lord Newby
I will definitely relay the noble Baroness’s request to my noble friends. As she will know from Committee on the Bill, a number of examples were given which made it less straightforward than she suggests, not least in terms of family members having access to calls being made from organisations such as helplines.
Financial Services Bill
Debate between Lord Newby and Baroness Hayter of Kentish Town(11 years, 7 months ago)
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Baroness Hayter of Kentish Town
My Lords, I thank the noble Lord, Lord Newby, for making my case. He said that who the lead regulator is will depend on the issue. The bodies will have to work closely together. The one thing that he did not explain was why on earth we should not write into the Bill that the two regulators should co-ordinate and have a memorandum of understanding. It seems a simple point.
I thank the noble Lords, Lord Trenchard and Lord Phillips, and my noble friends Lord Peston and Lord Barnett, for their support. I also thank my noble friend Lord Borrie, whose advice, given that he was director general of the OFT, I take seriously. The last of the three amendments does not touch on the difficult issue he raised, that is, laying down who does what. It basically says there should be a MoU between these two very important issues. The Minister says not to worry, that there is one and they are working on it, but in the interests of transparency, I would have preferred to see it statutory and therefore published. However he is clearly not going to give way on that, so I fear I must. I beg leave to withdraw the amendment.
Financial Services Bill
Debate between Lord Newby and Baroness Hayter of Kentish Town(11 years, 7 months ago)
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Lord Newby
I will check what I said, but it may have covered what the noble Lord is looking for. If it does not, I shall write to him with the relevant wording.
Baroness Hayter of Kentish Town
My Lords, I am sorry that the Minister did not listen to what I said, which was the reverse of passporting. It was about the passporting of our banks into EEA countries. I was interested in the protection of customers in those areas who are served by the UK banks that are being passported there but would be regulated here. Our regulator should therefore cover that. That is a different issue from the one that the Minister has answered. If he would check on that, I would be quite happy for us to revert to the matter at Third Reading. I am interested in consumers wherever they happen to dwell, such as the consumers in EEA areas being served by our banks. I am therefore worried about their lack of coverage by our compensation scheme, which should be brought to their attention. If I could leave the Minister to clarify that, at this stage I beg leave to withdraw the amendment.
Baroness Hayter of Kentish Town
My Lords, this amendment stands in the name of my noble friend Lord Eatwell as well as mine. It is about transparency and we have moved from passporting to prohibition orders, with a big jump to Clause 12. The amendment would ensure that, when a prohibition order is made, the regulator publishes its reasons and the individual's name appears on a list of people subject to prohibition orders on the Treasury website. The purpose of this is both to promote good practice, by making it clear what constitutes bad practice, and to enable investors and others easily to identify who has been subject to such an order.
As was clear in Committee, the issue did not really divide us. At that stage, I quoted Matthew Hancock as saying in another place,
“the principle that prohibition orders on people who are not fit and proper persons should be published is crucial … Prohibition must not only be a sanction for past irresponsible behaviour, but a deterrent for future irresponsible behaviour … the point of prohibition is not only … to stop the actions of those who have … committed acts that make them not fit and proper, but to demonstrate the bounds of behaviour that are deemed responsible and reasonable”.—[Official Report, Commons, Financial Services Bill Committee, 6/3/2012; col. 384.]
The then Minister, Mr Mark Hoban, agreed that prohibition is both a punishment and a deterrent.
When we discussed this in Committee, the noble Lord, Lord Newby, replied in this House along similar lines, saying that,
“regulators ought to give explanations of their actions and I do not think anyone would dispute the need for the identity of persons subject to prohibition orders … to be made known”.—[Official Report, 8/10/12; cols. 860-61.]
However, he felt that the existing duty on the FSA to maintain such a list was sufficient. We disagree with regard to the list of those prohibited. Investors and borrowers here and abroad would be more likely to see the Government as a source of such information, and we would therefore like HMT, via its website, to have a role in this.
With regard to the first part of our amendment, it is crucial, if the findings of a case are to help influence the future behaviour of other firms and authorised persons, that they can read and understand exactly what was alleged and why it was found to have transgressed acceptable behaviour. Hence there is the need to publish reasons. I beg to move.
Lord Newby
My Lords, as the noble Baroness says, we discussed this at some length in Committee and, to a certain extent, I am afraid I can only repeat what I said then. I repeat that FiSMA already requires the FSA to maintain a publicly available record of individuals subject to prohibition orders. The relevant subsection simply says that the register must include a record of every,
“individual to whom a prohibition order relates”.
and provides that the register must include the name of the individual and,
“details of the effect of the”,
prohibition order.
The FCA will keep these records in future and the Bill, in paragraph 17 of Schedule 12, also requires the PRA to assist the FCA in keeping the record up to date, including by notifying the FCA of every prohibition order that the PRA makes. The principal effect of the amendment would be to move these records from the FSA website on to the Treasury website. The noble Baroness said, in effect, that the Treasury website would almost command more respect or be more likely to be looked at for this purpose. We disagree with that. The Treasury website sets out government policy, not records of regulatory decisions. The logical place to go for a record of a regulatory decision is to the regulator. We think that it would be confusing if investors expected to go to the Treasury website rather than to the regulator’s website to get the relevant names and other information. In our view, it would be contrary to the noble Baroness’s stated objective of ensuring clarity and transparency. I am afraid I cannot give her much comfort. We believe that what we are doing meets her requirements and that those are better met by doing it via the regulator’s website rather than via the Treasury website.
Baroness Hayter of Kentish Town
I thank the Minister for that response. I have a query that is not so much on the website. I think he said that the list was kept along with details of the effects of the prohibition order, which I assume means that this person cannot do this, that, or the other. We were asking for the reasons. I hope that he will look at this, even if there is only a recommendation back to the regulator. It is really important that the allegation and the reason why it was found proven is there as guidance for others. I hope that he will look at that and reassure me that the reasons are there, not just the effects of the prohibition order. With those comments, I beg leave to withdraw the amendment.
Baroness Hayter of Kentish Town
My Lords, we reach the last amendment of the evening, which stands in the names of my noble friend Lord Eatwell and myself. It is short, sharp and clear. The Bill allows for FCA statements of policy relating to its use of disciplinary powers to be provided to anyone, for a fee if necessary; to be given to the Treasury, presumably for free; and to be published as appropriate. Noble Lords will have noticed that the one body not automatically to receive the statement is Parliament. This amendment would correct that oversight. I beg to move.
Lord Newby
My Lords, no one disagrees with the proposition that certain important reports and other documents that are produced under the new regime should be laid before Parliament. A good example of this view is to be found in Clause 80 under which, if the Treasury in future receives a report relating to an inquiry or investigation carried out under the provisions of Part 5 of the Bill, it must publish the report and lay what it publishes before Parliament. Since these reports concern inquiries or investigations in connection with possible regulatory failure or on other matters relating to the public interest, this is clearly the right approach. It enables Parliament to consider the matter and, where appropriate, call upon Ministers or the regulators themselves to give an account of their actions. Indeed, the Government are so committed to ensuring parliamentary accountability in this area that they have tabled Amendment 107D to ensure that any direction that the Treasury gives regarding these investigations is also laid before Parliament.
However, the statement of policy issued by the FCA under new Section 88C is not a report of that kind. It is more like the guidance issued under FiSMA, although it is really guidance for the regulator itself rather than for regulated firms. This explains why the FCA must follow the procedure in Section 88D before it issues a statement, which is essentially the same as the procedure when the FCA issues guidance to firms set out in new Section 139A. The Treasury must be notified of any new FCA guidance or changes to existing guidance but it has never been thought necessary for the Treasury to lay that guidance before Parliament, although it will be available on the FCA website.
The approach that we are taking not only follows the general FiSMA model but it is the same approach that is taken in other regulatory legislation. For example, Section 38 of the Competition Act 1998 requires the OFT to prepare and publish guidance on the appropriate amount of any penalty imposed for abuse of a dominant position. It must get the Secretary of State’s approval for it but there is no obligation to lay it before Parliament. Equally, Section 392 of the Communications Act 2003 requires Ofcom to prepare and publish a statement containing guidelines on the penalties that it may impose under that Act or other legislation, except the Competition Act 1998. Again, though, Ofcom is not required to lay that before Parliament.
All we are doing is following normal procedure. We do not think that this kind of guidance should be laid before Parliament because it is guidance to the regulator and will be available on the regulator’s website. In those circumstances, I hope that the noble Baroness will feel able to withdraw her amendment.
Baroness Hayter of Kentish Town
My Lords, I thank the Minister for that answer and, via the Minister, I thank his Bill team because they have clearly done some interesting research for us in areas beyond HMT.
Ministers have probably not made the right call. There will be an increased requirement for transparency and Parliament is becoming more interested in questions of guidance, particularly in relation to disciplinary matters. My guess is that there will come a time when more of these will come to Parliament, because saying that it is normal practice and we can go on as before is not necessarily always the right view. We will get there, even if it is not in the Bill, but for the moment I beg leave to withdraw the amendment.
Financial Services Bill
Debate between Lord Newby and Baroness Hayter of Kentish Town(11 years, 7 months ago)
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Lord Flight
My Lords, I am delighted to see that my Amendment 37A has effectively been reproduced by the Government. I apologise as I note that my amendment states, “The FCA may appoint”, whereas it should refer to the PRA. I had taken the same wording for the PRA panel as for the FCA panel. It is healthy to have this structure, which will give people greater confidence to work with the PRA.
Baroness Hayter of Kentish Town
My Lords, as I said earlier today, it feels rather wrong to establish a PRA practitioner panel while excluding the views of those whose money and savings are at the heart of this industry and who depend on well regulated companies for their well-being. It also looks a bit too cosy a set-up between the regulator and the regulated community with no user-interest input. So, while we do not oppose these amendments, we do not think that they are a balanced response to the demand for the PRA to listen to those who work in financial services.
We know from the Treasury Select Committee report on RBS of the silos that existed even within the FSA between its prudential and conduct sections. With the move to two regulators, physically a mile apart, there is an even bigger risk of such silos. This will not be helped by having two separate practitioner panels, so that even within the industry there will be a split between those addressing one regulator and those focused on the other. This will be the case as regards numerous issues, including, for example, benchmarking. The proposal is for LIBOR to be overseen by the FCA, and therefore have input from the FCA practitioner panel, but how it is working out in practice, the inputs to it and the use made of it will be the preoccupation of that part of the regulated community represented by the PRA practitioner panel. This proposal might therefore not be the best that the Government could have come up with. It was not the first choice of the industry and it would not have been our first choice.
Lord Newby
I am grateful to the noble Lord, Lord Flight, for his support for what we are seeking to achieve. I am not surprised by the comments of the noble Baroness, Lady Hayter. However, I hope that the House will feel able to support these amendments.
Lord Newby
My Lords, no one would doubt the importance of stewardship and of ensuring the proper conduct of those authorised persons who manage investments on behalf of others, including in relation to the exercise of voting rights. Stewardship is also a matter for a wider range of authorities than the financial regulators—in particular, the Financial Reporting Council which has issued a stewardship code.
Amendment 46A would require the regulators to include in their MoU provision about the exercise of their functions relating to stewardship. This amendment is based on the premise that the PRA has a role in stewardship. I do not think that this is a correct premise. First, only the FCA will have any powers in relation to listed companies themselves. The PRA has no responsibilities in relation to listing. Secondly, the regulated activities which cover managing investments are not PRA-regulated activities. The PRA will need to regulate an authorised person who manages investments only if the firm also has a permission to carry on a PRA-regulated activity, such as accepting deposits or effecting or carrying out contracts of insurance. In those cases, the PRA will be the prudential supervisor and the MoU will already cover the co-ordination of FCA and PRA interests in these firms.
Amendment 79B would make clear that the FCA’s powers to make general rules include the ability to make rules relating to stewardship. I can assure the noble Baroness that the amendment is not needed. First, there is no doubt that the FCA’s general rule-making powers extend to making rules about stewardship. New Section 137A to be inserted into FiSMA 2000 under Clause 23 of the Bill is quite clear. It states:
“The FCA may make such rules applying to authorised persons … with respect to the carrying on by them of … activities … as appear to the FCA to be necessary or expedient for the purpose of advancing … its operational objectives”.
Secondly, the FCA’s powers essentially follow the existing FSA powers. The FSA has already made a rule which requires UK-authorised asset managers to put statements of commitment to the FRC’s stewardship code on its websites or, if an asset manager does not commit to the code, to provide its alternative investment strategy there. I expect the FCA to continue with this rule. Far from any suggestion that the responsibility will fall through the cracks between the two regulators, it is absolutely clear that the FCA will take on the FSA’s existing powers in respect of stewardship and ensure that they are properly implemented. I hope, therefore, that the noble Baroness will agree to withdraw her amendment.
Baroness Hayter of Kentish Town
I thank the noble Lord, Lord Newby, for that. Of course, he did not answer the point that I made. When research is done, it is found that details of the “the comply or explain” commitment are not on the web—neither what is being complied with in the code nor what is there instead.
However, I thank him for the clarity of his answer that it is an FCA responsibility. That rather begs a question that I asked in Committee, and to which I may return, that the code is the responsibility of the Financial Reporting Council, which gets no mention in this Bill. In Committee, the Government refused my suggestion that there should be an MoU between the FCA and the FRC, which is regrettable. The importance that the noble Lord has said about the code and the ability of the FCA to make rules, including the commitment to follow it, strengthens the case for a better connection between them. I at least thank him for clarity on that, but we may need to come back to look at the FCA aspects. For the moment, I beg leave to withdraw the amendment.
Baroness Hayter of Kentish Town
My Lords, we have spoken already about the need to have information from banks about their lending to different communities and sizes of business. The noble Lord, Lord Newby, said that the FCA will collect data about access to financial services. In the amendments we seek to obtain information to identify how well markets are working for lower-income communities. This is therefore broader than simply small businesses, and is about whether lower-income households can get credit, insurance, saving products and banking services. We know already, for example, that about 1.5 million people have no bank account, but we need to know more about what other groups are excluded from such services and products. We therefore ask for the FCA—which will be able to obtain the information—to research and assess whether such needs are being met and to include its findings together with any strategy for dealing with identified unmet need in its annual report. If the FCA is doing its job, it will do this anyway, but this is belt and braces so let us write down our expectations of it in this regard. I beg to move.
Lord Newby
My Lords, having agreed earlier today that we want to require the FCA to obtain and publish these data, obviously we have considerable sympathy with these amendments to the extent that they seek to flesh out how that remit should be undertaken. However, that is the end of the good news because we think that the amendments are in part unnecessary and in part inappropriate because they are too prescriptive.
We believe that there is no need for a specific provision relating to the annual report for the FCA because in paragraph 11(1)(b) of Schedule 3 we state that the annual report must cover,
“the extent to which, in its opinion, its operational objectives have been advanced”.
Given that in a series of amendments today we have strengthened the role of the FCA in looking at disadvantage and making that a new area where the FCA has a very specific responsibility, it will have to report in those areas in any respect.
Amendment 61B is very prescriptive. Our view is that with the FCA reporting on this, as with many other things that it will report on, the Bill itself should not have detailed prescription as to how the FCA should do its work. It has a legal requirement to report and it is up to the FCA to respond as it thinks fit. If there is any sense that it is falling down on its objectives, it will be reporting to Parliament and will be questioned by Parliament and Parliament will have the opportunity to raise with representatives of the FCA on a regular basis how it is meeting this and any other of its statutory objectives. I hope that the noble Baroness will feel that the outcomes that she seeks will be achieved in any event and that she can withdraw her amendment.
Baroness Hayter of Kentish Town
My Lords, I warmly thank the Minister because sympathy was much more than I got when I spoke on consumer input to the PRA. So I think that I will bank that one. I thank him, too, for endorsing the spirit of my amendments on the record so that when the report comes out people will be able to quote his very wise words that that was what we were looking to the FCA for. With that, I beg leave to withdraw the amendment.
Financial Services Bill
Debate between Lord Newby and Baroness Hayter of Kentish Town(11 years, 7 months ago)
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Lord Newby
My Lords, the Government obviously recognise that consumers have an interest in the outcome of the PRA’s actions and decisions. In particular, consumers will be beneficiaries of a safer and more stable financial system. However, the PRA will not focus on consumer protection as an end in itself. That will be the job of the FCA.
New Section 3D in the Bill requires the PRA and the FCA to co-ordinate their functions in areas of common regulatory interest where one may have relevant expertise or a material adverse impact on the objectives of the other. This means that while it is right that the PRA must focus on its safety and soundness objective, where its actions may impact adversely on consumer protection it will need to listen to the FCA, which obviously has the lead consumer protection objective. As the regulator with expertise and analytical capacity in relation to consumer protection, it is right that the FCA should consider stakeholder perspectives, including the views of the consumer panel, come to a balanced view and then communicate this view to the PRA. I do not think that it would be sensible to require the PRA, which will not have detailed expertise in general consumer issues, to consider separate consumer representations and potentially develop an alternative rival consumer view about the best way to deliver consumer protection.
For these reasons, I cannot support the amendment. I hope the noble Baroness will be satisfied that the system will enable all consumer concerns to be represented to the PRA, but that that will be done through the principal channel of the consumer panel that the FCA is to establish.
Baroness Hayter of Kentish Town
My Lords, I thank the noble Baroness, Lady Noakes, and my noble friend Lord McFall for their support. I am sorry the amendment does not find favour with the Minister. I think he misunderstands. If he thinks consumer protection is just about conduct, he does not understand the impact of things that the PRA will be doing. The FCA will put only a combined view to the PRA; it will not put the consumer viewpoint.
If we listen to the Minister, the PRA will still listen to consumers but through newspapers, through lobbying, through letters, and so on. I would like something different: a grown-up dialogue between the consumer panel and the PRA, rather than the sort of campaigning that the rest of us have done as lobbyists for many a year. I still hope for that. Therefore, I would like to test the opinion of the House.
Financial Services Bill
Debate between Lord Newby and Baroness Hayter of Kentish Town(11 years, 8 months ago)
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Baroness Hayter of Kentish Town
I shall deal with our own amendment in this group, Amendment 187RZA, which is virtually the same as Amendment 187T. We should clarify that our idea is not to cover everything that the FOS produces. The Financial Ombudsman Newsletter is one of the best publications I have seen; it beautifully describes the cases and gives a lot of guidance, with a small “g”. The intention of our amendment is that any guidance is fully consulted upon where such guidance could lead to a “safe harbour”, and should therefore take account of all relevant interests, including those of the industry and consumer groups.
I turn to some of the other amendments tabled by the noble Lord, Lord Flight. Two major changes are suggested that worry us. One would virtually make non-publication the default option, with the Financial Ombudsman Service having to justify in each “particular case” when it wants to publish, having given the respondent—but not, interestingly, the complainant—the right to argue for non-publication. In our view this is not in line with the Hunt report and would not amount to the transparency and openness to which consumers have a right.
The second issue is the one that my noble friend Lady Sherlock has just been talking about—cases that have wider implications, such as PPI, where it soon became evident to the ombudsman that the mischief went far wider than a particular provider. While we welcome an early alert from the Financial Ombudsman Service to the FCA that something is going amiss and that regulatory action or new guidance might be required, it seems to us quite wrong to put on hold an individual’s claim for compensation when they have clearly been mis-sold a product and might be out of pocket. We do not agree that the individual consumer’s justified complaint should be suspended while a large bureaucracy—I am afraid that that is what the FCA will be, with its need to consult and so on—gets its act together.
As we have heard, the ombudsman’s role is to resolve complaints—speedily, we hope—that have not been satisfactorily dealt with by the service provider, which is of course always the first and best option. If PPI is anything to go by, though, the banks could and should have refunded the money themselves pretty speedily and stopped selling the product unwisely. It is this that would have stopped the consumer detriment, and incidentally saved the banks a lot of money further down the track.
Other amendments from the noble Lord, Lord Flight, in this group seek to include the rationale for each published decision to be explained. However, our fear is that this would add considerably to the process for handling cases and undoubtedly to the costs, and we would be surprised if the industry were in favour of that since it funds all this.
By including “operations, policies and procedures”, Amendment 189P would appear to us, as my noble friend Lady Sherlock said, to risk undermining the independence of the ombudsman service. We hope that that was not the intent, but we have a similar concern about Amendment 187S, which would appear to give the regulator the power to decide not only which complaints the ombudsman can decide on but, worryingly, how the ombudsman should do so. That would undermine the very independence of the ombudsman, which is of course meant to serve as an informal alternative to the courts.
With regard to Amendment 187Q, as my noble friend Lady Sherlock also reminded us, the FSA—or, as it will be, the FCA—is already able to make a redress scheme under Section 4 of FiSMA, the effect of which is to bind the ombudsman, so there is probably no need for it.
Lord Newby
My Lords, I am very tempted to say that I agree with the noble Baroness, Lady Sherlock, and sit down.
Lord Newby
Sadly, however, I ought to explain the Government’s view of these amendments. Amendment 187E would require the FOS to exercise its functions in a manner consistent with the FCA’s strategic and operational objectives and the regulatory principles. Obviously the FCA will have an important role making and approving the rules of the ombudsman scheme, and must comply with its regulatory objectives and principles in doing so, but I do not believe that the regulator and the FOS should share the same objectives or be held to the same regulatory principles.
The FOS is not a regulator and should not be expected to act like one. Its role is to provide an impartial alternative dispute resolution service for consumers and firms. It is not a consumer protection body, and I would be concerned that by giving the ombudsman consumer protection objectives we would put that impartiality at risk. Moreover, in practice such a duty would be burdensome and difficult to interpret.
Amendment 187P is similar to Amendment 187, in that it seeks to hold the FOS to the FCA’s objectives and principles. However, it goes further by giving the FCA a role in ensuring that the FOS complies with those objectives and principles, and in carrying out an annual review of the FOS operations, policies, and procedures. The FSA already has a role in overseeing the FOS, which the FCA will retain—appointing and removing the board of the scheme operator, for example. However, the FOS’s claim to impartiality, and hence its legitimacy in making determinations that are binding on firms, is credible only if it is operationally independent of the regulator. This does not mean that it should be unaccountable or free from scrutiny—this is why we have brought in provisions requiring the FOS to be audited by the NAO. Associated with these new powers, the NAO will be able to launch value-for-money studies of the FOS. However, to require the FCA to ensure that the FOS complies with its objectives would require detailed oversight and control of the FOS’s day-to-day operations, which in our view would not be compatible with the FOS’s independence.
Amendments 187F to 187L relate to the new transparency requirements for FOS, under which the ombudsman scheme operator will have a duty to publish a report of determinations unless, in the opinion of the ombudsman, it would be inappropriate to do so. Amendments 187F, 187G and 187H seek to reverse the proposed new provisions, leaving the scheme operator merely with a power to publish determinations if it decides that it is appropriate, and a duty to explain the rationale for publication in that case.
Previously, ombudsman decisions have been published by one or other of the parties involved, leading to a partial and sometimes misleading picture of the way in which the FOS made decisions. Now that the FOS is subject to the Freedom of Information Act, ombudsman decisions may also be published in response to requests for information under that Act, so there is clearly a need for change.
Amendment 187J seeks to modify the transparency arrangements to provide anonymity for the respondents except where they agree to be identified. However, in many cases it will not be possible to redact all the information by which a firm could be identified without thereby withholding key elements of the substance of the decision—for example, the content of a firm’s advertising material, policy wordings, and product names—and there is no reason to think a firm’s reputation should be unfairly tarnished by the publication of a decision. However, I entirely agree with my noble friend that there is a case for withholding genuinely commercially sensitive information. The FOS will have the power to do that, and has made it clear in its consultation on transparency earlier in the year that it intends to protect commercially sensitive information.
Amendments 187K and 187L would provide for a minimum period of 28 days between the scheme operator considering a determination for publication and its taking the decision to publish, during which the respondent may make representations. It is of course important that firms get a fair hearing but, as I have said, by the time a decision is published, firms have had many opportunities to explain their side of the case already, and the ombudsman scheme rules already provide for firms to be able to provide sensitive information to the ombudsman in confidence. Given that this route already exists for the firm to identify information that it would be inappropriate to make public, I would be concerned that firms may see a process to make further references, as the amendments propose, as an opportunity to appeal the substance of the decision itself. However, I reassure my noble friend that the FOS would be very open to listening to proposals from firms about how best to ensure that it does not publish sensitive material.
Amendment 187N would require the FOS to suspend cases and refer the matter to the FCA when it encounters an issue with wider implications. Obviously the FOS will encounter issues that demand a response from the regulator, and there need to be clear duties and routes for the FOS to raise these issues with the FCA. I draw my noble friend’s attention to the measures in the Bill that provide for this. In future the FOS will be required to share information with the FCA that it considers relevant to the FCA’s objectives. The FCA is in turn required to take account of this information. In addition, the Bill introduces a mechanism whereby the FOS and the firms concerned can refer issues of mass detriment to the FCA, and the FCA will have to publish a response within 90 days, which is a very much improved procedure over what has obtained in the past. The response from the FCA might set out a timetable for regulatory action that would allow the FOS to consider whether or not to place a hold, or stay, on complaints. I reassure my noble friend that the Government share his concerns, and we think that we have taken measures in the Bill to address them.
Amendment 187Q seeks to require a clarification procedure for regulatory matters arising from complaints to be resolved by the FCA or for the FCA to provide guidance. While supporting the spirit of these amendments, my concern about the clarification procedure proposed is that it would be overly bureaucratic and could blur the distinct remits of the regulator and the ombudsman. The FOS’s role is to provide swift and low-cost dispute resolution. In doing so it must of course take into account, among other things, the relevant law and the regulators’ rules and guidance. It cannot, in practical terms, be expected to refer an issue to the regulator every time it encounters regulatory matters, any more than it could be expected to refer a matter to the courts every time it encountered a legal matter. We have included a package of measures in the Bill to improve co-ordination and co-operation between the FCA and the FOS. These include the new information-sharing and co-ordination provisions, as well as a new mechanism for the FOS and firms concerned to refer issues of mass detriment to the FCA.
Amendment 187S would require the FCA to make the detailed procedural rules for the ombudsman scheme rather than approve rules made by the FOS itself as at present; and to define the factors the FOS must take into account in its “fair and reasonable” test in legislation. On the first part of the amendment, the FSA already makes rules concerning key elements of the FOS’s compulsory jurisdiction. The more detailed rules of the ombudsman’s procedures are made by the FOS itself with the FSA’s consent. This strikes the right balance. As part of its operational independence, the FOS is responsible for preparing the detailed procedural rules which the regulator must approve. The alternative would be for the regulator to be directly responsible for running the ombudsman.
Baroness Hayter of Kentish Town
My Lords, in addition to all the comments made by my noble friend Lord Whitty, which we obviously support, I would like to speak for a few moments to Amendment 189BC, which stands in my name. Had that been in place, it would also have provided a route for small firms that were sold totally unsuitable interest rate swaps to have reached a speedy cross-industry solution.
The committee will know that many SMEs took out loan agreements, having been told that they also needed to take out an interest rate swap. Those SMEs, usually with no professional legal or accountancy staff, are sitting targets for financial services companies out to make a fast buck. They need the protection that this amendment could provide. I hope that the Minister will accept it, or a suitable alternative, to ensure that small and medium-sized companies, on whom we all depend to kick start our economy, get easy access to complaint resolution where their interests are damaged.
The amendment would give small firms the ability to complain and bring proceedings—court proceedings if necessary—to ensure that they could get proper adjudication on whether they were indeed mis-sold a particular product. As we have heard, the amendment would require the Government to introduce proposals within three months of Royal Assent to make it easier for groups of small firms to bring collective proceedings before the courts in respect of financial services claims, with the right to opt out for companies not wanting to be party to the outcome of the cases.
The amendment would also empower SMEs to complain to the regulators and to give their representative bodies the right to complain about market failures to the FCA, in the same way in which individual consumers can.
There is a gap in the legislation for small firms wanting to make complaints in their role as consumers of financial products. A case can be made for the representative bodies of small firms being able to take civil complaints. On 22 May this year, the Minister in the Commons, Mr Hoban, said that,
“the provisions in the Bill will not prevent bodies representing small and medium-sized enterprises which fit the relevant definition of consumers from making super-complaints”.
We therefore seek clarity in the Bill to that effect through the amendment.
Mr Hoban also said that:
“what type of consumer body should have access to super-complaints is complex and will require more detailed criteria than can be set out in the Bill.”—[Official Report, Commons, 15/10/12; col. 1031.]
He announced that the Treasury would publish draft criteria “later in the year”.
I might have missed it, but it is now later in the year and I think it is yet to appear. Perhaps the Minister could provide those further details.
Lord Newby
The Government believe that collective proceedings, in the appropriate circumstances, can deliver access to redress and a potential deterrent effect. That is why the Government have been consulting on a range of proposals to make it easier for consumers and small businesses to bring private actions in competition law—including whether to extend to businesses the current right of consumers to bring a collective action following a breach of competition law, and whether to make it easier to bring such actions. The Government are considering the consultation responses and hope to publish their response before the end of the year. We want to take the opportunity to learn from the outcome of that consultation and reflect on the implications for the financial services sector before proceeding to legislation.
The noble Baroness may say that her amendment would provide adequate time for consultation. However, her amendment specifies that small businesses should be able to bring collective proceedings on an opt-out basis. The type of persons who might bring collective actions, whether on an opt-in or opt-out basis, are substantive questions on which BIS has been consulting. We think that it is a lot better to await the outcome of the BIS consultation and reflect on the implications for financial services than to seek to pre-empt that process and require a particular model now. If the Government were to conclude from this exercise that it would be appropriate to bring forward legislation on collective proceedings for the financial services sector, any proposals should then be subject to proper consultation.
As an addendum to the second part of Amendment 189BC, I note that the Bill would not prevent bodies representing small and medium-sized enterprises that fit the relevant definition of “consumers” from making super-complaints. As was explained in another place, the issue of what type of consumer body should have access to super-complaints is complex and will require more detailed criteria than can be set out in the Bill.
We have considered this matter carefully, and I can inform the House that the consultation document that the Government will shortly publish covering this issue will include the proposal that the Treasury should be able to designate bodies that primarily represent the interests of small to medium-sized enterprises as super-complainants and that this will be reflected in the draft criteria.
I hope that, with the reassurance that the Government will consider proposals on collective proceedings carefully and that they will shortly consult on allowing SME representatives to make super-complaints, the noble Lord and the noble Baroness will feel able to withdraw their amendments.
Financial Services Bill
Debate between Lord Newby and Baroness Hayter of Kentish Town(11 years, 8 months ago)
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Lord Newby
My Lords, it is extremely helpful—and it will be done over the coming months. First, it is a single-market measure, not a eurozone measure. The aim is to establish a level playing field for consumers across the EU that is funded not by the state but by the financial services sector wherever the scheme is in operation. This means that as people move around the EU, as they increasingly do, they will know that they will get broadly the same degree of consumer protection wherever they are. That is a good idea, not a bad one. However, whether it is a good or a bad idea, this is the framework within which the deposit protection level operates in the EU, and therefore in the UK. Within the discussions about the directive that are going on at the moment, the level of compensation and the bodies that are eligible for it are being considered.
I say to the noble Baroness that we have listened very carefully to her concerns, and that the Government will consider whether it is appropriate to review the eligible limit to charities in the context of our overall negotiating priorities on this proposal. This is just one of a number of issues that we are considering in the round and as part of the negotiating posture we will take up. I assure her that we will give careful consideration to whether this is the way of achieving what she wants to achieve.
I move on to Amendment 187CA in the name of the noble Lord, Lord Hodgson of Astley Abbotts. This amendment would amend FiSMA to require the regulators to ensure that levies imposed on a particular class of firm reflect the claims made, or likely to be made, on that class. Before I address this amendment directly I would like to use this opportunity to draw noble Lords’ attention to the fact that a draft of the statutory instrument allocating rule-making responsibility for the FSCS between the two regulators will be published on the Treasury’s website this week as part of a broader consultation on draft secondary legislation required by the Bill. I will place copies of this paper in the Library of the House.
I am not entirely convinced by the case for Amendment 187CA. FiSMA already requires the regulators, as the noble Lord, Lord Hodgson, said, to take account of the desirability of ensuring that the amount of levies imposed on a particular class reflects, so far as practicable, the amount of claims made, or likely to be made, in respect of that class. Ensuring that classes are levied in a way that fully reflects claims, or likely claims, as proposed in the amendment is likely to be an impractical and disproportionate approach to evaluating how the fund should be funded. The current drafting in FiSMA reflects my noble friend’s concern but also leaves sufficient flexibility for the expert regulators to use their judgment.
The FSA’s recent consultation document on its funding model in the new regulatory system gives a good indication of the complexity involved in determining the funding model of the FSCS. I have it here, and its 100-odd pages demonstrate that this issue is somewhat more complex than might immediately be apparent. It demonstrates, among other things, how difficult it would be to ensure, in any strict sense, that levies fully reflect claims, or likely claims, on a particular class while delivering a fair and equitable scheme.
I suggest to the noble Baroness that the correct way to address her concerns is to contribute to the consultation on this document, which is open until 25 October. On that basis I would ask her to withdraw her amendment.
Baroness Hayter of Kentish Town
I thank the Minister rather more positively than I did his colleague on the previous amendment. It appears clear that he and the Government have understood the problem and I thank him for agreeing to look at this again. Charities of course, unlike people, do not move around; British charities are only in this country. I thank the Minister for saying that they will look at that. If it is not possible by that method, perhaps he could ask others in the Government if there is another way to assist. That would be extremely helpful. On the basis of that offer I beg leave to withdraw this amendment.