Financial Guidance and Claims Bill [HL]

Lord Stevenson of Balmacara Excerpts

Report: 2nd sitting (Hansard): House of Lords
Tuesday 31st October 2017 Lords Chamber

Moved by

[Lord Stevenson of Balmacara]

22: After Clause 2, insert the following new Clause—
“Debt respite scheme
(1) As part of its debt advice function, the single financial guidance body must operate a debt respite scheme (“the scheme”) under which authorised debt advice providers who approach the single financial guidance body for further advice or guidance in relation to a specific case may receive statutory protections for their clients in respect of the relevant debts for the period during which advice or guidance is being sought.(2) The Secretary of State must make regulations by statutory instrument detailing the operation of the scheme by the single financial guidance body under subsection (1).(3) The regulations must limit access to the scheme to persons who have received debt advice from a debt advice provider who has been authorised by the FCA.(4) The regulations must make provision about the length of a period or periods where the protections under the scheme will apply.(5) The regulations must set out the terms of the scheme, including but not limited to—(a) the nature of relevant debts for the purpose of the scheme; (b) the process and conditions of eligibility under which FCA authorised debt advice providers are able to apply for statutory protections for their clients under the scheme;(c) the criteria under which FCA authorised debt advice providers will be authorised to advise persons on the scheme, support applications to the scheme, and operate designated debt management plans for persons while under the statutory protections of the scheme;(d) the limitations to be placed on actions that may be taken by creditors against persons in receipt of statutory protection under the scheme;(e) the method for determining the level and timing of debt repayments by a person while under the statutory protections of the scheme;(f) safeguards to protect the integrity of the scheme;(g) the arrangements to be made to create a central register of persons admitted to the scheme; and(h) the arrangements to be made to ensure that creditors of persons on the scheme are kept informed.(6) A statutory instrument containing regulations under subsection (2) may not be made unless a draft instrument has been laid before, and approved by a resolution of, each House of Parliament.(7) The Secretary of State must make regulations under subsection (2) within 12 months of the commencement of this section, subject to subsection (6).(8) This section commences on the day on which this Act is passed.”

[Lord Stevenson of Balmacara (Lab)]

My Lords, in the film “Groundhog Day”, the same character repeats experiences on a number of occasions until, mercifully, he is eliminated from it. I feel a little like that, not least because people stream out when I stand up to speak. But I gather that there are rival attractions about to start elsewhere and I can understand why people might wish to be present for those. I thought that we had also lost the Minister as well, but she was just temporarily unavailable.

Group 1 today contains a single amendment, Amendment 22, which is in my name and the names of the noble Baroness, Lady Altmann, and the noble Lord, Lord Sharkey. I am grateful to them for their support. One of the good things to come out of the Bill has been the incredible willingness of people from all around the House to work together and seek progress, not only on this important issue but on a much wider range of topics. Before I get into the detail, I will declare my interests. I am a former chair of StepChange Debt Charity and a commissioner on the independent Financial Inclusion Commission. I thank debt charities and in particular the Children’s Society for their support of this amendment.

I also want to mention the water companies. Rae Stewart of Water UK wrote to me recently and gave me permission to quote him, so I would like to set the context for the Bill in the light of this industrial comment. He said:

“I understand that your ‘breathing space’ amendment to the Financial Guidance and Claims Bill may be debated today. I thought that you might like to know that the water industry backs a breathing space for those people struggling to pay bills and who are seeking financial advice. But although we already operate that way as an industry, we believe that such a scheme will only be properly effective if other companies follow suit. After all, any responsible creditor—whether in the private sector or public sector—would support a breathing space. It’s something that’s been talked about for years, so we very much support its introduction soon”.


It is interesting to look back at the progress we have made in realising this vision of a breathing space. It has the support of all the political parties, as evidenced in the manifestos for the recent election. More by accident than by design, we have arrived at a system where a group of charities, including StepChange, Citizens Advice, the Money Advice Trust, Christians Against Poverty and a number of others, have created an effective system of debt counselling, which enables hundreds of thousands of people in need of help to receive advice, support and access to formal mechanisms that enable them to pay off their unmanageable debts. I pause to pay tribute to Malcolm Hurlston CBE, who was largely responsible for much of the current debt-counselling activity and was my predecessor as chair of StepChange.

We have the infrastructure and, with the support of the financial companies, it is free at the point of the use to those who wish to be part of it. However, these organisations have struggled for far too long to do their job properly. Basically, the only solutions that are readily available to people with unmanageable debt—such as payday loans, guarantee loans, logbook loans and the rest—push people further into debt. The additional charges, punitive interest rates and appearance of bailiffs compound the situation. The combination of this with the stress of dealing with making ends meet causes what is estimated to be some £8 billion-worth of social cost to the economy each year through illness, relationship breakdown and suffering to children.

All this impacts on creditors, too. Most banks, credit card companies and other lenders have good systems in place to deal with people who have problems meeting monthly repayments. But these companies cannot cope with the situation that so often arises, when people owe money to several different creditors. That is where the debt charities largely come in. Creditors need certainty; they need a timescale and they are entitled to receive 100% of their borrowing back—although in practice they will and often do settle for a lot less.

In my experience most people with unmanageable debt and sufficient resources, most of whom want to repay their debts, can be brought on to a formal repayment plan which ensures that their creditors will receive more of their outstanding debt—and in a shorter timeframe than if those creditors had had recourse to legal action. But it is abundantly clear that this whole process is enhanced if the person with unmanageable debts can be given some time to sort out what their actual financial situation is; to work out with advice what constitutes a sustainable budget; and to sign up to a formal debt-management plan. This is at the heart of the amendment which I am moving.

What we have in Amendment 22 may not be perfect; it has had to be constructed within the very narrow limits of the Long Title of the Bill. Even so, it would introduce the breathing space that we all want to see. It is based on the Scottish system, which has evolved over the last 15 years and does what is required. The amendment has the following key elements: the Secretary of State will have the power to set up the scheme; a body will be designated which will be able to designate authorised charities to operate the scheme; it establishes a flexible regime with reasonable time limits; it identifies categories of protections to be offered; and it ensures that creditors are kept informed.

There is a case for considering this amendment on its merits, but there are also ways in which it might be expanded in future, particularly in its territorial extension to make sure that England, Wales and Northern Ireland follow what is happening in Scotland. It is unreasonable and unfair to have a differential approach, because this problem is common to the whole of the United Kingdom.

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For that reason, I hope that noble Lords can work with the Government to achieve consensus and ensure that this important scheme can be implemented quickly and effectively, with minimum risk to both the scheme and the single financial guidance body. Therefore, I would like to take the time between now and Third Reading to take this issue away, review it and consider it further. For those reasons, I ask the noble Lord to withdraw his amendment.

[Lord Stevenson of Balmacara]

I am grateful to all noble Lords who spoke in the debate. There was a question about public sector responsibilities. In the Bill, as in the amendment, it was intended that that be subject to further consultation. The Minister made the point that there was no reason to suppose that public sector bodies would be excluded from that; it has to include all the pressures on the families affected, and the answer would be yes. Behind the question was a certain amount of knowledge about the situation affecting those who have public sector debt. The arrangements in local authorities, in particular, but also in central government, are not of the standard that we would wish to see. There is far too easy a recourse to bailiffs and to worse measures, and it is time that this was looked at—and I hope that that will be part of the consultation.

I thank in particular the noble Lord, Lord Kirkwood, for his contribution on the situation in Scotland. He made a point that I should have made—it is absolutely right —that the introduction of the scheme would affect the behaviour of those involved in it. If it changes behaviour for the good and leads to a broader and better discussion and debate, it has to be the right way forward.

The Minister has suggested that the Government want to see a breathing space introduced, and introduced quickly, that it should have as part of its processes a statutory repayment plan—I certainly welcome that—and that she generally wants it to be designed to be the best possible way in which consumers can repay their debts and creditors obtain the benefit of that. I think that she is in agreement with all the principles that I identified in introducing this amendment. She shares our desire that, given that there is a Bill passing through, we should attempt to latch on to it as quickly as we can.

I noted the Minister’s reservations about the drafting. However, we are where we are because the Long Title of the Bill is very tightly worded—and I do not want in any sense an impression to be left that we have deliberately chosen the single financial guidance body because we thought that it was the best fit, because it is not, for all the reasons given. I do not need to repeat them, and there may well be others. Indeed, there was a hint in what the Minister said about what the Government might be thinking, and I would support that. I mentioned making sure that there was parity of action across the country.

We seem to be in a consensus on this, and I would like to work with the Government. Therefore, in answer to the question whether we would work together to try to achieve a resolution, the answer is yes—we would. There is only one condition that I would make, and I would like the Minister to respond so that I can get a nod from the clerk that we are on the right track. She said that she would like time to discuss matters before Third Reading; she did not give the magic formula that she would come back with an amendment or permit us to bring back this amendment for further discussion at Third Reading. I would be grateful if she could signify that so that I can get the necessary assurance from the clerk that we are in the right place.

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[Lord Elystan-Morgan (CB)]

The Minister tangentially mentioned devolution here, raising the question as to whether there has been any discussion between Her Majesty’s Government and the Ministers in Wales, for example. It is in the realm of devolved authority, I believe. The Welsh Government would be wholly justified in saying, “This is a matter solely for us”. As she will know, on many occasions such as these, the devolved Administration will say, “We’re quite happy for you to legislate on this matter”. Has any discussion to that end taken place at all?

[Lord Stevenson of Balmacara]

My Lords, during that helpful intervention I was able to glance across to the clerk. I was looking for a nod but I got more than that. I got a small written note which confirms that the Minister has said enough to ensure that this issue can be discussed again at Third Reading. Without any commitment from the Minister to bring forward a particular form of words, the intention to look further and come back is sufficient on this occasion. On that basis, I beg leave to withdraw the amendment.

Amendment 22 withdrawn.

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[The Earl of Kinnoull]

My Lords, I will be very brief indeed, as we have heard two very clear and good speeches from the noble Lord, Lord Sharkey, and the noble Baroness, Lady Altmann. The first point I made at Second Reading was on the importance of maintaining access to justice for our citizens. The point I make now is that I see nothing in Amendment 42 which in any way fetters access to justice. I see only good features of it, and I very much hope that we will hear good news from the Government in due course.

[Lord Stevenson of Balmacara]

My Lords, I too support this amendment, which we discussed earlier and which I think has been re-presented in the expectation that it will commend itself to Ministers, and in the hope that they will look kindly at it. It is absolutely right to consider these cold-calling activities as one of the greatest nuisances of the modern age. Indeed, the Minister herself admitted that they had led her to give up her landline so that she could not be persecuted. But that does not seem to stop them; they just find your mobile phone and get on to that as well, using texts and other means. I cannot wait until they start using drones and other things to deliver their messages in the hand. Maybe at that stage we would have the Government on our side, as they might recognise aerial bombardment as taking it a step too far.

But at the heart of this is the question of trust. The noble Baroness was extremely persuasive on an earlier amendment in suggesting that she could be trusted and was a person of trust. Her work with all of us around the House—we have all had a chance to talk to her about issues of interest to us—can be seen in the amendments that she laid herself and the support she has given to other amendments coming forward. Here is a classic: she gave a commitment at an earlier stage, admittedly in slightly different circumstances, to bring something forward. She let slip that the civil servants are already working on it, which suggests that a great deal of activity has probably gone on around Parliament and departments, because she would not have mentioned it if she did not have some confidence that what was being proposed could have been seen and agreed by other Ministers who have an interest in this area. So I suspect that things are well primed. I do not like defence or guns in metaphors, but if the gun has been so charged and so primed, it seems rather odd that it has been left in a loaded position somewhere close to her office not being used. Trust is something we want to see exercised in practice, and I look forward to hearing the noble Baroness’s comments.

[Baroness Buscombe]

That is quite an interesting one: any gun should be locked in a cabinet. The amendment tabled by the noble Lord, Lord Sharkey, my noble friend Lady Altmann and the noble Earl, Lord Kinnoull, seeks to ban “unsolicited direct approaches” such as phone calls,

“by, on behalf of, or for the benefit of companies”,

providing claims management services. It also seeks to prevent these companies using data obtained through the use of such methods.

I have spoken previously about the significant steps taken by the Government to address these issues. We have increased the amount that regulators can fine those breaching direct-marketing rules. We have forced companies to display their number when calling you. As we have previously discussed in your Lordships’ House, cold calling is already illegal in certain circumstances, such as where a person has registered with the Telephone Preference Service or has already withdrawn consent.

The Information Commissioner’s Office enforces restrictions on unsolicited direct marketing. The Data Protection Act 1998 requires organisations to process data fairly and lawfully. Organisations must: first, have legitimate grounds for collecting and using personal data; secondly, not use the data in ways that have unjustified adverse effects on the individuals concerned; and, thirdly, handle people’s personal data only in ways they would reasonably expect. A serious contravention of the data protection principles could result in a monetary penalty notice being issued by the Information Commissioner. Depending on the circumstances, this could include a CMC which sought to use data that it had originally obtained through unlawful means.

However, we have listened carefully to the views of your Lordships’ House and fully agree that more needs to be done to tackle the prevalence of nuisance calls across the UK. As I previously explained, there are complex issues to work through, including those relating to EU directives. But I can reassure your Lordships’ House that the Government are working through the details of a cold-calling ban in relation to the claims management industry. To that end, I am pleased to say that I revisit the offer made in your Lordships’ House last week and repeat that the Government intend to bring forward an amendment in the other place to meet the concerns of this House. This amendment will look to ensure that the onus is no longer on the consumer to opt out of marketing calls.

Unfortunately, the amendment tabled by noble Lords would give the FCA a duty it cannot enforce under its current regime. I assure noble Lords that the Government are committed to tackling this issue properly and will consult with the FCA, the CMRU and the ICO to ensure that the government amendment addresses these issues in the most effective way. But if Amendment 42 were accepted, it would not achieve its aim. For these reasons, I urge the noble Lord to withdraw the amendment.