Payment Accounts (Amendment) (EU Exit) Regulations 2018

Lord Tunnicliffe Excerpts

Wednesday 12th December 2018 Grand Committee

[Baroness Bowles of Berkhamsted (LD)]

I thank the noble Lord, Lord Bates, for his introduction and the noble Baroness, Lady Drake, for drawing attention to the report of the Secondary Legislation Scrutiny Committee’s Sub-Committee A, on which I sit, so I do not have to do it. With the state of my voice, that is welcome.

The issue of note here is that an obligation to service non-UK residents is removed. Many of these will probably be UK nationals and will probably come to the UK sometimes, even though they are resident elsewhere. I am sure that this will be an inconvenience and that is greatly regretted. In the interests of saying that this is not being reciprocated, there has been a lack of generosity of spirit in this statutory instrument. Can the Minister confirm whether there would be any supervisory pressure, under “know your client” provisions, for these accounts to be closed? Will supervisors make it more awkward and put pressure on the banks so that closure is de facto the most likely event?

I also remind the Committee that one of the purposes of this legislation was to ensure that basic bank accounts could be opened in advance for people who were moving around for the purposes of work. Otherwise, you get into a Catch-22 situation where you cannot get a permanent place of residence until you have a bank account and you cannot get a bank account until you have a permanent place of residence. While I was an MEP, I got this in my postbag. Indeed, one of my own children had this problem. We were constantly having to intervene to get these things sorted. If we want to encourage talent and still allow it to come to the UK, why make it awkward? I am sure that those who come for big and well-paid jobs may find that they can open accounts, but what about the more ordinary person? I think that, actually, this is a very bad measure.

[Lord Tunnicliffe (Lab)]

My Lords, I thank the Minister for presenting this instrument. When I first read the Explanatory Memorandum, I thought it was good and it convinced me that, broadly speaking, the instrument was doing its job. Then my noble friend Lady Drake decided to share her speech with me and I realised that perhaps I had not fully understood it, but by this point in the proceedings, the Minister had enough questions to answer anyway without me inventing any more.

The point that has come out of the last two speeches is important. The Government often conclude that an impact is minimal because it affects quite a small number of people. The problem with that attitude is that for the people it affects, it affects them 100%. If you cannot get a basic bank account, that is pretty close to catastrophic in the modern world, so I hope that the Minister will have good answers to my noble friend’s points.

My question is one that runs through many of these SIs—the lack of formal consultation. The consultation paragraph states that there has been discussion with “relevant stakeholders”. One has an uncomfortable feeling that the relevant stakeholders are in fact the financial institutions themselves and not the key relevant stakeholders—the consumers. I would be grateful if the Minister could tell us who the relevant stakeholders were and whether they included consumer representatives, and, if not, why not?

[Lord Bates]

I thank noble Lords for their contributions. They rightly focused on basic bank accounts and the impact on people who are potentially vulnerable. I will try to offer some reassurance.

The noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Drake, asked about the consultation. The Treasury engaged with UK Finance, the Financial Conduct Authority and the Payment Systems Regulator to ensure awareness of these changes. The Treasury published the draft instrument and Explanatory Note on 31 October. We also notified leading consumer groups after the publication of the draft instrument to ensure awareness of these changes. We have not received any questions since publication. That may well change as a result of noble Lords’ comments today.

The noble Baronesses, Lady Drake and Lady Bowles, asked how many consumers and basic bank accounts will be affected by the changes. Customers legally resident in the UK, whether UK citizens or otherwise, who hold a basic bank account at one of the nine designated providers will not be affected, as the SI ensures that the nine providers must continue to offer these to qualifying customers.

The noble Baroness, Lady Drake, asked specifically about the impact of the SI on consumers. The impact on the majority of holders of payment accounts in the UK will be minimal. Basic bank account customers may experience a reduction in service as their providers are no longer required to give them access to, for instance, non-sterling EU transactions, although they may still choose to do so if they wish. It will be at the discretion of the providers whether they continue to offer new basic bank accounts or keep existing ones open for customers resident in the EU. We expect that that will affect very few. I accept the point made by the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Drake, that it may have an impact on those people and I will try to give some reassurance in that respect.

The noble Baroness, Lady Drake, asked why it was necessary for the SI to remove the EU residency requirement. Maintaining that obligation on the nine basic bank account providers would be inappropriate in a no-deal scenario when the UK will no longer be part of the EU single market for financial services. She also asked what happened to UK expats who live in the EU and whether they could open new basic bank accounts. Eligibility for basic bank accounts is dependent on residency, not citizenship, so that would be a matter for the member state and the laws that apply there.

The noble Baroness, Lady Drake, requested an assurance that residents will not be in financial difficulty. The spirit of the 2014 agreement, to which I referred in the previous debate, is to provide for the most vulnerable in society. The Government expect banks to honour that agreement in making any changes. The noble Baroness also asked whether the statutory instrument prevents the cross-border opening of accounts. The changes in this statutory instrument only remove the requirement for firms to provide certain support to customers who wish to switch their payment account from the UK to the EU. They do not affect a UK customer opening an account in the EU.