Financial Services (Banking Reform) Bill

Nigel Mills Excerpts

Wednesday 11th December 2013 Commons Chamber

[Sajid Javid]

I will. The hon. Member for Walthamstow, my hon. Friend the Member for Worcester (Mr Walker) and many other Members have shown great concern in this area and have made a welcome contribution to the debate.

[Nigel Mills (Amber Valley) (Con)]

Will the Minister give way?

[Sajid Javid]

I will give way for the last time.

[Nigel Mills]

I am grateful to the Minister for giving way one very last time. I am not sure that I agree with him that it is not for Parliament to decide roughly where the cap should sit, because if we set it too high it will be meaningless and if we set it too low we will drive too many people out of the loan market. What will the Minister do if the FCA pitches the cap in a different place from where the Government think it ought to be? Would he want to come back to Parliament to take another look at the situation?

--- Later in debate ---

[Sajid Javid]

I need to plough on; I am sorry.

I thank the hon. Member for Kilmarnock and Loudoun for giving me the opportunity to set out the FCA’s plans for implementation. I hope that has provided reassurance that the FCA is committed to taking action as soon as possible, and that she will feel able to withdraw her amendment.

In summary, the Government believe that a cap on the cost of payday loans is necessary better to protect consumers from excessive spiralling costs, working alongside regulatory interventions that the FCA is already proposing to clamp down on the causes of consumer harm in the payday lending market.

Amendments 162 and 163 will provide significant benefit to consumers and financial services businesses that have been affected by poor practice in the claims management industry. Claims management companies have a legitimate role in helping consumers claim compensation, but a minority have acted irresponsibly. Despite the threat of suspension or cancellation of authorisation, some CMCs act speculatively and submit illegitimate claims that clog up the system and ultimately impose costs and delays on consumers. The amendments will give the claims management regulator power to impose financial penalties on CMCs that are guilty of misconduct.

The Government’s amendments provide a new form of redress—including financial compensation for consumers affected by a poor service from CMCs—by introducing a mechanism for the cost of handling complaints to be recouped from the industry. Together, the amendments will help ensure that the claims management industry acts more responsibly, and where it does not the regulator and Office for Legal Complaints can take action.

The Government agree with Lords amendments 153 and 154 that provide the PRA with a secondary competition objective and the FCA with competition powers that are exercisable concurrently with the Competition and Markets Authority. The Government are committed to improving competition in our banking sector to drive up consumer outcomes. A secondary competition objective for the PRA was recommended by the PCBS, and the Government accepted it. That objective will ensure that the PRA remains above all the watchdog for financial stability, but we will require it to play a more proactive role on competition.

[Nigel Mills]

If the Minister had had the pleasure of sitting on the Bill Committee, he would know that I tabled an amendment to suggest we cap the market share that banks could have in certain markets. What will he do if, perhaps by 2020, we have not seen a great increase in competition and still have too few banks with too high a market share? Does he think further action by Parliament would be needed?

[Sajid Javid]

My hon. Friend will know that the Government have introduced many initiatives to increase competition in the banking sector. Just today we heard that Tesco Bank will enter the current account market next year, creating hundreds of jobs in Scotland. That is welcome news, and other innovations such as current account switching also help to engender more competition. I do not think any of us know what the situation might look like in the future, but I am sure a future Government will take that into account in 2020, and beyond, and see whether any further measures are required.