UK Acorn Finance (Mortgages)

Priti Patel Excerpts

Tuesday 11th November 2014 Westminster Hall

[The Exchequer Secretary to the Treasury (Priti Patel)]

It is a pleasure to serve under your chairmanship, Mr Turner.

I congratulate the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd)—I hope my pronunciation is just about correct—on securing an extraordinary debate on what is, it is fair to say, a disturbing issue. He has been assiduous in his campaign to represent his constituents, and I pay tribute to him for the work he has done. I also thank him for sharing with me the background information on this very specific case, and I have read much of it.

Such debates are so important. By highlighting the facts and drawing them to the attention of the House, we can try to effect some change in the right place, notwithstanding the fact that the right hon. Gentleman gave a tremendous list of the organisations that have already been approached to investigate and address the case.

It is deeply disturbing to hear not only about what has happened and its overall impact on the right hon. Gentleman’s constituents, but that there are some 44 other cases, spanning about 20 other Members’ constituencies, and that so many other individuals have been targeted. I therefore pay tribute to the right hon. Gentleman for raising this distressing case and highlighting the range of issues associated with the individuals he named.

I hope the right hon. Gentleman and other Members will understand that it is not appropriate for me to comment specifically on the individual case, which is subject to a range of proceedings. However, I should make it clear that I intend to take away all the points he raised and to share them with the Home Office, as he suggested. That absolutely has to happen.

The right hon. Gentleman mentioned a specific individual’s history, and their case is quite alarming. He touched on bankruptcies, IVAs and county court judgments—the list is endless. He also mentioned that that individual’s licence was renewed in 2012. I will pass the case to the regulator. The Financial Conduct Authority is fully independent, but it will be sent the details he highlighted. It is only right and proper that the FCA, with the full powers that it has, look at this case.

I will share with Treasury and Home Office officials the details the right hon. Gentleman has raised. I will ask them to consider what steps the Government can take to address every concern he has outlined. It is only right and proper that we do that. In the meantime, I hope he and other Members will find it helpful if I set out the approach the Government take on some of the issues he has brought to the attention of the House.

The hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) mentioned payday loans, which have, thankfully, come under greater regulation today. The legislation the Government have introduced, along with changes that have been made over the past few years, are intended to bring in more robust consumer protections. That is right and proper, because we do not want vulnerable individuals to be targeted in a malicious way. We have heard about one such case this afternoon, but we have seen similar cases with the payday loan industry, and it is right that the right protections are there.

That is why the Government established a strong, independent regulator—the Financial Conduct Authority—dedicated to ensuring that financial services firms treat their customers fairly. Fairness and transparency are absolutely key. We do not want to hear of cases such as this ever again. This is about protecting consumers. However, the protections provided by the FCA do not generally extend to lending to businesses in the same way as they do to consumers, as the right hon. Gentleman highlighted.

[Mr Llwyd]

I must say I am encouraged by the Minister’s response, because I believe she will diligently pass on the information about this case, and I am grateful for that. However, on commercial lending being different from domestic lending, there is every reason to leave farms in the domestic area, because if something goes wrong, people do not just lose a house, which is bad enough—they lose everything. The people in this case wanted to absolve themselves from ordinary, proper, decent responsibilities towards borrowers.

[Priti Patel]

I fully understand the impact on the individuals. We should be clear that people have lost their livelihood; this is about losing not just bricks and mortar and a roof, but an entire livelihood.

[Cathy Jamieson]

When the Minister makes her representations and passes information to the FCA, might she not want to highlight this issue? It appears that the intention has been to use a loophole—redefining a domestic premises as a business premises—potentially to get round some of the regulations.

[Priti Patel]

The point is well made. This is clearly about the impact on individuals and their livelihoods. We need to ensure that loopholes are closed and that individual protections are put in place. The Government are clear about being committed to introducing FCA regulation, where there is a clear case for doing so, in the right and proper way. However, there is a balance: we do not want to impose greater burdens, additional red tape and costs on financial firms, but we want to ensure at the same time that consumers are protected.

Businesses are expected to be better placed than consumers to judge whether contracts they make with other businesses are in their interests, so they do not necessarily need the protection of FCA regulation in the same way. However, the point that has been raised really is valid, because we are talking about the impact on smaller businesses. Of course, such businesses have a different right of recourse—to the Financial Ombudsman Service. This is always about the right kind of protections and information, and making sure that consumers are protected and loopholes closed. At the same time, however, there is, from a regulatory point of view, a fine balance.

I reiterate that this is a serious and significant case, and there are avenues I can look into—speaking to the Home Office, in particular, and asking Treasury officials to look into the issue.

For micro-businesses—businesses with a turnover of less than £2 million and fewer than 10 employees—the Financial Ombudsman Service is an independent, non-Government body established under statute to provide proportionate representation and independent resolution of complaints against financial services firms. That is predominantly for bank customers. Those decisions are binding, which is to be welcomed.

The right hon. Gentleman has made representations on behalf of his constituents, but there seems not to have been the positive engagement he is looking for, so we will address the issue on that basis.

I want to touch on the subject of fraud. If it is believed that a business is a victim of fraud, there is an additional avenue to explore. From April 2013, all reports of fraud are now made to Action Fraud rather than the police. The right hon. Gentleman spoke in some detail about Avon and Somerset Constabulary. Obviously he has engaged with it on behalf of his constituents; but Action Fraud is a Government-supported specialist fraud reporting and advice service. It is not a law enforcement body and therefore does not investigate crimes, but it provides a portal for the collection of crime reports and information so that they can be analysed. Going by the files and information that the right hon. Gentleman has sent me, there is a lot of information that could be analysed through law enforcement mechanisms. Where viable that would be sent out to the local force. I should be happy to discuss with the right hon. Gentleman how matters could be followed up using that avenue.

Although business lending is not regulated, the major lenders already take steps, as we have heard, to prevent repossessions and insolvencies. I understand the highly specific nature of the case that the right hon. Gentleman has brought to the House today, but there are processes through which businesses affected by repossession and insolvency can work properly with third parties on repayment plans and so on.

[Cathy Jamieson]

Given that the case we have heard about today concerned not only a business but a home, will the Minister commit at least to seeing whether anything else should be done about insolvency practice and guidelines in such circumstances?

[Priti Patel]

I am sure that the Government can look into that, because small businesses in particular suffer in such circumstances. Small businesses that are closely intertwined with family business become subject to different conditions from those affecting larger ones, and the implications are different for them if they reach the devastating time when they go into insolvency and get an individual voluntary arrangement. The process is traumatising, which takes us back to the point made by the right hon. Gentleman: it is a question of an individual’s livelihood, as well as a business.

[Mr Llwyd]

The Minister is, may I respectfully say, very responsive to what has been said. The hon. Member for Kilmarnock and Loudoun made the point that farms are a special case. We have already mentioned that they are often asset-rich but cash-poor; so they are there for the picking. Given that, to my knowledge, there are at least 44 different cases—perhaps 45, or perhaps even more—with roughly the same MO, surely there must now be a redefinition. Otherwise, the same thing will happen again. The people responsible are sharks who will continue to absolve themselves from regulation and play fast and loose with innocent people, with the disastrous results I have described.

[Priti Patel]

I think I have made it clear that the practices we have heard about this afternoon are wrong; we have heard about their devastating impact. Clearly, the case is distressing and complex, and we will look into every issue the right hon. Gentleman has raised. I will write to him personally once we have done so, and follow things up with him, to see how we can provide support and assistance in pursuing the matter. There is potential to examine definitions as well. I understand the circumstances in question, and the impact and implications of what has happened.

I hope I have been able to reassure the right hon. Gentleman that we are committed to putting in place the appropriate protections. We have really only touched on some of the areas in which the Government are working to protect consumers. We have heard a lot in the news today about payday loans—one such area. Today the right hon. Gentleman has brought the attention of the House to a very particular case. He has shown tremendous dedication to his constituents in supporting the affected families. He mentioned that there are potentially 44 other cases, and I would encourage the other Members who have such cases to engage in the issue as well. It is through such a collective evidence base that we will be able to effect change, and through due diligence and due process that we will get the justice needed by the right hon. Gentleman’s constituents.