Financial Services Bill

Debate between Stephen Gilbert and Stephen Lloyd

Monday 6th February 2012 Commons Chamber

[Stephen Gilbert]

My hon. Friend is quite right; that is a welcome step forward, although there are some bits that still need to be tidied up. I shall come to those later.

It is particularly welcome that the FCA will have a super-complaint power. This will allow Citizens Advice and other consumer bodies to use their evidence of widespread consumer harm to make complaints on behalf of all consumers, including those who might not know how to complain, and those who do not understand that their rights have been infringed. To make this new era of consumer protection effective, however, the Bill should require the FCA to respond quickly and effectively to super-complaints concerning widespread consumer harm, and I ask the Minister to consider what improvements could be made to the Bill in that regard when it goes into Committee.

As we know, the Bill sets out a framework for moving the regulation of consumer credit lending to the FCA. That, too, is welcome. But it is vital that not only lenders but debt collectors, brokers, debt managers and retail lenders that sell insurance products are regulated by a single, strong regulator. I believe that the responsibility for all that regulation should go to the FCA. In recent years, we have seen a succession of widespread consumer problems with financial products and services, including the mis-selling of payment protection insurance, poor lending and arrears collection practices in sub-prime mortgage markets, unacceptable debt collection practices by major credit providers, irresponsible lending of unsecured credit, and the ongoing saga of bank charges. It is clear that a change in the way in which consumer credit is regulated is necessary to protect consumers better in the future. I am looking at the hon. Member for Walthamstow as I say that.

Under the Consumer Credit Act 2006, the Office of Fair Trading has too little power or policy autonomy to respond quickly to emerging consumer harm, particularly when it concerns new products, services and business practices. That makes it easy for firms engaged in bad practices to target vulnerable consumers. It also undermines attempts by the sector to police itself, and makes the task of regulatory enforcement much harder. The level of financial penalties is also too low to act as a deterrent.

The OFT does not have the power or resources proactively to supervise regulated firms, or to identify and stop bad practice at an early stage. OFT guidance does not have the quality of rules, the breach of which could lead to a sanction, so enforcement is also slow. In respect of payday lending problems, for example, the OFT appears unable to make a specific rule limiting the number of times a loan is rolled over, or binding provisions on how a payday loan firm should ensure that it is lending responsibly, or to require a firm to deal with borrowers in financial difficulty in a specific way.

The Consumer Credit Act conduct regime is highly enforcement focused. There are few powers to pre-empt causes of consumer harm, or even to require firms to compensate consumers who have suffered harm. I think that all Members would agree that the consumer credit market needs a regulator that can regulate products and prevent consumer harm before it becomes widespread.

[Stephen Lloyd (Eastbourne) (LD)]

I strongly agree with the direction of travel that my hon. Friend is taking, but does he acknowledge that there is a slightly slanted argument on this matter, because the APR on bank overdrafts that have not been arranged is often far higher than that charged by the better known and perhaps more reputable payday loan companies?

[Stephen Gilbert]

I am grateful to my hon. Friend for making that point. I believe that all financial services should be underpinned by two principles: one is transparency, in that the consumer needs to know what they are getting; the other is that interest needs to be proportional to the length of time and the amount borrowed. I am sure that the record will reflect what my hon. Friend has added to the debate.

Transferring responsibility for consumer credit regulation to the FCA will also have the advantage of providing one umbrella regulator for credit, insurance, broking and debt management. It is vital that we do not allow a two-tier system to develop, with mainstream credit being regulated through the FCA and a reduced number of licensable firms being regulated under the CCA by a small successor to the OFT with lesser powers and diminishing resources. I am therefore pleased to see the direction of travel that the Government are taking on this matter.

My second point relates to the Prudential Regulatory Authority and the FCA. It seems anomalous to give the PRA a veto over the FCA. This could have the effect of putting the prudential strength of banks above consumer protection. The Bill might allow the PRA to veto the FCA taking action against a party for market abuse. If the PRA were to veto the FCA’s taking action to protect consumers, it would have to tell the Treasury that it had done so, but it could also prevent the Treasury from informing Parliament. In my view, that provision needs to be reversed.

Turning to the need for the United Kingdom to maintain effective representation abroad, it is clear that the proposed new supervisory bodies will need to co-ordinate in order effectively to represent our national interests at European and international levels, including with the new European supervisory authorities. The financial services industry, the Government and the UK regulatory authorities all have an important role to play in representing the UK in international discussions on financial regulation.

The Financial Services Authority and other UK regulatory bodies have a strong record of constructive engagement with, and influence in, European and other international bodies. Indeed, to give the House just two examples, the former head of the FSA’s international division now leads the European Securities and Markets Authority, and the Governor of the Bank of England has a leading role on the European Systemic Risk Board and on the governing committees of the Bank for International Settlements. The International Monetary Fund’s recent report on the future of regulation in the UK has also said that the effective international co-ordination of the UK’s position is important.

I therefore welcome the Government’s recent statement that they accept the case for a committee on international co-ordination, and I want to underline to the Minister the need to get that right. There will not be a perfect match between the scope of the responsibilities of the new UK bodies and those of European and other international groups, so there is a requirement for co-ordination between different UK bodies to represent the British interest effectively. The proposed measures in the Bill will oblige the new UK regulatory bodies—Her Majesty’s Treasury, the Bank of England, the PRA and the FCA—to sign a statutory memorandum of understanding and to work together.

I believe that TheCityUK was right to say that effective international co-ordination is so important to the broader UK economy, as well as to the financial sector, that a dedicated group or committee should be appointed to give sufficient priority, resources and responsibility to mobilising the UK’s European and international representation. It proposes the formation of an international co-ordination committee with specific responsibility for leading the UK’s representation on European and international committees. I commend that approach to the House.

I welcome the Bill, but I ask Ministers to look again at the balance of power between the FCA and the PRA, at the inclusion of all CCA activities within the remit of the FCA, and, above all, at the need to ensure that the United Kingdom retains a strong and coherent voice externally.

Unscrupulous Builders

Debate between Stephen Gilbert and Stephen Lloyd

Wednesday 9th February 2011 Westminster Hall

[Stephen Lloyd]

That is a good point. It is not the conclusion that I have reached, but it is a strong point. The challenge with local government oversight is that it varies a lot around the country. Some local authorities would make it a high priority, while others would not. It is an option, but the conclusion I have drawn is that the Government must start taking steps to look at a licensing proposal.

I am aware that there are already programmes to help regulate the construction industry and mitigate fears, and I do not wish to undermine the valuable work of organisations such as TrustMark and the National House-Building Council. However, those schemes are taken up mainly by large companies that operate at national or regional level, and they are not the problem. The administration and cost involved in registering with such schemes is a natural deterrent to the individuals and small firms that I, and many of my colleagues, want to help. Because the vast majority of substandard work is carried out by individuals or small gangs of rogue builders, the current measures are inadequate.

According to Local Authority Building Control, TrustMark has insufficient funding to deal with the problem. Therefore, we need serious consideration about how to proceed with more effective methods of regulation. The seriousness of the matter is heightened by the well-known target of the illegitimate traders—older people, who are often the most vulnerable in our society. An ageing population coupled with increased home ownership necessitates a Government response.

Between 1981 and 2001, the proportion of the population over 75 years old increased by more than 30%. The number of pensioners living alone increased by 150,000 between 1991 and 2002, and now accounts for 14.4% of all households. That means that there are now more than 5 million pensioner-only households. Let me be clear: MPs in the House know that unscrupulous builders target vulnerable, often elderly, people. That is a growing market, and unless something is done, those builders will have ever more opportunities to rip people off.

Numerous investigations have shown that unscrupulous builders are taking full advantage of the gaps in our legislation and our rising pensioner population. Crooked salespeople are commonly overbearing, persistent and totally unscrupulous. That is a particular problem for older people, as they often live alone and are trapped by such intrusive door-to-door sales techniques. Once a salesperson is in their home, a vulnerable individual has limited means by which to end the transaction. The option of asking someone to leave is not always available to them because many home owners feel too intimidated in that situation to broach things so directly. That may sound absurd, but our experience as Members of Parliament, dealing with a large amount of casework and listening to constituents, who are often elderly, means that we know that they will be too frightened to ask the cowboy builder to leave.

When hard-sell tactics are used, many individuals feel trapped in their homes and have nowhere to retreat, leading to increased pressure and a desire to rid their home of the unwanted guests as quickly as possible, often—crucially—by accepting the service being offered. In fact, there are even reports of people being driven to their bank immediately to draw out large sums of money when faced with threatening demands.

[Stephen Gilbert (St Austell and Newquay) (LD)]

I am grateful to my hon. Friend for securing a debate that is important to constituents from throughout the country and represented by hon. Members on both sides of the Chamber. Does he agree that one way in which we could consider regulating the sector is by extending what we have done with the gas industry to the building industry? The Gas Safe register gives older people confidence that the engineers coming into their home are qualified and professional.

[Stephen Lloyd]

I thank my hon. Friend for his intervention. That is a good idea as long as it is managed properly. My concern is that it might end up a bit like TrustMark. Many people do not know about that scheme and even among those who do know about it, there is some concern that it is not robustly policed. I like the idea, but we have come to the point when we need to introduce licensing. I will explain how I propose that we fund it.

In my judgment and that of many others, none of the current legislation is able sufficiently to protect the public from such threats. I hope that hon. Members will forgive me because I am going to give them a bit of a history lesson. The Pedlars Act 1871—that is a wonderful phrase; “the Pedlars Act”—excludes virtually all callers involving property maintenance and repairs. The cancellation of contract concluded away from business premises section of the consumer protection regulations is an important statutory consumer measure, but it will generally offer little or no protection from criminal practices when the traders’ names and addresses are not known. Large amounts of cash change hands, yet there is no intention of operating in a fair manner. That is absolutely appalling. It is systemic and we simply cannot let it continue. Section 16 of the Theft Act 1968 has left a loophole in legislation, as its definition of theft covers only actions when a person, by deception, dishonestly obtains property belonging to another with the intention of permanently depriving the other of it.

Cowboy builders are fully aware of the flaw in consumer protection and know that as long as they carry out at least some activity, the incident will be classified as a contractual disagreement and therefore not a criminal offence. Prosecution of those perpetrators is very tough, as the necessary evidence is often very difficult to obtain; I could go on and on. That is why the market has been expanding and the actions of those deplorable individuals have got bigger every year. They know the law is an ass.

There is a logistical problem for any witnesses asked to stand up in court and face those who wronged them. That is a particular concern when the victims are already among the most vulnerable. It is another reason why action must be taken to halt the spread of these fraudulent criminals.

I am coming to the end of my speech because I want to give the Minister plenty of time to reply. In raising these issues, I make it absolutely clear that I do not want to cast aspersions on the legitimate business men and women who provide an important and welcome buildings and renovation service to many people up and down the country. In my constituency, a noted builder, Ellis Builders, has given me advice on how I can present and pitch a proposal in a way that will work for legitimate builders. I appreciate the support that its managing director, Derek Godfrey, gave me.

We must consider the possible courses of action open to us and the ways in which we can aid genuine tradesmen and end the scourge of rogue builders. Naturally, a central aspect of any reform would have to be an increase in public awareness. The public must know how to confirm whether the workers being hired are legitimate. One reason why the current voluntary schemes are ineffectual is the lack of public knowledge surrounding programmes such as TrustMark. I believe that to make any significant advance in protecting the well-being of individuals, it is critical that we provide one clear method for assessing the competence of a building tradesman. On that point, I agree with the National Federation of Roofing Contractors and join it in advocating a means of appraisal that will provide confidence that the tradesman or woman in someone’s home is competent, trustworthy and reliable.

There are many ways in which that may be achieved. Successful licensing schemes already operating in Australia and the US could provide a useful starting point for the consultation that surely must follow this debate. However, at such a difficult time for our economy, I appreciate that we must be extremely careful not to overburden a crucial sector of that economy—construction. It is necessary to strike a careful balance. We need to provide regulation and protection for the consumer on the one hand without disproportionately increasing costs or deterring compliance on the other.

It is time to consider seriously a national licensing scheme. The fee need not be too expensive. It could be £500 per annum and tiered, with smaller companies paying less and larger ones more. Any legitimate builder would see that as a worthwhile investment in their business. It would give the public the security of knowing that a builder was licensed. They could say to someone, “Do you have a licence?” If the answer was no, they could say, “You won’t be doing any work in my home.” If the answer was yes, they could open the door. In my judgment, that sum, if it was tiered as well, would be sufficient to fund a licensing body.

We cannot keep sweeping this issue under the carpet. The legitimate building trade—companies of all sizes—deserves more. The public deserve more. We can do more. To misquote the great and one and only Gary Cooper, “It is time to run the cowboys out of town.”

Park Homes

Debate between Stephen Gilbert and Stephen Lloyd

Thursday 16th December 2010 Commons Chamber

[Stephen Gilbert (St Austell and Newquay) (LD)]

rose—

[Stephen Lloyd (Eastbourne) (LD)]

Thank you very much, Madam Deputy Speaker. Like everyone, I congratulate my hon. Friend—