Financial Guidance and Claims Bill [Lords]

Stephen Lloyd Excerpts

3rd reading: House of Commons & Report: 3rd sitting: House of Commons
Tuesday 24th April 2018 Commons Chamber

[Stephen Lloyd (Eastbourne) (LD)]

The hon. Gentleman is making a salient point. Given that the range of interest rates for a number of companies that offer equity release is really quite considerable, does he agree that one of the advantages of the advice going through an independent body is that those who are offering better and lower interest rates for consumers are more likely to receive custom?

[Crispin Blunt]

I am grateful to the hon. Gentleman, and I agree. He will note the very distinguished role that his predecessor played in the whole business of promoting equity release. It ought to be a really major option given the construction of people’s resources and where they sit on the scale of property ownership in the UK. We need to be clear about how important an asset it is and how important it is to make sure that this industry has the opportunity to give the best possible service to people in their life plans.

Consumers must obtain qualified financial and independent legal advice before they confirm their decision to go ahead and purchase any equity release product. Guarantees include the right to remain in the property for life or until moving into long-term care. Another key safeguard provided by members of the Equity Release Council is the “no negative equity” guarantee, whereby the repayment of the loan is never greater than the value of the home.

A major reason why the single financial guidance body signpost should include housing wealth is the growth in the equity release sector. Homeowners released £3 billion worth of equity in 2017, with 37,000 new customers signing up for equity release products for the first time.

--- Later in debate ---

[Madam Deputy Speaker]

I am delighted to hear it.

[Stephen Lloyd]

You make a salient point, Madam Deputy Speaker. I have been sitting here for two hours, so I agreed with a lot of what you said.

I am glad that we are finally concluding our consideration of the Bill. I rise to speak to amendment (a) to new clause 9, as well to new clause 7, amendment (a) to amendment 10 and amendment 34. The Liberal Democrats welcome the amendments that the Government have tabled, but we believe that they do not go far enough.

The Bill as introduced in the other place had three major flaws. First, the single financial guidance body had no explicit function to protect consumers. Secondly, the Government missed an opportunity to ban cold calling by claims management companies, as they had promised to do in their manifesto. The ban should also have extended to other financial products. Thirdly, there were no safeguards to ensure that people received financial guidance before they accessed or transferred their pension benefits.

I pay tribute to my Liberal Democrat colleague in the other place, Lord Sharkey, whose amendments to the Bill paved the way for the concessions that we have today. I know that he and others from across the political divide have been lobbying Ministers intensely behind the scenes. It would have been nice if the concessions had come earlier in the proceedings, but there we go.

My support for the concessions is not absolute. In particular, under clause 34, claims management companies must act as though all UK phone numbers are registered with the Telephone Preference Service. As the House will be aware, however, the TPS has proven to be somewhat ineffectual. The Information Commissioner’s Office received more than 11,000 reports of cold calls from people on the TPS register last year. We believe that the Financial Conduct Authority has more teeth to enforce a ban on cold calling by claims management companies. For that reason, we support new clause 8, which would put Lord Sharkey’s amendments back into the Bill. The other amendments to new clause 9 would have a similar effect, allowing the FCA to police the ban on pensions cold calling.

Government new clause 9 allows Ministers to ban pensions cold calling and, if they do not, they must lay a statement before Parliament each year. Although I would love to name and shame Ministers every year until a ban comes into effect, I would rather that they just got on with it. Amendment (a) to the new clause would make it a legal requirement for the Government to ban cold calling, rather than just an optional extra.

New clause 4 allows the Government to ban cold calling in relation to any other financial services product after receiving advice from the SFGB. I welcome the amendment, but Lord Sharkey and I are worried that the SFGB’s duty to report on cold calling “from time to time” is too weak. I have tabled amendment (a) to amendment 10 to ask the SFGB to publish its report on cold calling at least every two years. This duty should not fall quietly by the wayside.

I also encourage the Government to accept amendment (b) to new clause 9, which was tabled by the right hon. Member for Birkenhead (Frank Field). As my colleague, Lord Sharkey, pointed out in the other place, a ban on cold calling must also include a ban on the commercial use of data obtained by cold calling. This gives the Information Commissioner two bites at the cherry to punish companies flouting the ban.

I now turn to the two amendments that I tabled on income shocks. They would require the SFGB to improve the capability of the public to plan for sudden reductions in income. The issue was brought to my attention by the former Pensions Minister, Professor Steve Webb, and the Chartered Insurance Institute, to which I am very grateful. Too many people are unprepared for a sudden fall in income. The 2015 financial capability survey found that 26% of working-age adults have no savings to fall back on and that a further 29% have less than £1,000 saved. There are many reasons why income shocks could occur. Money Advice Service research from 2016 found that nearly three in four households receive an unexpected bill every year. One third of households have had to make an unexpected car repair or replacement, at a cost of £1,300 on average.

The “Improving Lives” Green Paper revealed that 1.8 million employees have a long-term sickness absence of four weeks or more in a year, yet statutory sick pay is worth less than three hours’ work a day on the national living wage. This problem is made worse because, as the FCA has noted, people with serious illnesses often have poor access to financial services, particularly insurance.

Amendments considered in the other place also touched on this issue. In response, the Government said that public preparedness for income shocks would be an aspect of the money guidance function. Although I welcome that commitment, I would like the Minister to go further. The Bill contains no specific direction for the body to improve preparedness for income shocks or any mechanism to measure the progress of the body in this regard.

The SFGB’s focus will be pulled in every direction. How will the Government convey to the SFGB the strategic priorities for the coming year, and how will Parliament and the public be able to scrutinise and evaluate that work? The Government have finally listened to the arguments made on these Benches and in the other place. I thank them for doing so, but they must now go the distance. They must take robust action to end the scourge of cold calling and protect millions of vulnerable people from sudden income shocks.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

I apologise for missing the earlier part of the proceedings; I was chairing a debate in Westminster Hall.

I want briefly to voice my support for amendments 8 and 9, to which I have added my name, and also for new clause 8, in my name, which effectively repeats amendment 42 as proposed by Lord Sharkey in the other place. As Members will know, that amendment was withdrawn on the solid understanding of a promise by the Minister in the Lords who said that her officials were working through the detail of a ban on cold calling. She went on to say that the Government would bring forward amendments to this House to implement that ban. Plainly, they have not done so.

I am not quite sure why the Government have backtracked on what seemed to be such an obvious and solid promise. It might have seemed that focusing on the role of the Information Commissioner and Ofcom was the easy option, but, with all due respect to the hon. Member for North Warwickshire (Craig Tracey), the kind of cold calling that innocent people are being subjected to every day is actually a cold, calculated business strategy; it is not only an issue about the misuse of personal data, important though that may be.

This Bill is supposed to be designed to ensure that people are protected and that the financial decisions that they make are taken after careful consideration and access to independent guidance. Why on earth are the Government reneging on their promise to eliminate cold calling for commercial purposes, the aim of which is to bounce people into decision making and deny them the time for proper, careful consideration and access to good guidance? New clauses 3 and 4 simply will not do the trick. People may well see them as a deception—an attempt by the Government to fool people into thinking that they are taking action when they are not really doing so at all. Everyone knows that it is a complete nuisance and underhand practice designed to entrap consumers.