'(1) The Consumer Credit Act 1974 shall be amended as follows.
(2) After section 60, insert-
"60A Form and content of retail credit-token agreements
(1) The Secretary of State may make regulations as to the form and content of documents embodying retail credit-token agreements, and the regulations shall contain such provisions as appear to him appropriate including requirements to ensure that-
(a) the rate of interest on the credit to be provided under the agreement for credit (or all the rates on a per annum basis where there is more than one rate of interest) does not prejudice the interests of debtors; or
(b) the agreement for credit includes a seven day cooling off period during which credit would not be available to the debtor.
(2) 'Retail credit-token' means a credit-token (which has the meaning given by section 14(1)) which results in the provision of credit under a credit-token agreement provided by a retailer or group of retailers which can only be used for purchases from the retailers concerned.
(3) A 'retailer' means a person or business providing goods and services to an individual.
(4) Accordingly, a 'retail credit-token agreement' is a regulated agreement.".
(3) For section 67, substitute-
"67 Cancellable Agreements
(1) A regulated agreement that is not a retail credit-token agreement may be cancelled by the debtor or hirer in accordance with this Part if the antecedent negotiations included oral representations made when in the presence of the debtor or hirer by an individual acting as, or on behalf of the negotiator, unless-
(a) the agreement is secured on land, or is a restricted-use credit agreement to finance the purchase of land or is an agreement for a bridging loan in connection with the purchase of land, or
(b) the unexecuted agreement is signed by the debtor or hirer at premises at which any of the following is carrying on any business (whether on a permanent or temporary basis)-
(i) the creditor or owner;
(ii) any party to a linked transaction (other than the debtor or hirer or a relative of his);
(iii) the negotiator in any in any antecedent negotiations.
(2) A retail credit-token agreement may be cancelled by the debtor in accordance with this Part.".
(4) For section 68, substitute-
"68 Cooling-off period
The debtor or hirer may serve notice of cancellation of a cancellable agreement between his signing of the unexecuted agreement and-
(a) the end of the fifth day following the day on which he received a copy under section 63(2) or a notice under section 64(1)(b), or
(b) if (by virtue of regulations made under section 64(4)) section 64(1)(b) does not apply, the end of the fourteenth day following the day on which he signed the unexecuted agreement, or
(c) if the cancellable agreement is a retail credit-token agreement, the end of the seventh day following the day on which he signed the unexecuted agreement.".'.- (Mr. Hoban.)
Question put, That the clause be added to the Bill:-
The House divided: Ayes 167, Noes 253.
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I beg to move, That the Bill be now read the Third time.
We have had an interesting debate on Report. I am grateful to everyone who took part in it, and to the members of all parties who have contributed to the debate as the Bill has passed through the House. In particular, I should like to thank those hon. Members who served on the Public Bill Committee, and I am grateful for the overall constructive approach that all sides adopted in those sittings, even when there was disagreement.
In Committee, we had the opportunity to review and discuss in depth the Bill's specific measures. That process was instrumental in teasing out further details on how we envisage that the Bill's measures will operate. I know that that process was very much welcomed by a number of the outside bodies that follow our proceedings closely.
I want to take this opportunity to remind the House of the context in which the Government are introducing this piece of legislation. Over the past couple of years, the global economy has been tested in ways that few would ever have anticipated. The origins of the crisis lie firmly in the financial sector. We have a duty, indeed an unprecedented opportunity, to review our financial landscape and ensure that the lessons of the crisis are learned by shareholders, corporate investors, management, regulators and Governments alike. We need to make absolutely sure that in future any crises will not only be less damaging but less likely altogether.
The causes of the crisis were complex, and there is no single remedy for all of them at once. We need a package of measures that address the wide variety of aspects affecting the industry, from the way it is regulated and its corporate governance, to the way it treats its consumers. That is why the Bill contains such a diverse range of provisions. The Government believe that, together, those measures will help bring a real change in emphasis, in the way we consider and address systemic risk, and in the way we protect consumers.
I am grateful to hon. Members for their probing and questioning over the past few weeks in Committee. I know there were some questions about the practical effects of some of the measures. I hope I was able to bring further clarity, and with it reassurance, to the Committee.
Specifically, I know that the Committee had concerns about the proposed new powers of the FSA on remuneration rules. The Government were happy to remove any ambiguity, and following a recommendation from the Joint Committee on Human Rights, we tabled an amendment to make it clear that any FSA rules making contractual provisions void when they breach a prohibition on remuneration will apply only to contract provisions that are agreed after the rules in question have come into force. We are not proposing-as I think some were concerned-that the powers should be in any way retrospective.
Similarly, I understand that there was some confusion about the scope of the short selling power. We had the opportunity to debate short selling today. I hope the confirmation that any prohibition would apply to identified financial instruments, or ban short selling in specified cases rather than by certain firms, will reassure hon. Members. It is not the case that one firm might be banned from short selling a stock when another was able to do so. I am happy to reaffirm that.
Overall, I was encouraged by the willingness of the Opposition to support the principle of many of the Bill's provisions. Many of the questions relating to the recovery and resolution plans sought to ascertain what they might look like in practice, rather than challenge the intention of the plans, which is to reduce the impact and likelihood of firms failing. Only recently, we heard contributions to the "too big to fail" debate.
I pay tribute to Mr. Hoban for the thorough way in which he led for the Opposition. He was keen to find out what the court rules might look like in relation to collective proceedings. I sympathise with his desire to engage on the greater detail, although I hope the House appreciates that such a level of granularity is best determined by experts in the fields, and is a matter for other channels. Those aspects will, of course, be subject to consultation.
We have discussed the shape of institutional arrangements at considerable length. I said a few moments ago that it was a well-trodden path-if not an excessively trampled one. It is an important issue, but as I have been at pains to stress on several occasions, I do not think structure is the issue. The crisis was a global one, affecting countries regardless of their institutional frameworks. What matters most is not who does the job, but that the job is done effectively, and that the institutional framework is clear and coherent. That is why the Bill focuses on making the existing arrangements work better by strengthening them further-for example, by introducing the council for financial stability, which will operate on a more formal, transparent and accountable basis than the previous arrangements, should the Bill pass into law.
It is clear that the arrangements have not received universal approval, but the Government are clear that we need the authorities to focus on reducing risk and strengthening the resilience of the financial system, and-at the risk of repeating myself-not having to deal with the disruption and uncertainty that would be caused by unnecessary institutional upheaval. I think that we need to be very clear about the real risks that would be involved in that.
Hand in hand with that, we propose to give the FSA a financial stability objective. While many have interpreted that as an erosion of the FSA's consumer protection objective, or vice versa, I believe that the objectives are in fact complementary. It is unlikely that one would succeed without the other-both are necessary.
The Bill will enhance the powers and responsibilities of the FSA, embed a structure to monitor financial stability in the UK and abroad, and give regulators additional powers in relation to remuneration in the financial services sector. It was a shame that we did not have the opportunity to debate some amendments relating to those proposals today, but the measures were considered substantively in Committee. Importantly, the Bill will also ensure that banks and building societies address the likelihood and impact of their failure by drawing up contingency recovery and resolution plans.
In parallel, the Bill includes provisions that will enable the creation of a brand new independent consumer financial education body to enhance education and awareness. It will establish new and more effective routes to redress and compensation for consumers where there has been widespread detriment. Again, although we were unable to discuss those issues on Report, we discussed the proposals extensively in Committee, and they have been widely welcomed by consumer groups.
The proposals represent the Government's considered response to some of the key lessons learned during this crisis. The Bill entrenches a new strategy to ensure the protection of financial stability and wide-ranging reforms to the financial services industry. We want to ensure that the industry on which our economy relies so much emerges on a more robust footing. This vital Bill will help to build a new environment in which a financial services industry based on both stability and prosperity can thrive. That is no small task. I am most grateful for the thoughtful and thorough scrutiny that the House and the Public Bill Committee have given the Bill, and I commend it to the House.
I echo the Minister in commending all those who have participated in the scrutiny of the Bill, both on Report and in Committee. One of the strengths of the Public Bill Committee-I referred to this at the conclusion of its proceedings-was that it was assisted by the presence of several hon. Members from both sides of the House who were able to bring their expertise from serving on the Treasury Committee to bear on the matters in the Bill.
Those Members were not the only people who contributed to the Public Bill Committee, however, and I am grateful to my hon. Friends who served on it for the time that they put into developing their ideas. Rob Marris, of course, was a prodigious commentator on the Bill. I was sorry that Dr. Cable did not join us in the Public Bill Committee, even though he was a member, but his colleague, Mr. Breed, did a good job of setting out several of the arguments.
It would be remiss of me if I did not say a few words about the Minister. This is our fifth Bill since October 2008, and among his hallmarks are his willingness to engage in debates and to give good answers to questions that are posed, and his understanding of the content of Bills, which goes beyond that occasionally displayed by Members on both sides of the House. I understand that he has decided to step down after the next election, whenever that comes, and I wish him well in whatever he chooses to do.
The Bill is a strange combination. We did not oppose its Second Reading, and when I glanced just now at its contents, I realised how much of it we support. I would divide the measures into three categories: the welcome, the cosmetic and the misconceived. There are more measures in the welcome category than in the other two and important proposals will enhance consumer protection, but one challenge that the financial services sector faces as it seeks to rebuild confidence in it following the financial crisis of the past two or three years is how to encourage consumers to engage with the Bill.
Many measures that focus on the consumer will help to encourage consumers to engage. Three distinct areas are involved in that, the first of which is the establishment of the consumer finance education body. One challenge that we all recognise is the need to increase people's confidence in discussing financial products with independent financial advisers, banks and insurance companies. A huge deficit in people's financial understanding needs to be dealt with.
We will not necessarily all agree exactly about how that deficit should be repaired-Mr. Todd has his own views on how effective those measures will be and how best to target the work of the new consumer finance education body-but we are all clear that the work that the FSA has already established in the pilot projects needs to continue. On a visit to Gateshead, I saw for myself the importance of the work done by Age Concern and Help the Aged as part of the pilot project.
The second group of measures aimed at improving the lot of consumers is the action taken on banning credit card cheques. Sending out unsolicited credit card cheques has been one of the most indefensible practices in the consumer credit industry over a long period. In Committee, I told hon. Members that my wife had received some credit card cheques before Christmas. The industry, knowing that such cheques were to be banned, was still sending them out. I had rather hoped that the pre-Christmas mailshot would be the last that she received including such cheques, but I was disappointed, as in the past 10 days or so they have been offered to her in another mailshot from her credit card company. Clearly, the consumer credit sector is having a last hurrah.
The next batch of measures that protects consumers, which we welcome, is the arrangements on collective proceedings orders and consumer redress schemes. The point of contention, perhaps, between me and the Minister is straightforward: the measures have been included in the Bill, but they came as a surprise to the industry despite the fact that they were trailed in the consumer White Paper.
The industry was not clear about how the measures would work in practice. The scrutiny process achieved some clarity on the fact that generic court rules would be designed, then Treasury regulations introduced to modify those rules to ensure that they were appropriate for financial services claims. That process is now understood and welcomed, but the industry will want to engage with it in some detail over the coming months, as the Minister might expect.
Another important area, which we touched on occasionally in Committee, is what we do when a number of people have experience of buying a particular product involving a systemic case of mis-selling-for example, when a number of products with the same fault have been put on the market.
Currently, such cases are dealt with by the Financial Ombudsman Service. I think that the procedure is unsatisfactory, both for FOS and the industry. The reforms set out in the Bill will insert a new section 404 in the Financial Services and Markets Act 2000 to create consumer redress schemes, which is an important move forward. I am sure that there is more we can do on safeguards to ensure that they work properly, especially where there is some doubt about the application of law or of FSA regulations. Improvements can be made to ensure that the proposals are welcomed not only by consumer groups, but by the industry.
We also welcome measures on remuneration, the framework for short selling, which we debated earlier, and living wills. Our financial regulation White Paper, issued last year, outlined our support for living wills. That is an important part of the resolution regime introduced in the Banking Act 2009.
There are cosmetic changes on financial stability and the Bank of England. When Angela Eagle was Exchequer Secretary, she was keen to point out that the FSA already had the implicit objective of financial stability. The Minister believes that by making that objective explicit it has greater salience, but we shall see what happens and how behaviour changes as a consequence. The duty to co-operate with international bodies was a matter of interest for my hon. Friend Mr. Cash. The FSA already does so much of that that it is difficult to see what more can be achieved.
Some measures in the Bill are misconceived. The Minister referred to the well-trodden path in the first four clauses. We trod it well in Committee, both in our evidence sessions and in our debates. Indeed, the issues were reprised this evening, and they are the source of fundamental disagreement between the Minister and me. We set out clearly in our White Paper our plans to give increased powers to the Bank of England on micro and macro-prudential stability, and what we are going to do to give new powers to the Consumer Protection Agency. If I go on for too long, Mr. Speaker, you will rule me out of order for a Third Reading speech, so I shall save my remarks for another occasion, if the opportunity presents itself.
There are important lessons to be learned from the financial crisis, and the Bill deals with some of them. However, the financial services sector must recognise that it is not just policy makers and legislators who need to make reforms, but that it, too, must engage. I am sure that we will return to these issues again, because as the financial crisis unfolds-the Bill is good at future-proofing, with measures on living wills, for example, on which we are creating a framework for the FSA, and measures on remuneration, which create another framework for it-there will be opportunities to identify new issues, which may require legislation, as a result of the duty to co-operate with international financial institutions.
This is a helpful Bill that improves the opportunities for consumer protection and education. It makes important changes to the framework to help to ensure that if there is another banking crisis a proper resolution is in place. There are things in it that we support; there are some things that we think are purely cosmetic; and there are some things that are misconceived. However, the process that it has undergone over the past couple of months has helped to illuminate its workings and set out the challenges to which we all need to rise.
Order. Before we proceed, a moment ago, three hon. Members were seeking to catch my eye. We have less than 12 minutes to accommodate them all. I should like to do so, but Members can do the arithmetic themselves.
I shall not detain the Chamber long, Mr. Speaker.
The Bill was born of the need to learn lessons, and it must be said that many of those things were not spotted by the original regulatory and supervisory system. It introduces some sensible measures, most of which we can wholeheartedly support, and our work has certainly been assisted by the witness sessions. We could not support the official Opposition's amendment to abolish the council for financial stability. Overall, there is a need for a tripartite system. It did not work last time, but that does not mean that it cannot work. We would like to stiffen it up even more, but perhaps in the light of events, we have the opportunity to give it greater transparency and authority. We were able to support the granting of additional powers for the FSA. I heard what Mr. Hoban said about the Bank of England, but it would experience some difficult conflicts of interest if it was given significant new powers on financial stability.
Recovery and resolution plans will need to be fleshed out-their cost, how they will be updated and how they will apply. Whether we break up some of the big banks will have a major effect on them. We support the collective proceedings, but they are wide ranging and cause concern to the industry. Some tweaking is needed so that they get the necessary support.
I welcome the fact that we will get rid of credit card cheques. I am disappointed that we could not also get rid of unsolicited credit limits, but I assume that will be considered fairly soon, hopefully after a review. It would be a similar and complementary measure. The financial education body will be extremely useful. Much more consumer education is needed if people are to understand what they are buying, how they are paying for it, and their rights and responsibilities.
Finally, as the Minister, like me, has decided not to stand again, may I say that I have much enjoyed his company? His courtesy, kindness and good humour greatly assisted our Committee proceedings.
I, too, enjoyed serving on the Committee that considered the Bill, and shall say some nice words about the Minister. He has worked incredibly hard over the past two years-some people have worked him too hard. He has announced that he is leaving the House at the next election. I know that he has a great many friends on both sides of the Chamber, and I am sure he will find a berth very quickly in the private sector, where his talents will be put to good and, I hope, profitable use. So I say farewell to the Minister, at least from the perspective of seeing him at the Government Dispatch Box.
A witness who appeared before our Committee said that the banks made entirely the right decisions based on the totally wrong assumptions. If the Bill starts to redress that imbalance in decision making, it will be a good thing. I am not entirely sure that the council for financial stability will be a wild success. I remain to be convinced about that, because ultimately, if we want banks to be responsible, we need responsible management and responsible shareholders who want long-term returns on their investment, not short-term returns.
Perhaps I may add, without trying Mr. Speaker's patience, that we need fewer people called Fred the Shred running our banks. We need more people called Brian the Boring running our banks-good, old-fashioned, boring bankers who can make the numbers add up at the end of the month. That is what the British public want-a lot of boring bankers. I said that very slowly.
Consumer financial education sounds very boring, but my word, it is important. If something sounds too good to be true, it is too good to be true. Many banks have taken advantage of people who lack financial sophistication, and that is not to the banks' credit. One of the reasons we are in this mess is that many people have over-extended themselves, not because they are greedy but because they have been persuaded by their banks that they can afford to take that debt on board. Educating the customers of banks and financial institutions is crucial. We do not want to do that only when they walk through the doors of those establishments as adults. We need to start educating them at school at an early age. For that reason, if for no other, I am entirely happy to support the Bill. I am sure it is just one building block of a very large house that we will all need to build.
I declare an interest as a reformed and very boring banker. Although there is a need for education, what confidence does my hon. Friend have in the Government to give that education to young schoolchildren? I worry about the children of Southend. They need to be educated in financial management, but I would not want to send them along to the Government in general, despite the good things that my hon. Friend said about the Minister. I would not want to send them along to a Government who have run up debt and spent, spent, spent.
I want to be charitable this evening, because I believe that there will be a change of Government in three to four months, and that is a good thing. The democratic wheel turns and other people get their turn in Parliament; and then in 10 years' time we will all be hated and I imagine that the other lot will get their turn. In agreeing with my hon. Friend, however, I think it very important that children in Southend and Broxbourne understand from a very early age, the importance of finances, and understand that how they manage their finances will have a major impact on their life. With that, I shall sit down and allow others to take part.
I, too, pay tribute to the Minister. He is an intellectual. I know that that can in some places be a dirty word, and I hope that his Whips will not hold that against him for the remaining time that he is a Member. However, it is always a great pleasure to sit on a Committee with a Minister who has the intellectual capabilities to understand and to run arguments, so I thank him very much for that.
During the course of the Bill's proceedings, I, too, have found it fascinating and a great privilege to serve with distinguished members of the Treasury Committee and distinguished Members of this House. I cannot help feeling a little disappointed by the Bill's eccentricities, but only one or two items of principle divide us. The item of major principle which has divided us is the Bill's reaffirmation of the tripartite arrangement. I am absolutely devastated that we lost the vote on the amendment that would have removed clause 1, because that would have been a fitting end to the endless speeches on the subject from me and my colleagues. The Bill takes an ostrich-like approach, in which the tripartite arrangement is still seen to be resilient and a good thing; and it is a Bill in which the creation of a body that is almost identical to its predecessor is still seen as a major step forward.
There is symmetry in the new system, however. The biggest criticism of the old system was a lack of leadership, and the biggest criticism of the new system is a lack of leadership. Even that, however, provided Government Members with a golden opportunity to practise in Committee the skills that they will undoubtedly need in opposition of calling for us to explain our policies. I hope that those skills stand them in good stead.
We have created some confusion by marginalising and blurring the responsibilities of the Bank of England while allowing the Financial Services Authority to stray from simple regulation into politics. The Bill is high on PR but low on change, and I still struggle to see the real additionality to it. The other issue about which I felt frustrated was the enormous lack of detail, particularly on costings. It came out in relation to living wills, for which the impact assessment provides no costings, and in relation to short selling. That aspect of the Bill was pulled back remarkably today into a sensible state, but the ranges of available costings are too wide to be useful.
Other Members have spoken of the good work that the Bill promises on improving public education in finance, but there was still some confusion about its relationship with what the private sector already does. The relevant clauses left so much open and provided such a vague framework that, in the opinion of one witness,
"the wording is sufficiently wide that in all probability we will be able to come up with appropriate regulations that fit within whatever comes" --[ Official Report, Financial Services Public Bill Committee,
We would not like that to be a regular feature of any Bill.
There are backstops all over the place, such as the consumer redress measures. They are headline grabbing, we are not sure when they will be used, and there is no consistency or real understanding of the potential to introduce US-style litigation to UK courts. One witness was prompted to say that
"just about everything of substance is passed to a secondary legislative process through regulations... It does not seem to be the way to proceed." --[ Official Report, Financial Services Public Bill Committee,
I entirely agree with that. Having regulations, even in draft, alongside the Bill would have helped enormously in giving us a greater understanding and depth of discussion, which at times we have had to skirt around.
Question put and agreed to.
Bill accordingly read the Third time and passed.