Amendment 16

Part of Financial Services Bill - Report (2nd Day) – in the House of Lords at 5:45 pm on 14th April 2021.

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Photo of Lord True Lord True Chair, Intergenerational Fairness and Provision Committee, Minister of State (Cabinet Office), Chair, Intergenerational Fairness and Provision Committee 5:45 pm, 14th April 2021

My Lords, this has been a long and important debate, which I found to be of great interest. As many will know, I am not responsible for the grouping of amendments. That is not a matter for the Executive; it is a matter for the House. However, following on from the noble Lord, Lord Addington, I feel a little like the “MasterChef” hopeful who presents his dish to the judges and is told that there are too many things on the plate. There are different issues conjoined here: the important issue of the behaviour of bailiffs—as, being an old boy, I still call them—credit card applications, gambling protection and child trust funds in the case of incapacity. It is a diverse group of amendments, but they all relate to the protection and fair treatment of consumers and, as we have heard today, of the most vulnerable people in society. I will try to respond to each of them, but I am not certain that I will be able to satisfy every hope of everyone who has spoken. I hope, however, because I am confident from the discussions that I have had with colleagues in different departments—I come as an outsider to this—that I can assure your Lordships that my perception is that the Government are positively engaged on all these fronts and are listening, have listened and will listen.

Amendment 16, from the noble Baroness, Lady Meacher, and others, would commit the Government to making the activities of enforcement agents—also known as bailiffs—in relation to taking control of goods a regulated activity under the Financial Services and Markets Act 2000. The Government understand the importance of debts being enforced in a fair and proportionate manner. Since Committee, I have had the great advantage of speaking directly to the noble Baroness and others, including the noble Baroness, Lady Morgan, and the noble Lord, Lord Stevenson of Balmacara, along with my colleague, my noble friend Lord Wolfson from the Ministry of Justice, which is the department with responsibility for the regulation of enforcement agents. I know that my noble friend Lord Wolfson and the Minister of Justice have heard the arguments of noble Lords. I can reassure the House that the Ministry of Justice is currently reviewing the case for strengthening the regulation of the enforcement sector. As we have heard, that would be widely welcomed, as representatives from the enforcement and debt advice sectors have united to form a working group, led by the Centre for Social Justice, to consider how an independent oversight body could raise standards in the sector. The Government welcome this.

The Ministry of Justice recognises the important momentum of this development and looks forward to continuing to engage with the working group on its proposals for an enforcement conduct authority. The Ministry of Justice has also assured me that it would want to work closely with the working group to monitor the operation of the enforcement conduct authority and will review its operation within two years. At that point, it will consider whether there is a case for legislation to provide statutory underpinning to the body if necessary, as some noble Lords have argued. I stress that the Ministry of Justice will look to work with the enforcement authority as soon as it is established to assess what can be done to improve standards on the ground. It does not see the two years as a target: it would be willing to review the authority operation and consider legislation before the two years if necessary. I hope that that has reassured noble Lords that the Government take this offer from industry very seriously.

On the amendment itself, it would by default require the FCA to act as the regulator of enforcement agents unless its functions were delegated to another body within two years following the passage of this Bill. As I set out in Committee and in the valued exchanges that I have had with noble Lords involved, I think that there is now agreement—indeed, that has been expressed by the noble Baroness, Lady Meacher, and others—that the FCA would not be the right body for such a function. I must underline that the Government’s view on this will not change between now and Third Reading. We do not believe this Bill to be the right legislative vehicle for any changes to the regulation of enforcement agents. I hope that, having heard the assurances that I and my noble friend Lord Wolfson have given, noble Lords will withdraw the amendment and continue to engage with the Government as we go forward.

My noble friend Lord Trenchard asked about the use of the Corporate Insolvency and Governance Act moratorium to give UK companies a formal breathing place in which to pursue a restructuring plan in case of indebtedness. The power is working as intended. A handful of firms have already successfully applied to use the moratorium under the Act. As government support and regulatory easements come to an end, we expect the number of firms using the moratorium to increase. The new restructuring plan is also being used to good effect with Virgin Atlantic and other large firms using the new tool to recapitalise balance sheets.

Amendment 26 from my noble friend Lord Leigh of Hurley seeks to expand the jurisdiction of the Financial Ombudsman Service to include potential customers. I am grateful to my noble friend for his characteristic persistence on this important issue and I know that he is keen to make sure that the regulatory system ensures that others are not faced with the same potential risk of fraud that he experienced. As I sought to reassure noble Lords in Committee, it is already the case that both customers and potential customers of a firm can seek redress through the FOS scheme under the FCA’s existing rules, notably rules in the FCA dispute resolution handbook.

If we have understood the specific case correctly, my noble friend was the unfortunate victim of attempted fraud and did not intend to be a customer of the firm. He was therefore not a potential customer as defined by the relevant rules that cover people seeking to be a customer. As I said in Committee, I assure the House that had this incident led to financial loss or to my noble friend being pursued for a debt that was not his, he would have had recourse to the FOS and been supported by the current regulatory framework.

However, my noble friend was lucky to have intercepted the attempted fraud. In order to prevent harm to others, he has raised a valuable suggestion regarding ways in which financial services firms could protect customers against attempted fraud, namely that credit card companies should be obliged to verify potential customers and seek confirmation of their application before issuing their new card.

The FCA is responsible for setting rules on how firms should act when dealing with an application for a financial services product, and the FCA requires all authorised firms to have systems and controls in place to mitigate the risk of their being exploited to commit financial crime, as the noble Baroness, Lady Kramer, suggested. Any changes to these rules are the responsibility of the FCA, which also has a statutory duty to carry out a cost-benefit analysis and to consult ahead of making changes to its rules.

I am pleased to inform the House that since we last discussed the matter, senior Treasury officials have raised my noble friend’s case with Nikhil Rathi, the chief executive of the FCA. I can therefore assure him that the matter is in the knowledge of the FCA at the very highest level. I am grateful to my noble friend for raising this important issue and hope I have reassured him that his concerns have been brought to the attention of the FCA at that highest level, and therefore that he feels able to withdraw his amendment.

So many noble Lords spoke so eloquently and with such feeling on the next group of amendments, another important group, initiated by the right reverend Prelate the Bishop of St Albans. The Government recognise the value in voluntary gambling blocks to allow gamblers to self-exclude from making payments to gambling operators. This would add friction to the system to help gamblers manage their spending.

The UK banking sector has already made considerable progress in this area. Since an industry round table in February 2019, when the then DCMS Secretary of State set out the merits of these features, almost all the largest UK banks, as well as some of the digital challenger banks, have introduced voluntary gambling blocks for their debit cards. This represents a significant expansion of coverage, and access to gambling blocks is approaching approximately 90% of the current account market.

The Government also recognise the importance of cool-off periods to prevent these features being switched off immediately. Your Lordships’ Select Committee on the Social and Economic Impact of the Gambling Industry made a recommendation last year that cool-off periods on gambling blocks should be at least 48 hours. I am pleased to say that almost all the banks that provide gambling blocks now have this provision.

Regarding credit cards, licensed gambling operators in the UK are already prohibited from accepting credit card payments. On top of this, most of the major high-street banks already block credit card payments to gambling operators where they have the correct merchant categorisation code.

The right reverend Prelate quite reasonably asked about unlicensed operators. Unlicensed gambling operators are illegal, so they sometimes get around gambling blocks by pretending to be other types of merchant. Requiring a universal gambling block would not solve this problem. By the time a bank has realised it is making payments to an illegitimate operator, it is likely the Gambling Commission has already been made aware of the illegal operator and taken action to ensure it ceases operations. It is an issue on which we continue to reflect.

There is clearly already comprehensive market coverage of gambling blocks—already 90%, as I said—which means that customers who wish to use these features can either speak to their bank about how to access them or switch to an account that better suits their needs, so we do not see a case for this amendment.

However, I can say to the right reverend Prelate and other concerned noble Lords that the Government recognise that, despite the enormous amount achieved by the industry on a voluntary basis, it can go even further. That is why the Government will shortly write to UK Finance to organise a further ministerial round table with the sector in which we will talk about the action it has taken on gambling blocks and the concrete steps that can now be taken to go even further. This will include looking at the cooling-off periods that apply to blockers—that is, the ease and speed of turning them on and off. I hope that with that assurance, the right reverend Prelate will be able to withdraw his amendment.

I turn lastly to Amendment 37C, which brings novel material into the Bill at what is, frankly, quite a late stage. I recognise that it carries forward a campaign on which my noble friend Lord Young of Cookham and others spoke eloquently. The amendment seeks to give parents and others access to matured child trust funds and junior ISAs where an individual lacks mental capacity, without the form of legal authority required under the Mental Capacity Act 2005. The noble Lord, Lord Blunkett, also spoke eloquently on this point.

I begin by thanking my noble friend Lord Young for his focus on this topic. The Government are committed to supporting parents and carers in the most balanced and sensitive way. While I understand the intentions behind this amendment, we have real misgivings about this proposal, which is not compatible with the Mental Capacity Act. The Act upholds a long-established principle that legal authority is required to deal with the property of an adult who lacks mental capacity, through a lasting power of attorney or an order of the Court of Protection. This is a vital safeguard for the protection of vulnerable people and their assets; the noble Baroness, Lady Finlay, reminded us of that. We should not seek to bypass that Act in this Bill.

However, I assure noble Lords that the Government are working with financial institutions to ensure that parents and guardians are made aware in good time of the Mental Capacity Act and the possible need to make an early application to the Court of Protection. My noble friend made a strong argument about the appropriate balance between complexity and clarity. Having myself wrestled with the issue of long-term responsibility for a disabled person—sadly, lately deceased —I understand the motivation behind his remarks.

The Ministry of Justice is seeking to make the process of gaining legal authority as straightforward as possible. My noble friend Lord Wolfson, who is personally engaged with this matter, as my noble friend Lord Young knows, and whose commitment has been recognised by many in this House, has met the president of the Court of Protection to discuss it. While court forms are a matter for the judiciary, this item will, as the noble Baroness, Lady Finlay, said, be on the agenda at the next Court of Protection Rule Committee on 20 April. That committee oversees court forms and processes for applications to grant legal authority where individuals lack capacity, and it will consider whether the forms can be simplified in some ways, as my noble friend asked.

In December, moreover, the Government issued clarification of the guidance on court fees and child trust funds regarding the need to make an early application to the court and the availability of a fee remission. That means the vast majority of those applying to the Court of Protection will not have to pay a fee.

However, we do not think it possible to give this due consideration as an amendment to the Bill at this late stage. If the Government were to legislate on such an issue, it would be important to consult beforehand with the financial sector and others, including disability rights groups, and to consider the UK’s international legal obligations. Therefore, it is not possible for the Government to accept this amendment.

The amendment itself raises many concerns, as it extends far beyond giving parents and guardians access to matured child trust funds and junior ISAs and could enable third-party access to any bank or building society account. In addition, withdrawal amounts are high and the amendment does not address the circumstances, as the noble Baroness, Lady Finlay, pointed out, of an adult regaining capacity. I do not for a moment imagine that this is what my noble friend Lord Young of Cookham intended, but it demonstrates the need to consider this area carefully and in detail.

I repeat and give the assurance that this is a priority for the Government. At the Ministry of Justice, my noble friend Lord Wolfson—I have been present in meetings where he has engaged on these matters—continues to look at this and will carefully consider whether there is a need to legislate once all relevant issues have been fully considered. We have engaged further with the relevant stakeholders and my noble friend Lord Young of Cookham and others who are interested. We are not ruling anything out at this stage.

I hope that I have given my noble friend confidence that the Government do take this issue seriously but that this Financial Services Bill is not the right place to address it. Therefore, I hope that he will feel able to withdraw his amendment, and I also hope that I have managed to assure all those who spoke so eloquently to this important, persuasive and vital group of amendments that the Government do and will consider all these issues seriously, now and in the future.