Clause 1

Dormant Bank and Building Society Accounts Bill [Lords] – in a Public Bill Committee at 10:30 am on 14 October 2008.

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Transfer of balances in reclaim fund

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I beg to move amendment No. 1, in clause 1, page 1, line 6, leave out from ‘fund’ to end of line 8 and insert—

‘(i) the balance of a dormant account that a person (“the customer”) holds with it, and

(ii) the name, date of birth and last known address of that customer, and’.

May I join the previous speakers in welcoming you to the Chair, Mr. Benton, and say how much I am looking forward to serving under your chairmanship? I am delighted to have the opportunity to kick off the deliberations on what the Minister rightly said is a Bill that has commanded support from all parties in the House of Lords, as well as in the House of Commons. I look forward to proceeding on that basis, but with the caveat that, as the Minister knows, we disagree on some points. As the Government do not have a natural majority in the other place, they were not able to force through provisions that the majority felt could be improved. We shall now seek to improve the Bill again with amendments in Committee.

Before I turn my mind specifically to the amendment, I am bound to say that it seems faintly peculiar that, yesterday in the Chamber, we discussed how £37 billion of public money could be put into the banking system, yet today we are discussing how a rather smaller amount can be taken out to assist public funds with youth projects and similar matters. Nevertheless, we are where we are, so we shall concentrate on what is before us.

Photo of Joe Benton Joe Benton Labour, Bootle

Order. The hon. Gentleman is going beyond the scope of the Bill. Will he come back to the amendment?

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Sorry for pushing your patience, Mr. Benton.

Photo of Martyn Jones Martyn Jones Labour, Clwyd South

I remind the hon. Gentleman that the funds to which he referred are funds not of the banks, but of people who have lost contact with their money.

Photo of Joe Benton Joe Benton Labour, Bootle

Order. We do not need to focus on yesterday’s proceedings. Will the Committee return to the amendment?

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Absolutely. I take the blame entirely for taking us down that road.

Amendment No. 1 concerns a matter on which the Minister sought to reassure me last week on Second Reading, but I should like further reassurance about the means by which a depositor can be reunited with his or her money if he or she goes to his or her bank more than 15 years after having last touched the account. As set out in the explanatory note, the banks and buildings societies will act as agents for the reclaim fund and continue to manage the customer relationship, but the precise details of agency arrangements will be a matter for negotiation between the bank or building society and the reclaim fund.

The individual will go to his or her bank to reclaim a sum—for the sake of argument, let us say £100—after which the bank will go to the reclaim fund, but at that point the reclaim fund needs to locate the money and may be unable to share sufficient details with the bank. The Minister might consider that I am concerned unduly about such matters and that the practical arrangements are better than I understand them to be, but the amendment would require the bank to transfer the customer’s name, date of birth and the last known address when transferring the balance of a dormant account to the reclaim fund. The purpose of the amendment is to ensure that the individuals concerned have the minimum administrative difficulty in being reunited with their money, which is why I hope that it will be supported by the Committee or that the Minister will reassure us to such an extent that it will not be necessary to press it to a Division.

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

The amendment raises an issue about the relationship between the reclaim fund and the bank, which body people will go to for assistance and what records the reclaim fund will be required to hold. The hon. Member for Taunton suggested that we enable the reclaim fund to trace the money that has been transferred to it by the bank. I have a slightly different worry about that and why the reclaim fund needs to have such information. If the customer goes back to the bank and the bank acknowledges that a liability is due to that customer and tries to recover from the reclaim fund the money that is due to them, which I think is how the process is meant to work, how is the reclaim fund to know that the bank has not tried to reclaim money for that customer before? What controls will be in place to ensure that the reclaim fund only pays legitimate claims to banks? If the reclaim fund has simply transferred a lump of money from bank A, how will it know which customers that sum refers to, what the breakdown of that money is between different accounts and therefore what action it needs to take?

In the other place, my noble Friend Baroness Noakes commented that the reclaim fund

“could not have a proper system of internal control that did not identify the potential obligations that it took on—which would have to be on a named basis”—[Official Report, House of Lords, 11 December 2007; Vol. 697, c. 67.]

Baroness Noakes made an important point. It is difficult to know how the reclaim fund could properly perform its functions without that type of information. As I mentioned earlier, how would the reclaim fund know that it was paying a valid claim that the banks had not sought to recover in respect of that customer at an earlier stage and that no one was not coming back for a second bite of the cherry?

This issue is also relevant to the other functions of the reclaim fund. If I was administering the reclaim fund, I would want to know the liabilities that were being transferred across to me. For example, if £1 million was transferred to the reclaim fund from a bank, I would want to know whether I was accepting one block of £1 million or 1 million amounts of £1, because I would take a different approach to releasing that money to the Big Lottery Fund, depending on the nature of the breakdown of the assets being transferred. That relates to the proposed change to clause 1 set out in the amendment, which would ensure that the reclaim fund knows the balance of a dormant account that a person holds with the bank. It is important that such information is transferred, so that the reclaim fund is properly protected and so that it knows the make-up of the liabilities that it is meant to assume. That would allow the fund to make repayments to the banks in a controlled fashion and to have the detailed knowledge that is necessary for making the right decisions on the amounts to release to the Big Lottery Fund.

I am pleased that the hon. Member for Taunton has tabled the amendment, because it helps to tease out the issues about how the reclaim fund will function, what controls will be in place and what data it will hold. There was a significant debate in the other place about the amount of data that the reclaim fund should have. My noble Friend tabled an amendment suggesting a confidentiality agreement that the reclaim fund could enter into, to enable it to hold more data about the holders of dormant accounts. In that case, the Government maintained that the Data Protection Act 1998 would provide sufficient protection. We accept their assurances, but it would be useful if the Minister indicated in his response what information the reclaim fund will hold on individuals to enable it to perform its duties properly.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

I hope that I can give the hon. Member for Taunton the assurances that he seeks, but I believe that the amendment is unnecessary. One of the key principles behind the Bill is that the bank or building society is expected to handle customer repayments. Customers should not notice any significant change as a result of their accounts being transferred to the reclaim fund; it remains their money and if they go to their bank or building society and ask for their money, they should get it. It will then be up to the bank to make a claim on the reclaim fund. Customer records are therefore expected to be retained by the original institution, to verify claims on behalf of the reclaim fund. In practice, there should be no need for confidential customer information to be transferred routinely to the reclaim fund. I, for one, would not feel comfortable with a situation where a customer’s natural right to privacy within their own bank or building society was, without their knowing it, jeopardised by information being given to a third party—the reclaim fund. We do not believe that that is necessary.

As the hon. Member for Taunton will be aware, a bank or building society normally has a duty not to disclose information about its customers’ affairs to third parties without the customer’s consent. However, we recognise that, in exceptional circumstances, a customer might be unable to seek repayment from their bank or building society and the claim might need to be handled directly by the reclaim fund. That could happen, for  example, in a dispute about repayment in which the reclaim fund becomes directly involved as the respondent. As a result of that eventuality, clause 14 will allow a bank or building society to transfer customer information lawfully to the reclaim fund if that is necessary to enable it to deal with claims for repayment. Such a transfer of information would otherwise breach a legal restriction on sharing information, such as the bank’s duty of confidentiality.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury) 10:45, 14 October 2008

Will the Minister give an example of circumstances where that may be necessary, as I am confused as to what they might be?

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

My understanding is that they would be exceptional circumstances. At the moment, in normal circumstances, banks or building societies should hold sufficient information to identify the account holder and to ensure that the money that was held in their accounts and transferred to the reclaim fund is genuinely reclaimable. Under those circumstances, there should be no need for information to be transferred. Of course, there is potential for dispute in such situations—for example, a bank or building society might no longer exist, and the records might be imperfect. Clause 14 is intended to deal with such exceptional circumstances. The principle that we should not routinely transfer data that give private information about an individual to the reclaim fund is correct. Normal account details should remain with a bank or building society.

Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I understand the Minister’s point about not transferring data beyond what is necessary. In practical terms, however, presumably I could go along to a bank where I had an account with £100 in it that I had not touched for 10 years, withdraw the money and walk out with £100 in cash. If I had a bank account that I had not touched for 20 years, could I similarly go in and walk out with my £100? Would there be a delay or complications because that money, having passed the 15-year threshold, had gone into the reclaim fund? Could the bank say, “Sorry, we’ll have to process it, and it will take a certain amount of time”? Would I, as the customer, notice the difference between an account that had not passed the 15-year threshold and one that had?

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

Subject to verification checks, which one would expect a bank or building society to want if someone had not been in touch with them for 15 or 20 years, a person should be able to get the money immediately. If the money has been transferred, it will be up to the bank or building society to get it back from the reclaim fund. A customer can walk into a bank or building society and get the money that is rightfully theirs. The bank or building society should have already written to the individual to alert them to the possibility that the money might be dormant. If they had not received any information back from the customer, after 15 years the money could be transferred into the reclaim fund. The principle that someone can get their money back by going to their bank or building society and having some simple verification checks is right, and it is one of the reasons why banks and building societies  should maintain official data that can be verified so that customers can get their money as easily as possible. Overall, I do not believe that the amendment is necessary.

Let me respond briefly to the point made by the hon. Member for Fareham. When money is transferred to the reclaim fund, there should be sufficient information—but not personal details—to enable the reclaim fund, when producing its business plan, to make some assessment of the likelihood of dormant funds being repatriated. We discussed on Second Reading the need for a balanced decision to be taken by the reclaim fund on that basis. There will be information that enables the reclaim fund to take those decisions, but customers’ details will not be routinely passed to the reclaim fund. We do not believe that to be necessary.

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

I am grateful to the Minister for that clarification. What type of information does he envisage being passed across by the banks or building societies to the reclaim fund? Will it have a breakdown of the individual account balances that have been transferred across, on a numbers basis? Will they know for how long an account has been dormant, again on a numbers basis? What sort of information will they get to enable them to make such a judgment, which we all agree is a fundamental part of making sure that the scheme works?

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

My understanding is that fairly high-level information will be provided. Individual accounts will not be subject to in-flight refuelling. My advisers suggest that that will be a matter for agency agreement and not for the Bill. As regards the general principles involved, we need sufficient high-level information—to be clarified in agency agreement—to be provided to enable the reclaim fund to understand how many customers’ accounts have been transferred to it, the age profile of those accounts and the quantums involved. The reclaim fund need not necessarily know exactly which individuals are having accounts transferred into it. The Bill allows for the provision of information that is likely to be necessary to repay customers. Other than that, it will be a matter for agency agreement. I appreciate that the hon. Member for Fareham is making a probing point. The reclaim fund needs sufficient information to be able to have a properly functioning business plan and to conduct the work that we want it to do, which is to transfer money to good causes.

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

I have been reassured by Minister. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

I beg to move amendment No. 8, in clause 1, page 1, line 15, at end insert—

‘( ) The reference in subsection (1) to an account that a person holds is to be read as including an account held by a deceased individual immediately before his or her death.

In such a case, a reference in subsection (2) to the customer is to be read as a reference to the person to whom the right to payment of the balance has passed.’.

Photo of Joe Benton Joe Benton Labour, Bootle

With this it will be convenient to discuss Government amendment No. 10.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

The amendments are technical and arise from debates in the other place. Our consistent position has been that all accounts should be eligible for transfer into the scheme, provided that they meet the test of dormancy set out in the Bill. That includes accounts opened a long time ago. As the Bill is currently drafted, if a customer dies it is not possible for their balance to be transferred to the reclaim fund and the bank’s liability extinguished, because the account is not one that the customer holds with the bank. That presents difficulties, as banks will not know whether older, inactive accounts are owned by living or deceased persons. We certainly intend to address that point, which was raised in the other place. It is unlikely that banks or building societies would know whether account holders were living or deceased. We appreciate what the banks and building societies have told us—that they wish to have certainty on that point so that they are not constrained in their ability to participate in the scheme. We are happy to propose the amendments, which are a technical clarification confirming that the accounts owned by deceased persons are eligible for transfer into the scheme.

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

I am grateful to the Minister for that clarification of the purpose of the amendments. He will be aware of concerns outside the Committee about how accounts belonging to deceased persons can be reunited with the people to whom they have been bequeathed in a will. Does the measure make it easier or more difficult for that process to take place?

Amendment agreed to.

Clause 1, as amended, ordered to stand part of the Bill.