Provision of advice on consumer credit matters by legal advice clinics

Financial Guidance and Claims Bill [Lords] – in a Public Bill Committee at 11:00 am on 6th February 2018.

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“(1) In exercising its functions, the single financial guidance body must have regard to the availability of consumer access to advice on consumer credit matters.

(2) The single financial guidance body must specifically consider the impact on consumers of Part XX (Provision of financial services by members of the professions) Financial Services and Markets Act 2000 preventing probono legal clinics from providing advice on consumer credit matters.

(3) If the single financial guidance body considers that allowing members of the professions to provide advice on consumer credit matters would be conductive to its functions it must advice the Secretary of State to amend the Financial Services and Markets Act 2000.

(4) On receipt of advice from the single financial guidance body under subsection (4), the Secretary of State may by regulations made by statutory instrument amend Part XX of the Financial Services and Markets Act 2000.

(5) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”—

This new clause would require the single financial guidance body to consider the effect on consumers of the prohibition on probono legal clinics giving legal advice and if it considers necessary recommend that the Secretary of State amend the Financial Services and Markets Act 2000 to allow probono legal clinics to provide this service.

Brought up, and read the First time.

Photo of Yvonne Fovargue Yvonne Fovargue Shadow Minister (Housing, Communities and Local Government)

I beg to move, That the clause be read a Second time.

This measure is probing and I will not press it to a vote. It was prompted by LawWorks, the operating name of the Solicitors Pro Bono Group—I know that the Minister is a great supporter of pro bono. The group is an independent charity that helps to bring together lawyers who are prepared to offer their time free of charge to individuals and community groups in need of legal advice and support.

The purpose of the new clause is not to deregulate the whole market, but to relax the prohibition that applies to solicitors working in pro bono legal advice clinics from providing advice on consumer credit matters. The prohibition arose as a result of what LawWorks believes was an unintended consequence of secondary legislation under the Financial Services and Markets Act 2000.

By way of background, in 2014 responsibility for regulating consumer credit and consumer credit advice in the UK was transferred from the Office of Fair Trading to the FCA. As part of the regulatory transfer, the group licensing regime was abolished and replaced by the individual authorisation and permission regime for credit-related regulated activities.

The regulatory transfer has not affected the not-for-profit organisations such as local citizens advice, which operate under an OFT group licence, because it could continue under the grandfathering provision. The Law Society’s group licence, however, could not transfer under that provision, because the Law Society is not a not-for-profit organisation. Although LawWorks and the clinics in its network are not-for-profit organisations, they have not been able to rely on the grandfathering provision because they did not have their own group licence before 1 April 2014. As a consequence, the solicitors and firms who volunteer at clinics are at risk of committing a criminal offence by breaching the general prohibition in the FSMA when providing debt and consumer credit advice services.

The new clause would simply make a legislative change to the FSMA to enable the services to be provided without the need for FCA authorisation in a discreet range of services. I certainly do not want an unregulated market, but I want pro bono solicitors to be able to offer the advice they are trained to give. It complements one of the Bill’s main aims, which is to facilitate a free and impartial money guidance service to the public.

Photo of Guy Opperman Guy Opperman The Parliamentary Under-Secretary of State for Work and Pensions 11:15 am, 6th February 2018

It is a delight to respond to a very important and legitimate point. I should make a number of declarations at the outset: I know LawWorks very well, I set up a free representation unit and a pro bono unit, and two Labour Peers have given me awards for my pro bono works in the past. Lord Goldsmith and Baroness Scotland were both most ill advised in giving me the pro bono lawyer of the year and then a pro bono hero award for exactly this sort of work, although not in respect of debt advice. I have great sympathy with the hon. Lady’s point. I will address it briefly now but am happy to discuss it in more detail.

There are a number of easy arguments to make. Most importantly, this is a matter that the single financial guidance body can already address. Clause 3(5), (9) and (10) give capacity for the single financial guidance body to review the provision of those types of arrangements, and to make recommendations once it has come to a conclusion on whether it is an appropriate way forward.

I accept and acknowledge that the FCA transfer has created some anomalies, but there is a reason why. The hon. Lady will fully understand that the Government are keen to ensure that consumers in problem debt have access to high-quality, regulated debt advice. The new body will, to a great degree, go a long way to ensure that that specific goal is met, but there are a couple of extra points I will make.

First, it is important to note that, during the transfer of debt advice regulation to the FCA, the not-for-profit debt advice providers widely supported the FCA regulation of their activity because they felt it was important to ensure that all debt advice was of a high quality. Secondly, with great respect to LawWorks and the point made, I do not believe the assertion made is appropriate. Of course, individual organisations can apply to be regulated if they so choose, or to get a group regulation under FCA rules, but I think it appropriate that we consider it in more detail and invite the SFGB to go away and decide whether it is something it would recommend as part of the statutory remit we have set up under clause 3. In those circumstances, I invite the hon. Lady not to pursue her new clause.

Photo of Yvonne Fovargue Yvonne Fovargue Shadow Minister (Housing, Communities and Local Government)

I thank the Minister for his reply and I am pleased that he has taken on board the principle. Certainly we do not want to deregulate the Debt Advice Network. I am in favour of it being a regulated body so that we can have high-quality advice. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Photo of Guy Opperman Guy Opperman The Parliamentary Under-Secretary of State for Work and Pensions

Am I correct that we have now finished all particular clauses that need to be decided thus far?

It would appear so.

Question proposed, That the Chair do report the Bill, as amended, to the House.

Photo of Guy Opperman Guy Opperman The Parliamentary Under-Secretary of State for Work and Pensions

Although the Committee has finished earlier than programmed, I think it is fair to say that the Bill has received thorough scrutiny from hon. Members in all particular ways. Some measures have been more scrutinised than others, even though they were not particularly on the amendment paper as appropriate for scrutiny.

I put on the record my thanks to your good self, Mr Rosindell, and also to Mr Stringer for keeping us moderately in order and for running the sessions so smoothly. I also thank Hansard, the Doorkeepers and the Clerks for enabling us to get through the business so efficiently. On behalf of my hon. Friend the Economic Secretary to the Treasury and myself, I thank the multitude of officials who have kept us in order. I also thank the hon. Member for Birmingham, Erdington, for the Opposition, and the hon. Member for Paisley and Renfrewshire South, for the Scottish National party, for the constructive way in which they have engaged with the debate. We believe we are taking forward a Bill that all parties fundamentally support, and doing the right thing. I look forward to continuing any of those further discussions on Report.

Photo of Jack Dromey Jack Dromey Shadow Minister (Work and Pensions) (Pensions)

To respond briefly, I echo those thanks to all who have played their part in the passage thus far of the Bill, initially through the other place and then through the House of Commons.

I will make two points. First, as I said on Second Reading, this is a good Bill and a welcome step in the right direction. The establishment of the SFGB is welcome indeed. Crucially, we now need to make it effective at the next stages. In Committee we set out, as we said on Second Reading, to further strengthen the Bill and to inject what I called a “sense of urgency” into certain of the provisions contained in the Bill.

Secondly, I hope the Government will reflect on what has been said in respect of both cold calling and default guidance on Report. In conclusion, it would be churlish not to recognise that this is a welcome step in the right direction. I thank both Ministers concerned for their constructive engagement. Would that that was always possible on all occasions on all issues with those on the Government Front Bench. Having said that, it would be churlish indeed not to reflect that engagement. I hope the Ministers accept on Report the overwhelming logic and power of argument in respect of cold calling and default.

I thank the Minister and the shadow Minister for their comments, and can I say what a pleasure it has been to chair this Committee?

Question put and agreed to.

Bill, as amended, accordingly to be reported.

Committee rose.