Lords Grand Committee

Monday 22nd June 2026

(began 3 months ago)

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15:45
15:45
15:46
None Portrait Speaker 3
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The Minister. Thanking the local northern Minister for his constructive engagement so far and. Bill Norton, Minister, for his constructive engagement so far, and noble lords across the House who have shared their initial views with us. These conversations have been very helpful and I think have underscored a shared objective, which is to improve financial services regulation in a way that promotes. My Lords, it is a pleasure to open our deliberations on the Financial Services and Markets Bill, and I want to begin by thanking the noble Lord.

The Minister. Thanking the local northern minister for his constructive engagement so far and. Noble lords across the House who have shared their initial views with us. These conversations have been very helpful and I think have underscored a shared objective, which is to improve financial services regulation in a way that promotes growth, attracts investment and supports innovation. Although there are differences between us, we all agree on the importance of the financial services industry across the United Kingdom. The contribution it makes to GDP, the 2.5 million jobs it supports, and the £110 billion in tax that it pays.

However, I think this first group of amendments will challenge the minister on a very important issue, which we will want to address at several points throughout committee. That is the issue of oversight and parliamentary scrutiny. We've approached this with slightly different amendments, but I believe that the noble lady, Baroness Bowles, shares the concern, which also applies to her specific amendments in Group two clause. One is short, but it is the gateway provision provision that introduces schedule one. It provides for the repeal and recasting of significant parts of the remaining Consumer Credit Act framework into FCA rules.

Now, the reasoning behind this desire for reform, as we said at second reading, is broadly understandable. The Treasury's policy statement on reform says the current framework is increasingly out of date because it was designed for a paper based credit market and now sits awkwardly alongside modern regulation. The government says the aim is to create a more agile and proportionate regime, and we do not disagree with that assessment. Certainly that is the feedback we've been getting in our discussions with stakeholders. However, identifying the right problem does not necessarily mean that the government has chosen the right solution.

Their approach has two serious consequences. First, Parliament will lose control and oversight of the core consumer protections currently contained in the CC. Second. We are being asked to approve the repeal of these protections without being able to scrutinise the regime that will replace them. This sets a deeply concerning precedent. The purpose for your lordships House is to scrutinise legislation to challenge the government, ask questions and ensure that the law is workable, proportionate and effective. Yet there is nothing for us to scrutinise.

The government is dismantling the existing regime without showing Parliament what will take its place. Now both houses contain a wealth of expertise. Many here today, including members with extensive industry experience who can identify unintended consequences and suggest more effective solutions. As we have previously made clear, we want to work constructively with the government on this bill. But asking Parliament to surrender its powers to a regulator before it can examine the replacement regime is not meaningful scrutiny, and it is not an approach that we can support.

Credit in particular matters because it is woven into the everyday financial lives of millions of people. It allows households to spread the cost of major purchases, manage short term cash flow pressures and access funds when they are needed, all of which supports wider economic participation, but needs to be done carefully and responsibly. This is a very important area, and like the other parts of the bill which delegate power, the minister must take this opportunity to answer some key questions. So first, which core consumer rights and remedies does the government intend to keep in primary legislation?And by what principle has it decided which protections may safely be moved into FCA rules?Second, when will Parliament be able to see the FCA's replacement rules in draft?And will these rules be finalised before any repeal of the existing statutory protections is commenced?What transitional arrangements?As the government plan?And third, how does the government intend Parliament to scrutinise future changes?Once the substance of consumer credit protection sits in the FCA rulebook, rather than in statute?Finally, what assessment has the government made of the effect of these reforms on smaller lenders and brokers and intermediaries, and on the availability of credit and related services more broadly?What effect is uncertainty on this point of the future regulatory regime having on economic activity, and how much is that costing?My Lords, my amendment seeks to re-establish a basic constitutional principle that is being threatened by the government's approach.

In this part of the Bill, that Parliament should not be asked to repeal important statutory protections before it knows what will replace them. How have the new regime will operate and how it will be held to account?Modernisation and agility are worthwhile objectives, but they cannot justify Parliament legislating in the dark before Parliament agrees to transfer such significant powers. The Minister must show us not only that the destination is right, but that the safeguards, accountability and route for getting there are right as well. I look forward to the Minister's response and I beg to move.
15:52
15:52
None Portrait Speaker 4
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This is my first contribution to the committee. I declare my interest as, um, as recorded in the register and in particular that I hold listed shares in financial services companies and in technology companies, which may be affected by the bill or by amendments that have been tabled to the bill. My Lords, I'm going to use the opportunity of this first group of amendments to raise the issue of the accountability of the financial services regulators, which, as we have heard, given very significant regulatory powers. This is a theme which certainly applies to clause one and schedule one, because of the vast new powers in relation to consumer credit being given to the FCA.

But the theme is pervasive, and we shall be debating it several times during the committee stage of this bill. I should start by saying that I agree that consumer credit legislation needs a massive overhaul. Legislation focuses on paperwork and processes. It was written in a pre-digital age and does not have a sophisticated approach to consumers. For example, not having a concept of a vulnerable customer. It's crying out for change. Indeed, when we scrutinise the 2023 Financial Services and Markets Act, I tabled an amendment to give the Treasury very significant powers to rewrite the legislation, including the ability to delegate to the FCA.

My noble friend Lady Penn, who was the Treasury Minister at the time, convinced me that this was a step too far because of the many significant consultations that were needed. In withdrawing my amendment. I suggested that the extensive consultation sounded to me like an excuse for not making any progress. I am therefore supportive of the government for using this bill as a vehicle to make some progress, though I do regret that they have still not completed the task. Now that support is qualified by issues which have become apparent since the 2023 act at that time.

I was a supporter of the model, which allowed Parliament to determine the overall principles of financial services regulation and left the detail to the regulators. Instead of challenging the huge burden being put on the Fsma model by the 2023 act, which made full made provision for the repeal and replacement of retained EU law, a number of us focused on the accountability of the regulators. This was an error. I now believe that we failed fully to understand what that meant for democratic oversight of what the regulators do with the powers that they acquire.

And we also failed to appreciate the scale of the task of holding the regulators to account. The model was set up by Fisma 2000. In an era when the most significant financial services regulation was set by the EU and either applied directly or incorporated by our own legislation. In either event, the. There was very significant oversight through the processes of the European Parliament and in particular econ, which was chaired by Baroness Lady Bowles of Berkhamsted. In addition, both Houses of Parliament had committees dedicated to oversight of the regulatory outpourings of the EU and in the case of your lordships House, we had a subcommittee of the EU Select Committee dedicated to financial services.

The model was not designed to do the heavy lifting that it is now being asked to do first via the 2023 act, and now via this bill for consumer credit legislation. I do not advocate scrapping the Fisma model, but I do believe that the time is right for re-examining Parliament's oversight and the accountability of the regulators. The 2023 bill initially provided for some additional oversight by the Treasury Select Committee. In the other place, but was amended during its passage to add what is now the Financial Services Regulation Committee of your lordships House.

Now, I am a member of that Committee, along with several other noble Lords present today, and I currently chair it. These arrangements were designed to increase the accountability of the regulator, but I have to tell the committee there remains a significant accountability deficit. Of more important committees of Parliament cannot and should not replace Democratic oversight of the judgments made by the regulators. And this is particularly important when we come to consumer credit law. The arrangement envisaged in this bill passes to the FSA almost total responsibility for judging the complex balance between consumer protection and the need for innovation and competition in the market.

Quite simply, that is not the right answer, and Parliament needs more involvement. The noble Baroness, Lady Bowles, has some amendments to schedule one, which will be debating in the next group, and I believe these are designed to alter the balance between Parliament and the regulators. And I look forward to that debate. But that alone will not be enough, because any reasonable approach to modernising consumer credit legislation will still involve very significant delegations to the regulators. And that is why we need to use this bill to revisit the mechanisms for, the accountability of the regulators to.

A later stage in our committee, we will be reaching some important amendments designed to tackle this. The noble Baroness, Lady Bowles of Berkhamsted, has a provision requiring a periodic independent review of the regulators and my noble friend Lord Bridges of Headley has some amendments dealing with an Office of Financial Regulatory Accountability. These issues of democratic oversight and regulatory accountability are unfinished business, and we must use the opportunity of this bill to strengthen both and not sleepwalk into a situation where the regulators govern us, rather than the other way around.

Now we will be debating the accountability of regulators when we get to clauses 16 and 17. And again, when we reach the accountability amendments that I've just referenced. The Minister will be aware that I wrote to him on behalf of the Financial Services Regulation Committee last week. Now, this Financial Services Regulation Committee incorporates members from all sides of your lordships House. The letter outlines serious concerns with clause 17 and the ability of the Committee to hold the regulators to account if it remains in the Bill.

The letter My Lords, can be found on the committee's website. It asks for the Minister to meet the committee to discuss our concerns. The minister is still new to our House, but he may not be aware that it is a very unusual step for a committee to take, and I hope that he will respond positively, and I'm pleased to take this opportunity to place this letter on the record. My Lords, Democratic Oversight and Regulator accountability will be issues which will run through almost all of our consideration on this bill.
16:00
None Portrait Speaker 5
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To speak very briefly, as a member of the Delegated Powers Committee, which has produced a report into this bill, now, that report concerns, especially clause three, but it does raise general issues that fall within the scope of the amendment that my noble friend has moved from the front bench, as my noble friend is essentially asking what the purpose of this bill is and what it will do. Now, on the committee, we have heard again and again where government bills are introduced quite correctly, that this is a fast moving world that government needs the flexibility and room to move quickly, that therefore it is appropriate to do this manner of things and that manner of things by regulation.

And this is far from being a contemptible argument. The government has a good point, and I suspect that ministers in different other political parties have made the same point from the despatch box in the past. But there are some very important issues to consider. First, as my noble friend indicated, it is not generally a good thing to bring in legislation. If you don't know quite what the intention is, and you propose to proceed by regulation, that's the first point. Second, um ministers in these points tend to say, trust us.

Um, which is fine, but the minister may change. A minister may come with a different approach. And we're about, I read to have a change of Prime Minister, and the government may decide that there's some alteration in its approach to these matters. Third, you may have a change of political party. You may have quite another government of a different complexion. Um, deciding what to do. And I don't want to anticipate debate on clause three, but I think um noble lords will find when we get there that if I read the the Bill rightly um powers given to the minister by regulation to pretty much close every bank account in the country.

Now why is all this happening?If I may just briefly discuss in closing, the reason is because down in the other place things are changing. Members of the other place are besieged by WhatsApp messages all day or in their WhatsApp groups to drowning in constituency correspondence, often besieging them with matters that would be better addressed by priests and psychiatrists. And then, finally, um. Being drawn away from the chamber by dealing with this and social media at a time when, as my noble friend Baroness Noakes has just pointed out, the burden of what they consider has had to increase because of Brexit, whether one's pro-Brexit or anti-Brexit isn't the point here.

The point is that there is simply more to do. I mean, in short, there's a general attention deficit problem of our culture, um, which I'm sure affects this House as much as anyone else. But it's particularly affecting the other place. And what happens then is poorly drafted legislation is rushed through. It's then challenged at successfully at judicial review. And we all blame the judges. Why should we do that when actually the fault is literally almost completely in our own house?I am grateful for the chance to raise these general issues and look forward to the Minister's reply.
16:03
None Portrait Speaker 6
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I should. I mean, just as a shareholder in significant shareholder in Lloyds Banking Group, of which I was formerly chairman. Um. While I recognise these concerns raised by my noble friends, uh, I do think it's important that we tackle. The confusion caused by the dual roles of the courts and the regulator in regulation of consumer credit, the. The regulation of consumer credit is not a black and white issue. Balance that has to be made all the time between the level of protection offered to consumers and the costs of compliance borne by the institutions and the um risk.

That if the courts are unpredictable in the way they interpret the Consumer Credit Act, that suppliers will either withhold products or build a a insurance premium into the costs. And we've had too many incidents, uh, over. The last few years where what financial institutions thought was a settled issue as determined by the regulator has been, uh. Retrospectively altered by decisions to the courts. Now we can have a choice one way or the other, but I think it's important that we tackle this.

The confusion caused by the dual responsibility. As I see it, actually, the Consumer Credit Act, as the government has set out, is an outdated piece of legislation. It was based on conditions that have changed radically. We have since set up regulators, financial services regulator with devolved responsibilities for regulation. We may or may not think it's doing that well. We may or may not want to increase supervision of that regulator, but I think the government should try and make clear through these amendments to the Consumer Credit Act.

If the result of this would be, as I hope, to make it clear, that there is a single definitive source of regulation for Consumer Credit Act, which is the balance struck by the Financial Conduct Authority and that the courts, um, so far as possible, no longer have a role.
16:06
None Portrait Speaker 3
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My Lords.
16:06
None Portrait Speaker 7
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This in the following group dwelt on the same territory. And I'll make my main intervention in the next group alongside my detailed amendments. I'm sorry to have to have separated them out. That was only because of the chief whip speaking time restrictions on Non-movers, which ironically means the debate will take longer overall. But I do have both general points and the substantive amendments on this clause. And I also agree very much with many other speakers, in particular with Baroness Neville-rolfe and Baroness Noakes.

And overall, this bill is extraordinary for the manner in which it does and undoes many things with questionable process. Now, my general approach on the Consumer Credit Act point is straightforward. I do not object to using the FCA to modernise and speed up redress mechanisms. We are already seeing that in practice with the Motor Finance Commission cases, but that experience also contains a very clear warning. And here I depart from what Lord Blackwell would wish to have in the first instance, the FCA made rules that were not in line with statute.

They said commission did not have to be disclosed unless asked about. And we have ended up with a situation where firms that thought that they were following the rules have been caught out because the statute said something different. Now, the moral lesson is simple. If you find yourself thinking, oh, good, I don't have to tell them about this nice little earner, then something is already unfair. And in practice, some car salesmen did discuss bonuses, quotas and commissions with customers, sometimes linking them to discounts.

I have personal experience of that. But if the statute had not existed, what would have happened?The logic is that the old way non-disclosure might have continued because the FCA rules permitted it, and they hadn't spotted the unfairness. And for all that, we have some very capable regulators. We have been shown that they're not infallible and they are not legislators. A point we will return to repeatedly as we go through this bill. From time to time, they hit the barriers of their remits, their perimeters, and their institutional role.

Our system is not to deregulate, to delegate regulators unconstrained power. Parliament sets the framework. Regulators operate within it, and when necessary, the court interprets. Yet here we are being asked to legislate for an automated substitution to set in train an unseen process that Parliament can no longer influence, that has no predetermined scope, and where courts lose jurisdiction. That is constitutionally unsound and unsupportable. I return to the detail in the next group, but the principle is clear. As Baroness Neville-rolfe has already said, Parliament should not sign away rights and protections without knowing what will replace them.
16:09
None Portrait Speaker 8
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That's a sorry. Blind for for for the Lib Dems on these benches. And it's a great privilege that I think people will know from second reading that I am, uh, very strongly that of the same mind as Baroness Noakes, Baroness Bowles. Uh, I think we cover the the Baroness Neville-rolfe and I take a very similar view on the on on on this first clause of of this bill. Uh, the others speak with some sense of diplomacy. I might be slightly more direct because from my perspective, the bill by repealing the CC A basically removes consumer credit protection from law and moves it to the FCA rulebook with no meaningful accountability and, frankly, little visibility.

Now, peers will remember that in 1920, that in 2021, the FCA, I think many of us in this House, in the other place, were getting very frustrated. It has some very good people, but it was definitely neglecting consumer protection. And this House consequently passed an amendment to to instruct the FCA to consult on a duty of care. FCA chose not to consult on a duty of care, despite that being that a direct instruction, it consulted instead and what it said was the equivalent, which was a consumer duty.

But the key difference being that a duty of care has a meaning in law, with a private right to action. In other words, that an individual can turn to the courts if she or she believes that they have been wronged, a right which the FCA and this was, I'm afraid you sort of heard Lord Blackwell to some degree at the behest of the industry, did not want the consumer to have, despite its long and very well established tradition in English law. Now this bill now achieves the wholesale removal of credit protection from the law and into the rule book of the FCA, and it is obviously an extension of that deliberate process to remove paths to redress for consumers.

House will be aware that consumers cannot take civil action against the FCA. It's immune. I mean, it's correct that it should be immune from action by those whom it regulates in the market, but it's also immune from action by consumers. And as we go on through this bill, we'll see that same process of undermining redress in future groups of amendments. And very much so when we're dealing with the FA's. Now, when I've talked to members of the government that's on this issue that they seem surprised at my comments because they see the FCA as a real champion of the consumer.

Indeed, the industry will say the same thing, but perhaps I have a longer memory. And this House does does to the members here. Remember the issue of payday lenders. That's the abuse, very widespread abuse, that of individuals who were entering into incredibly. That's a high priced credit that. And we're finding themselves continuously in debt trouble now. When the issues were put to the FCA and they were by members of Parliament, they were by complainants, they were by whistleblowers, that the only action that the FCA agreed to take was to make some minor adjustments to the rules on rollover.

It argued that payday lenders had an important part to play within our credit system. It took action in this House in 2015 when a minister broke with the government's perspective that and decided to support a move that had been made from the Labour benches by Lord Mitchell. It was Lord Sassoon who spoke for the government and decided enough was enough, and that the only way to deal with payday lenders was to shut them down. That action was put into law and it has improved the high, the high, you know, the whole credit environment.

And we live in today and eliminated a really serious course of abuse that as I. Read this, this bill that. People lose that opportunity when people claim that the FCA is a champion of credit champion and they cite the consumer duty that they don't realize that it doesn't incorporate that very traditional English right to turn to the courts. To. Today, one accepted that the FCA, in its current design and with the people in place, was indeed a consumer champion. It could easily change because we're relying totally on FCA culture in the 1990s, and I do often go back to the 1990s.

The financial regulators demonstrated the most extraordinary degree of deference to the financial sector. And, frankly, the 2007 crash could not have happened without that deference. Now, many actions that many of the lessons of that crash are being undermined by this bill. And throughout, there is a return to a deference, this time in the name of growth. So, my Lords, that I hope very much that the amendments that have been brought forward in this group and in the next group will get serious consideration by the government.

I am not sure that the government has fully understood the implications of the approach that's being taken. That, and I very much hope we can find some movement in that area.
16:15
None Portrait Speaker 9
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I'm sorry. Michael, forgive me. Uh, I would like to make my first contribution to this bill and one of my first in committee stage. So I beg my Lords forgiveness for any errors I will make. And I'm not one where the vast experience in the banking sector. But I have spent almost 25 years in technology in which I was working with a number of firms in the banking sector. Um, what I would like to say about this bill is to support the comments from my frontbench colleague, Baroness Neville-rolfe, and.

Also from Blackwell, about the impact of this broad ranging bill. I will later comment more on the technology aspect, but at this point, I would like to highlight that as we move forward, there is a degree of regulatory burden that is continuing to build, especially when it comes to the future of banking around fintechs and innovators and start ups and scale ups, a world which I have worked in significantly. And as we look at this bill, I look at it through that lens and seek to understand what are we doing in terms of our posture to or the posture that we are requesting from these new future banking institutions as they see different requirements from different regulators based on loose or sometimes, as in the case of this bill, not providing clear focus for what the regulator may or may not be asking.

I say this because we are hearing this from industry, and the last couple of years has also required significant consultation on start ups and scale ups, particularly when it comes to the areas of digital assets. And regulators have been undertaking extensive questioning of the industry. But there has seemed to be some gap between parliamentary oversight and regulatory direction. I think this is something that has been fed back and it's resulted actually in ad hoc approaches for, um, intervention with regulators from parliamentarians or industry bodies, or even as I co-chair the digital markets, digital money Appg to provide a certain level of input into the regulator about what industry, particularly the digital asset industry and digital start up banks may be considering.

I think there is a huge opportunity in this bill to understand how we would like to set out frameworks and risk management for the future, but I think there is also a considerable risk, as was mentioned by Baroness Neville-rolfe, about where we lose oversight and potential control at this critical time.
16:18
16:19
None Portrait Speaker 11
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Thank you for the opportunity to set out the government's position on this important set of issues, and for the constructive nature of the debate so far in the weeks. So I appreciate that. Um, just before we start declaration of interest, my own interest set out in the ministerial register, um, an investor in a number of funds that are regulated by the FCA. By addressing why clause one and schedule one should stand as part of the bill. Um the case for reform is straightforward.

The Consumer Credit Act, the CCA is over 50 years old and was enacted long before the creation of the FCA. It no longer delivers, as it should for today's consumers who engage with modern products and increasingly digital world. It's in people being sent lengthy, complex documents that they do not read, do not understand and cannot use with confidence. It's also important to say that 1 in 7 adults has literacy skills at or below those of expected of a 9 to 11 year old, and 34% of adults have poor or low levels of numeracy involving financial concepts.

And yet, the CCA regime means that some of the information provided on credit cards requires a far higher reading age debt. Charities have also criticised the way in which the CCA requirements often result in borrowers being sent arrears notices, even when they've agreed a repayment plan, causing confusion and alarm, and to address the point raised by the noble Baroness in her amendments. This demonstrates that it is not just the content of the arrears. Notice that is the problem, but the inflexible legislative triggers that mean they must be sent even when there is no clear purpose, and they cause more harm than good.

There are many more examples of where the CCA results in poor outcomes for consumers, and anachronistic procedures for lenders. That is why the bill continues to work and continues the work that began in 2012 of repealing this outdated legislation, such that it can be replaced with updated rules that better meet the needs of consumers and is fit for the digital age. The government strongly believes that those replacement rules should, in the main, reside in the FCA rulebook and not in primary legislation, the FCA. Has extensive experience in developing firm facing rules for retail markets, including mortgages, insurance and investments.

Their rule making approach is underpinned by consultation and consumer testing so that protections remain robust, proportionate and relevant. The FCA's new rules for the buy now, pay Later, which come into force this month, demonstrate what modern FCA rules based regime can deliver for customers. However, I've heard the concerns of some noble Lords that the Bill does not set out how the repeal provisions of the CCA should be replaced, and that has been left to the FCA to determine that a future time. While I appreciate that concern, this is entirely consistent with the model.

The model of regulation established in Financial Services and Markets Act two year 2000. These provisions only sit in the CCA because this model of regulation did not exist in 1974, Parliament has already. Vested the FCA with significant responsibilities in this space. Objectives that include the primary consumer protection objective and powers to allow them to fulfil this role and a comprehensive system of transparency, governance and oversight. Parliament will have a key role in scrutinising the FCA as it makes these replacement rules.

The FCA is required in advance of its objectives through its rules including its consumer protection objective. The FCA is required to consult and conduct cost benefit analysis on rule changes and to submit copies of this consultation to the relevant parliamentary committees. This includes the Financial Services Regulation Committee, chaired by the noble Lady, Baroness Noakes. The FCA also has a comprehensive set of enforcement powers that will help ensure compliance with the rules and to act decisively where firms are failing to comply with their rules, as well as ensuring that an expert body with the right objectives, powers and resources can fulfil this function.

This approach ensures that the rules can adapt as needed in the future to stay current and responsive to future trends. Rolf asked when Parliament will seek to the replacement rules and how the transition period might work, the FCA will set out the detail of the new rules through its normal rule process. Repeal of legislation will only be commenced once the relevant FCA rules will be in place. The Bill contains a power for HMT to allow for an orderly transition and so in practice, Parliament, consumer groups and stakeholders will see the FCA rules at consultation stage before the new regime takes effect.

I'm aware that some noble Lords have tabled amendments to strengthen parliamentary scrutiny scrutiny further, the government believes that the current arrangements work effectively, but I look forward to debating all of those in more detail later. My Lords, reform is an important opportunity to create a clearer, more flexible and more accessible framework that better reflects today's consumer credit landscape. The noble Baroness also asked what rights and protections will remain in legislation where rights and protections require legislation to work, they remain in legislation. Criminal offences will remain so canvas into minors and doorstep and sell in will remain in legislation, along with other key protections in sections like section 75 Baroness.

Roth also asked about the impact on smaller firms, as the FCA replaces parts of the Consumer Credit Act. I can assure her that the aim of the reform is to create more proportionate set of regulations for all firms, including smaller lenders. Everyone will benefit from this modernised regime, my Lords, I hope I've provided you with some assurances that the reforms are vital. I ask the noble lady, Baroness Leatherwolf, to withdraw her amendment.
16:25
None Portrait Speaker 3
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My Lords, I start by thanking all noble Lords who have contributed to this debate. Um and to the Minister for his response. And I particularly like to thank my noble friend, Lady Noakes. Um, uh, and the noble lady, uh. And my noble friend, Lords Goodson and Lord Ranger of Northwood. Um, all I think have echoed the opposition's concern about over delegation. And in fact, actually I appreciated and enjoyed their interest in historical and contemporary perspectives, which I thought brought the matter to light.

The discussion has demonstrated that the concern at the heart of these amendments extends well beyond the technical details of consumer credit regulation. It concerns a fundamental question about how Parliament performs its constitutional role, particularly when substantial powers are transferred from statute to regulators. I won't repeat all the points made by my noble friend Lady Noakes, but we do need to look at Parliament's oversight. There is a demographic deficit. We will no doubt debate her letter when we come to clause 17.

Um, and I noticed, uh, the support of Lord Davis of Brixton, um, for bottoming out the role of the committee and the points that were made. We support the objective of modernising the consumer credit framework. I'd like to emphasise that, but reform can't mean that Parliament approves the removal of existing protections without seeing what will replace them. Nor should moving provisions into a regulator's rule book place them beyond meaningful parliamentary scrutiny. We'll continue to apply these principles throughout our deliberations in this committee.

Wherever the bill delegates new powers or expands the remit of the Treasury or the regulators, we'll be asking the same essential questions. What safeguards will govern the exercise of these powers?Who will be accountable for the decisions taken?How will Parliament examine what is being proposed?Assess whether it is working because follow up is important to and intervene where it is not. There must be a direct relationship between power and accountability, and when the authority, discretion or remit of a regulator is increased, the capacity for effective oversight must increase alongside it.

It's constitutionally perverse, my Lords, for an expansion of regulatory power to be accompanied by a weakening of parliamentary scrutiny. Repeatedly invoked the need for agility, which I understand and we recognise the value of a framework that can respond to changing markets and emerging technologies. And my noble friend Lord Blackwell, um, you know, warned against the sort of confusing dual responsibility that sometimes exists between the CCA and the courts and the regulators. But the noble lady, Lady Bowes, pointed out, it's not as simple as delegating everything to the FCA, who are not legislators.

And I think she is right to warn against automated substitution. Agility cannot become a proxy for opaqueness, and flexibility can't become an excuse for removing important decisions from democratic oversight. The government must demonstrate not merely that each transfer of power is convenient, but that it is necessary, proportionate and matched by effective accountability. If the minister is willing to engage with us on this basis, we will do so constructively, but we will continue to challenge any provision that asks Parliament to surrender oversight without first showing how that oversight will be replaced.

We return to this issue at report unless we can find a better way of ensuring proper scrutiny. But for now, my Lords, I beg leave to withdraw my amendment.
16:29
16:29
None Portrait Speaker 7
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My Lords, I'm speaking to my notices to oppose clause one and schedule one standing part of the bill, and to my detailed amendments to the schedule, which appear as amendments 4 to 17. We all know how consumer agreements work, whether for credit or anything else. There is always an asymmetry of power between the provider and the consumer. And nowadays it is often impossible to speak to a person rather than a bot. If you do get a person, it's a call centre with scripted questions and answers, often including a recital of terms and conditions faster than it's possible to understand.

And you cannot get to the next stage without saying yes. I have understood and agreed, when in truth you have not. You cannot even see the terms and conditions until after you have clicked. Yes. And then you are given a time limited right to withdraw this back. To front impatience to get boxes ticked. First is now a feature of the modern consumer environment, and one I fear we have now replicated in the legislative procedures in this bill.

Only here, once Parliament ticks the box, there is no cooling off period and no right to withdraw this bill. Repeals parts of the Consumer Credit Act. It gives the government open ended, regulation making powers. There has been any consultation or indeed before we have seen the shape or operation of any FCA rules. I cannot support that. It goes too far, too fast and too unseen. That is not the way to make irrevocable changes. So I will not tick the box.

I want to know what I'm signing up to. Just as the consumer must. And I want to know that what I presented as rights are in fact rights. Clause one repeals statutory rights before replacements exist. The government takes power to make regulations before consultation. At the very least, that is a reason to take a great deal of notice of what is being said by Parliament.
16:32
None Portrait Speaker 9
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Element. I also question whether this approach meets the government's own statutory duties under the legislative and Regulatory Reform Act 2006, which requires regulation to be proportionate, accountable and. Repealing rights before replacements exist does not seem to meet those tests. This is a fundamental change from the status quo, where rights are in statute and rules made to assist in negotiating the statute. Clause one reverses that. It removes statutory protections now and offers only a possibility of regulatory rules later.

Rules are not rights. Rules can be changed by the rule maker. Rights bind everyone, including the regulator. The government's approach is therefore constitutionally backwards. Parliament is being asked to repeal rights without knowing what will replace them. It is like signing a credit agreement without knowing the terms, and we are being asked to sign it on behalf of the public. Solution is to preserve a statutory floor both now and the future, and not a temporary one that can be slowly eroded at the whim of the government or regulator.

My amendments to schedule one are intended to show how this can be done, and I thank. Which for their assistance in preparing them. They aim to preserve important provisions in relation to notices of arrears and default sums, and the unenforceability sanctions attached to them within the Consumer Credit Act. These are the legal backstop, the protections that ensure rights are real. So let me explain briefly what my amendments do and why they matter. First, they preserve the requirement to serve notices of arrears and default sums and the statutory consequences of failing to do so.

These provisions apply, for example, where a borrower has fallen behind on payments. A default notice must be served before a creditor. Before a creditor can take certain drastic steps, like terminating the agreement, demanding early repayment or recovering goods and land default notices also play an important part in determining when debts become statute barred, because once served, lenders have six years to take court action. Secondly, they keep these protections in legislation but allow. This is why amendments do but allow the FCA to modernize the form and content of the notices.

That is the right balance. Technology changes the way information is presented, changes. But the underlying rights do not and should not. The government's approach is to repeal the majority of the provisions, with the suggestion that they could be recast into FCA rules at some future point, subject to consultation. That means there will be no parliamentary scrutiny of what these protections might look like once they are repealed. My amendments guarantee that the core protections remain mandatory legal requirements, while allowing the FCA to update the way information is provided.

This is what the legislation should have done from the start. Modernised the form, not abolished. The substance. Me turn now to sanctions because this is where the Consumer Credit Act is at its strongest and where the bill is at its weakest. The sanctions in the CCJ were included in 1974 because Parliament recognised the significant imbalance of power between a consumer and a creditor. Parliament wanted proactive compliance with the law, not a system where individual, an individual consumer must detect a breach, voice a complaint and then pursue slow and time consuming legal or ombudsman remedies, particularly when those consumers are likely to be vulnerable, stressed or in financial difficulty.

The sanctions ensure that a creditor cannot take steps against a debtor, whilst the creditor is non-compliant with the law. They are automatic. They work because they require compliance up front and not after the harm has occurred, and they cannot be replicated in FCA rules. Without these sanctions, consumers may face new threats from being pursued for debts, particularly when debts are sold to unauthorised debt purchasers. The burden shifts onto the consumer to detect breaches and seek redress. Vulnerable consumers are disproportionately harmed, and the automatic reprieve that parliament deliberately created is lost.

My amendments ensure that these sanctions on arrears and default notices remain in legislation, while allowing the FCA to modernise the way information is presented. This preserves vital individual rights while recognising that flexibility is needed in a digital age. It is not an unusual approach. The CCA and the FCA's existing consumer credit rules already operate in a complementary way. The amendments I have tabled focused on arrears and default notices, because that is where the greatest harm would arise if protections were removed.

But they are only exemplary. They show the balanced approach that should have been taken across the whole reform of the Consumer Credit Act. Move form and content to the FCA rules where appropriate, but keep the substantive protections in legislation. I am looking for that complete reform. There are other areas, such as the form and content of credit agreements, the duty to provide information and a fixed sum and running account agreements, and the sanctions for improperly executed agreements where the same balanced approach could and should be taken.

And I would be happy to meet and discuss those. The government's own consultation on CCA reform was meant to have two phases. Phase one on information requirements and sanctions took place. Phase two on key consumer rights was scrapped. That is not a sound basis for repealing rights now and promising rules later. The CCA was groundbreaking for creating automatic protections. If at times those protections have been bitten for trivialities. That is a reason for modification, not cancellation.

Is still relevant. Ensuring active compliance. Preventing regulatory creep, and protecting vulnerable consumers. They cannot be replaced with certainty in FCA rules. Their removal shifts the burden onto consumers. This is a regression in consumer protection at a time when modern communications already curtail the time for circumspection. If the government were bringing forward a coherent replacement for the Consumer Credit Act, it would look something like this. The statutory principles of fairness. Transparency, good faith and protection against unequal bargaining power.

These are not exotic ideas. They exist in other jurisdictions. Australia's unconscionable conduct regime is one example. At the end of the day, businesses must think and exert conscience and play fair. But that is not what clause one does. It removes rights without replacing them. Modernisation is possible, but I will not tick the box on behalf of the public until I have seen the replacement and I. And until I know that it preserves rights now and in the statute.

I beg to move.
16:41
None Portrait Speaker 12
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Who goes next?
16:41
None Portrait Speaker 6
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I don't.
16:41
None Portrait Speaker 12
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Know. Okay. My Lords, I must first apologise that I was not in the country for second reading. So this is my first intervention in this bill. I rise to support wholeheartedly the amendments. In the name of the noble lady, Baroness Bowles, and the rationale that she has just explained. Um, I would also like to thank which for the work that they have been doing on this bill and indeed for the work that they are doing to try to help consumers.

Uh, I cannot support this leap in the dark for parliamentary scrutiny. I also cannot support imposing this leap in the dark on consumers, and that, at the end of the day, is what the provisions in these clauses and schedule one are at risk of doing. And I believe that the noble lady, Baroness Bowles, with her amendments and the amendments that we've seen from, uh, other noble lords in the first group, are helping the government to achieve its aims more safely for consumers, because I do believe that what the government is trying to do has the right motive.

It is just whether or not the manner in which this is being done is safe for us to agree to. And I obviously don't believe that. Indeed, it is. If we think we. One step ahead. What can. What protection will consumers have against the FCA making a significant error. Perhaps in its regulation. What protection will consumers have if the asymmetry of information and power that we know already exists in the financial services industry, especially for retail customers, continues.

Uh, along the lines that it currently, uh. Is and therefore, I, I hope that the government and the committee will recognise that leaving consumer protection to the regulators is not a safe thing to do if you want to improve consumer protection. And as I say, I do believe that is what the government would like to do. The the FCA has a very peculiar regulatory style. For example, if it has discovered or suspected wrongdoing, it doesn't do mystery shopping, as you might have expected on behalf of consumers.

It will ask firms generally to investigate how they behave and then report to the FCA. Now, that may work, but it won't always work and there is no fallback protection such as we have in the Consumer Credit Act. If indeed the consumer experience is not as it has been portrayed, or as the FCA might have expected. There is a consumer panel. As part of the FCA, but in my experience with a number of financial. Scandals or problems that have arisen for consumers, the FCA consumer panel has little or no power and is not listened to or does not form part of the FCA regulatory decision making process that perhaps one would need to be confident that it does represent the.

The case of passing on this protection to the FCA. So I do hope that the noble Lord, the Minister and the government will listen carefully to the arguments that have been made so far in. In the first two groups, and recognise the damage that could be done by pursuing the current proposed actions.
16:45
None Portrait Speaker 8
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And all the time, I think, much more sympathetic to the approach the government is taking here. I think we need to be very careful what we ask for when we interpret parliamentary oversight as potentially meaning Parliament being involved in the drafting, redrafting of every detailed regulation. Not only is that. Time consuming and likely to lead to long delays, I also fear the political process will inevitably mean that it is waited always to the highest level of consumer protection, regardless of the costs or the side consequences.

Um, there are other ways of having. Parliamentary oversight of the regulator, Parliament or government appoints the chairman, the chief executive. The board members. Uh, it doesn't have to be ex ante writing. An approval of all the rules in primary legislation or committee. Um. Parliament can exercise oversight by holding the FCA ex post to account on whether it is fulfilling its remit in a sensible and proportionate manner. And I think in um the reality, I mean, we have chosen in this system to have regulators, we should allow those regulators to operate properly and then hold them to account.

And when, uh, noble members refer to the long list of um. Protocols that consumers are led through in order to buy products, a lot of that is belt and braces protection that the financial institutions have been forced to put in place because of the complexity of the regulation and the, the risks of, um, action. Against them, if they don't ensure that the consumer has satisfied every um. Detail of the consumer protection. So there is a role of the regulator here to exercise proportionate regulation.

And I think we should hold them to account ex post rather than trying to insert Parliament in the process. Ex-ante.
16:47
None Portrait Speaker 6
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I could just comment briefly. I disagree with what my noble friend Lord Blackwell has just said. Um, I think he has fallen into the trap of believing that an accountability process can be effective within Parliament. The experience that I and my committee have had is that there are limits to what can be achieved in terms of parliamentary accountability. That is one of the reasons that there are other amendments later in this bill to find other mechanisms for improving accountability. I do think it is important to differentiate between those areas where Parliament has a right to be democratically involved in the decisions.

Um, and those areas which can safely be left to the regulators, uh, to, uh, to carry out the detail and be held accountable for that. And I think that it's the balance that we have a concern with. Now, I would probably end up with a different, um, decision on whether or not certain protections in the existing legislation need to be retained, as well as improving. Uh, the. The, the way in which the, the legislation works by updating it to a modern digital age.

I think there is genuinely a case for looking again at whether or not the sanctions that exist in the consumer credit legislation are, are right for today's world. I believe some of them are too severe or, or just or can be disproportionate to the issues that actually involve in practice. For example, minor breaches in relation to enforcement notices. Um, so I would not necessarily end up with the, the view that what is currently in the legislation must be preserved for all time. But I do think that Parliament needs an involvement in some of those key decisions about the parameters of where liability exists and what sort of sanctions can be applied.

And that is why I think we must constantly differentiate between democratic oversight and parliamentary accountability. They are different things. They are complementary, but they are different things.
16:49
None Portrait Speaker 13
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I differ on this matter and not being an expert on consumer credit. I would say that I have been involved in many cases over the years. When consumers have been dissatisfied with the consumer credit arrangements that they have undertaken and have felt there's been a serious breach of contract, I'm concerned that we're talking here about parliamentary process as being the answer to many consumer credit complaints. When parliamentary process is just about the least living instrument that we have in our possession. And it seems to me that the purpose of this bill, this part of this bill, clause one and schedule one, is to ensure that what is created is a living instrument, that which will which will modernise the consumer credit framework, not weaken consumer protection, and will become more effective because it sits in FCA rules rather than in primary legislation.

It's been suggested that FCA, FCA rules are not subject to the courts, but actually there's an elaborate system in the FCA rules already. Nobody has mentioned in this debate. So so far, the consumer credit duty, which is an extremely detailed document which has been in existence for three and a half years and has served the FCA, in my view, well, the result has been, if you look at the comments of law firms, which one can find all over the internet, that there has been much more informal resolution of difficulties than relying on the old system before that, consumer credit duty was created, I believe, therefore, that FCA rules are part of a living instrument.

They're binding. They're enforceable, they're subject to consultation and scrutiny. And at the end of the day, if they break the law, of course they're subject to the courts as well. That goes without saying. And to suggest the contrary would be nonsense.
16:52
None Portrait Speaker 14
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My Lord, I hesitate to follow the noble Lord, Lord Carlile, who is himself very, though not a specialist in the area, a lawyer. But I do support this group of amendments, and would have done, had I been here for Group one. Um, because in my view, it's very important that, uh, businesses and consumers alike have the protection of a law which is predictable, transparent, and, um, where there is no doubt arising about its interpretation. And we've seen many doubts arising in the judgments and rulings of the, by the FCA and a lack, perhaps of consistency.

I'm therefore very sympathetic to the noble lady. Baroness Bowles's. Um, wish to have something done on paper. We can see something before putting it through, because both businesses and consumers are used to having a legal um surround for such transactions. They go back to the 1850s in the bills of sale um act in 1844, 1854, which were modernised throughout the end of the 19th century and then followed by the Moneylenders Act in 1900, obliging the registration for money lending and allowing the courts to be involved.

And I do believe that it's important that we do have judicial oversight of not the updating process. And I agree with Noble Lords on that, but with a legal framework which is transparent, consistent, and people can see what is expected. I'm concerned at the impact also of the rushing through of legislation to empower as yet an uncertain regime of rulemaking, which nothing of substance is known. The FCA appears to be as unprepared for this um as others. In its response last month to the Treasury's announcement of the reform of the Consumer Credit Act, the FCA said such reform was an important step towards a more flexible regime, and that supports effective competition and innovation while maintaining appropriate consumer protection both now and in the future.

And it would it acknowledged that it would put greater emphasis on FCA rules and guidance, rather than prescriptive requirements set out in legislation, and it intended to consult on the key elements of the framework set out in the legislation, etc.. Now, one problem with being flexible or moving to what the FCA calls a flexible regime that supports effective competition and innovation while maintaining an effective, appropriate consumer protection now and in the future. Is that flexibility can be inconsistent and lack transparency. What is appropriate for one firm may not be for another, and it just brings doubts into the minds of businesses.

And we've heard of businesses concerned at the arrangements on run by the FCA, for example, given that many of the. To disclose information in. In the C, C, A and associated regulations ought to be repealed. How transparent will the rules be?How consistently will they operate?And will the FCA rulings be published?If they are to be less prescriptive and more in line with the FCA's consumer. Duty principle. How certain will businesses be of what counts as within scope?Before closing, I'd like to mention another concern the considerable compliance costs.

Much of the disclosure of information obliges the CC obligation much. Much. Most of the disclosure information. Um um obligations on the C, C, a and linked regulations being repealed and being replaced by FCA rules will bring um costs. I'm grateful to the firm. Um Addleshaw Goddard LLP for its analysis, which was published on its website, which suggests that reform to arrears default notices and in life information are likely to create major operational impact for collection for collections and arrears handling.

Given the high litigation costs which attach to these requirements, firms should carefully consider these changes and monitor how these requirements will be redesigned in FCA rules. And here we should think of the start up costs for this new system. Um with continuing compliance costs, which will be considerable. Take for instance the information requirements. How will they affect an estimated 30,000 firms who will have to amend documentation as they will not align with consumer duty. And so with those thoughts, I would like to support, um the thinking behind Baroness Bowles's and the question mark about a wholesale transfer of such powers without any information on how they will be operated or regulated or indeed what they will be.

Now.
16:58
None Portrait Speaker 15
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My Lords, I declare my interest in South Molton Street capital, which is regulated by the FCA. The amendments in this group reflect concerns similar to those raised in our previous debate. As the noble Baroness, Lady Bowles has argued, and also my noble friend Baroness Neville Rolfe. It is for the government to now set out a compelling case for moving Consumer Credit Act provisions into the FCA rulebook. This is a serious new precedent and they must meet it with an equally serious explanation.

Regulatory flexibility or as, as we have heard from my noble friends, the living instrument arguments may be appropriate for matters of form, process and technical detail. However, that flexibility comes with risks. Consumers, firms and the courts all benefit when substantive rights and remedies are stated clearly in law. Moving them into regulatory rules may reduce their visibility. Notwithstanding the comments made by the noble Lord, the Minister, and create uncertainty about their permanence and make their enforceability less clear. I hope the noble Lord, the Minister, will be able to assure us further how the proposal he has for us will avoid that issue.

There is also an important constitutional principle at stake. If rights established by Parliament can effectively be rewritten through regulator made rules, Parliament's role in determining the proper balance between consumer protection and regulatory proportionality is diminished. More broadly, public confidence depends upon protections being visible, accessible and readily understood. This is particularly important in consumer credit, where people may be making difficult or significant financial decisions while facing difficult or vulnerable circumstances. Rights are of limited value if consumers cannot identify or understand them, or cannot be confident about how they will be enforced.

Fundamentally, we need a lot more clarity on this process. On what the noble Lord, the minister has described, the orderly transition, and we shall be listening carefully to his response to this group, in addition to his previous reply.
17:00
None Portrait Speaker 3
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Thank you for the opportunity to set out the government's position on this important set of issues. I want to start by addressing why clause one and schedule one should stand part of the bill. However, I do not want to duplicate what I've said in the previous grouping where I set out the government's policy for the length. Suffice to say that this reform is straightforward. The Consumer Credit Act is over 50 years old and was enacted long before the creation of the FCA.

It is no longer delivers, as it should for today's consumers to engage with modern products in an increasingly digital world. That is why the bill continues. The work that began in 2012 of repealing this outdated legislation, such that it can be replaced with updated rules that better meet the needs of consumers and is fit for this digital age. Strength of feeling on the question of delegation, but I note from the speech from my noble Lord. Lord Blackwell has said that this is not a consensus.

As I have said, this is entirely consistent with the model of regulation established by Parliament in the Financial Services and Markets Act 2000. The government strongly believes that those replacement rules should, in the main, reside in the FCA rulebook and not in primary legislation. The noble lady, Baroness Bowles, has expressed her concern about how the FCA will replace some key protections, including information requirements. I've already explained the process that the FCA will follow in the last group and as I said in practice, Parliament, the sector and consumer groups will see the FCA's detailed proposals at the consultation stage before the new regime takes place, but I am happy to assure her that the FCA's recent public statement.

It confirmed that it aims to consult on key information, requirements and rights and protections, including cancellation and withdrawal. The termination of agreements, including early settlement and looking across the consumer credit journey. With its approach being underpinned by the consumer duty, this will be supported by consultation and cost benefit analysis. Consumer research and stakeholder feedback. So I turn to the amendments themselves. Amendments four five, seven, eight, nine, ten, 11, 12, 13, 14 and 16 would retain information, requirements and related sanctions in legislation or limit the FCA to prescribing only the form and content of notices that would preserve the rigidity we are seeking to address.

I can accept these amendments, as these provisions are not fit for the digital age. The Bill repeals these rigid statutory requirements so that the FCA can develop a more effective rules based regime. This is not about reducing inflammation, but improving its timing, its quality and its clarity. The aim of the regime is that it provides consumers with better information in a clearer form, and at a time that is most useful to them. The consequence of repealing these information requirements is that certain related sanctions will fall away.

These sanctions were designed for different era. The Office of Fair Trading had limited powers for supervision and enforcement, so the regime was designed to be draconian, to act as a robust deterrent. They apply automatically, regardless of the seriousness of any breach or whether any consumer harm has arisen. For example, a lender that used the incorrect wording in an arrears notice is required to refund any interest and fees charged from the point at which that breach was originally made, even if the error was in no way harmful to the borrower.

Much has changed over the years since these sanctions were designed, and this approach is poorly suited to the modern approach to regulation. The FCA has strong supervisory and enforcement powers, and under consumer duty, firms must deliver good outcomes. And unlike when the ACA was enacted, any consumer that suffers harm can straightforwardly access redress through the Financial Ombudsman Service. The Fos. I also recognise the concern behind amendment two, which seeks to ensure FCA rules can supplement but not replace or diminish rights and remedies in the House.

The Bill already preserves statutory rights that need to remain in legislation, and because FCA rules are not capable of eroding such rights, the amendment is not necessary. I have already set out several examples of protections that remain in primary legislation in the last group, including section 75 and provisions connected to criminal offences, which must, of course, remain in legislation. Amendment six and five would retain withdrawal, cancellation and early settlement rights in the CCA, rather than allowing them to be recast into FCA rules. These rights are, of course, an important feature of consumer credit products that ought to be preserved.

However, the current framework is complex and outdated, and as a result, not always well understood by consumers. Purpose of reform is to ensure that these protections work better for consumers, which is why the FCA has committed to consider cancellation rights along other rights, including withdrawal and termination of agreements and early settlement as part of its future framework. This amendment would prevent the FCA from taking forward this vital work. Lastly, amendment 17 covers certain important rights, such as time orders, and seeks to retain these provisions within legislation without changes.

However, changes to these provisions are necessary to ensure they work together with the new information requirements recast into FCA rules. My Lords, I hope I have been able to reassure noble Lords that the government is taking forward these changes for the benefit of consumers and convince them that the changes the Bill makes are necessary in order to modernise our protections and ensure that they are serving the intended purposes of protecting consumers. I acknowledge that we have come to the scrutiny of the regulators, and especially the FCA, in future groups.

I therefore move to the clause one and schedule one part of the bill and respectful. Respectfully ask the noble Baroness to withdraw her amendment.
17:06
None Portrait Speaker 9
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Like to thank the Minister and all those who have spoken in this debate, and I am sorry that to some extent, having it in two separate bits has made it more awkward. I think that, um with. Are at a kind of impasse here. Um, is that the minister replies as if we're saying nothing in the Consumer Credit Act can be changed. It's all going to have to stay there when in fact, all I'm saying is that there are some basic core rights that are similar to the sorts of core rights that exist in many other Commonwealth countries in statute should remain because you don't have rights when it goes into the regulator, because, as has already been explained by Lord Sharkey previously, that the consumer duty doesn't give you any rights, it's something that is, um, the opinion of the FCA.

And they can change how they're going to apply it. Um, and the main thing that we are objecting to is that this bill is a shoot first, ask questions later. It's give us all the power now and we'll consult and tell you what we're actually going to do later. And that is just not the way to make legislation. That's you know, that's not how you'd hire a telly, for heaven's sake, you know, and you're asking us to, you know, as I said, tick the box on behalf of the public for something that is really fundamentally unseen.

And the bill doesn't retain core rights. It says some things are going to change, and it gives an open ended power to change everything else automatically when the government wants to. That is not just because they're not taking them away now, doesn't mean the government can't take them away later. So that's that's the impasse that we're at. Some core rights that actually stay and. And for the rest, yes, it can all be simplified and streamlined and handled by the FCA and made more modern.

And the two should be able to be worked together. But it's not a simple fix. And this has been pushed through without that second. Consultation. And that's why it's now sort of falling apart as unsatisfactory. I will return to this, obviously when when we come to report stage. Um, but for now I withdraw my amendment.
17:08
None Portrait Speaker 5
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The question is.
17:09
17:10
None Portrait Speaker 5
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My Lords, before I turn to the detail of these amendments, I should briefly set the scene. Noble Lords will be aware that last week the Conservative Party announced a new policy in relation to the Financial Ombudsman Ombudsman Service, an amendment on our proposal for an alternative approach, a financial adjudication service is currently being discussed with the Table office, and I do not intend to pre-empt that discussion. We will have the opportunity to debate that proposal at a later stage of the bill. The clauses before us, by contrast, change the landscape of dispute resolution in financial services.

In the immediate term, our policy announcement does not prevent us from engaging properly with the provisions before us now. Indeed, it makes it more important that we do so. We want whatever system Parliament agrees on now to work as well as it can. The amendments in this group are concerned with certainty, with timeliness and with fairness. They are intended to ensure that the framework being created by the Bill does not introduce unnecessary uncertainty for firms does not allow yet further delay to become embedded in the system, and does not create open ended liabilities.

Or an undesirable degree of retrospection. So I turn first to amendment 17 a. This relates to unfair relationships under sections 140 A and 140 B of the Consumer Credit Act, 1974. Its purpose is to retain the 60 year limitation period running from the end, and I emphasise end of the creditor debtor relationship for applications or actions seeking relief in respect of an unfair relationship. These can of course, go back many years. This reflects concern that has been raised with us following the Supreme Court ruling in THG plc versus Cedra Trust Company, Jersey limited, which found that unfair prejudice positions, petitions.

Unfair prejudice petitions under section 994 of the Companies Act, 2006 and not subject to statutory limitation periods. I appreciate that the judgment arose in a different statutory context, but it has prompted a serious and practical question. Does that reasoning reasoning have any implications for applications or actions seeking relief?Under sections 140, A and 140 B of the Consumer Credit Act. If there is any doubt about the applicable limitation period, the consequences could be significant. Credit agreements and the racial relationships arising from them may have ended many years earlier.

Banks and other lenders do not keep records indefinitely. They cannot reasonably be expected to defend claims on the basis of files, communications systems and decision making processes from an indefinite period in the past. That's why limitation periods matter. They reflect a basic principle of fairness that after a certain period, evidence may be lost. Memories fade. Documents are no longer available without a clear time limit, firms could be exposed to open ended liability and to a significant increase in vexatious or speculative claims, often fired up by claims management companies.

Amendment 17 A, therefore, seeks to preserve the existing position that where relief is sought under sections 140 A and 140 B in respect of an unfair relationship, the relevant limitation period should be six years from the date on which the relationship between the creditor and the debtor ends, I would be greatly. If. If the Minister could give some clear answers, um. As my noble friend Lady Lawler said in the last group, um, it is important to have predictability. Does the government's understanding remain that the six year period applies?Has the position been affected in any way by the Supreme Court's reasoning in THG v zedra?If the government consider the position is already clear, will the Minister set that out on the record?If there is any doubt, will he commit to preserving the current six year period?I turn next to amendment 36, which concerns referrals from the Financial Ombudsman to the FCA.

The bill creates a new mechanism by which the Financial Ombudsman may refer matters to the FCA, where there is an issue of wider significance or where FCA rules may be ambiguous. In principle, that is sensible and an important mechanism. But one of the recurring criticisms of the current system is that firms can find themselves judged against. Interpretation to expectations that were not clear at the time. A root for the FCA to provide clarity is therefore welcome, however, that mechanism will work only if it operates at pace.

If a complainant is referred to the FCA, a complaint is referred to the FCA and then sits there for months. The result will be uncertainty for everyone. The consumer is left waiting. The firm is left with a live and unresolved complaint and the Ombudsman cannot proceed, and the wider market may be left in doubt about the meaning or application of the rules. Amendment 36 is therefore designed to ensure that the system operates at pace and with clarity about the timeframes in place.

It would require regulations governing referrals from the Financial Ombudsman to the FCA to include a 30 day time limit for FCA opinions, subject to appropriate exceptions. Where an interim response is given, it would require the FCA to provide reasons and to set the expected timing of a final response. It would provide for the annual publication of data on referrals and delays, and I want to ask an overlord, the minister, whether he is confident that the FCA can deliver opinions within a 30 day timescale. If the answer is yes, why not put that in the bill?If the answer is no, then I think the committee is entitled to ask how the government expects the new referral mechanism to improve certainty, rather than introduce a new source of delay.

Finally, I turn to amendment 44, which has echoes of amendment 17 a but at a different point. So I hope the Committee will bear with me. This amendment concerns the interaction between the Bill's changes to FOS time limits and the FCA's power to impose consumer redress schemes under section 404 of the of of of Fsma. The immediate issue arises from clause six, which changes the time limit for complaints under the compulsory jurisdiction of the Financial Ombudsman. The current six year time limit corresponds broadly to the limitation period for a legal claim.

In the case of a credit agreement, that would generally be six years after the agreement expires. There is rightly a saving provision in legal proceedings where there has been deliberate concealment or fraud. The Bill removes the alternative three year time limit from when a complainant becomes aware of a claim. I am concerned that alternative limits can produce uncertainty and complexity. Clause six goes further. It increases the overriding time limit from six years to ten years. That is a significant change in itself, but the real concern arises when clause six is read with clause ten.

At present, section 404 of Fsma allows the FCA to impose a consumer redress scheme, where it considers that there has been widespread or regular failure, causing loss to consumers. And we all know that the impact of such schemes can be enormous. The proposed Motor Finance Consumer Redress scheme has been estimated to cost around £9 billion. Now, under the existing section 404 framework, the FCA can impose a consumer redress scheme only where there would be a remedy in legal proceedings. In other words, the FCA cannot use redress scheme to revive claims which would be time barred.

That is an important safeguard, my Lords. It means that the regulatory redress powers broadly track the position that would apply in court. Clause ten changes that. It removes the requirement that redress must be available in legal proceedings, and instead the FCA need only have regard to the possibility of consumers obtaining redress under the Ombudsman scheme. But clause six extends the Ombudsman time limit to ten years. I do not think the government's justified that change. The six year limitation period exists for good reasons, and six years is the standard period in UK civil law.

Under the Limitation Act 1980. It reflects the point at which claims become stale. Evidence becomes unreliable and firms may no longer have the records needed to defend themselves properly to extend that period to ten years for the purposes of consumer redress schemes, is a very serious step. Amendment 44, therefore provides a simple and proportionate safeguard. It would ensure that the FCA cannot impose a consumer redress scheme in respect of loss or damage, whereby reason only the lapse of time. No remedy or relief would be available in legal proceedings on the date the rules are made.

It also preserves appropriate exceptions for cases equivalent to fraud or deliberate concealment. This is not about preventing redress where redress is properly due, nor is it about protecting firms from legitimate claims. It's about ensuring that the FCA's redress powers do not become a route to overriding ordinary limitation principles without Parliament being clearly and expressly. Without them clearly and expressly deciding that that should happen. So I ask the Minister to explain the government's position on three points. First, do the government accept that the combined effect of clauses six and ten is to extend in practice the period within which the FCA may impose a consumer redress scheme from six years to ten?Does he anticipate that the change we described in amendment 17 A has an effect on these notices and on the time limits applicable?Secondly, if they do accept that, what is the justification for such a significant extension?And thirdly, if they do not intend to allow the FCA to impose redress schemes where no legal remedy would be available because of limitation, will they accept the principle behind my amendment 44?These amendments are all directed at the same underlying concern.

Consumers need a system that is fair, timely and capable of delivering redress where it is properly due. Firms need a system that is clear, predictable and not retrospective. In effect, the wider market needs confidence that regulatory powers will be exercised within defined and proportionate limits. I hope the Minister will be able to provide the clarity we seek. It's very much a committee style discussion and I beg to move.
17:20
17:20
None Portrait Speaker 9
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Um, I'd like to join in this discussion, and I think that this is probing thoughts, and I just want to make a few comments on amendment 17. A because the issue overlaps with amendment of mine that comes later in in the main Foss group, amendment 17 A raises an important point about limitation periods and the concept of when a relationship ends, it seeks to preserve the six year limitation period for unfair relationship claims running from the end of the creditor debtor relationship. And I understand the intention, but I think it exposes a deeper difficulty.

The end of a relationship is not or may not be the same as the end of rights, and it is certainly not the same as the end of enforcement powers. In many cases, firms retain continuing benefits or enforcement rights long after the consumer's remedies have expired. Debts can be sold, pursued, securitized or enforced. Years after the practical relationship has ended. Yet the consumer's ability to challenge an unfair relationship may already have fallen away. Is an asymmetry, and while, as I said at second reading, I really do understand the industry's desire to get a grip on long tail risk and liabilities, especially where regulators are interested in it, that cannot be done off the back of consumers.

If we are to move parts of the Consumer Credit Act into the FCA rules, then at the very least those rules must be required to secure as far as reasonably practicable symmetry between the duration of rights, remedies and redress available to consumers and the duration of rights remedies, enforcement powers or continuing benefits to firms arising from the same act, omission or relationship. Without that symmetry, we risk creating a regime where firms retain long tail powers. But consumers lose long tail protections. Limitation periods cannot be considered in isolation from the underlying rights the two must move together or we distort the balance that Parliament intended.

And that is why the statutory framework has a place. Now, the FCA has already announced a year or so back a shift in emphasis to allow more risk in the interests of growth. This is a recurring theme, and that was an important statement by the FCA. And of course, it feeds into the need for proportionate regulation and acceptance that there may be more failures which Parliament must accept, but it cannot mean a bias advantage towards business in ways where firms retain, retain recourse against consumers whilst consumers lose recourse against firms.

Under that process, companies may enjoy growth by escaping the consequences of some bad actions. But that growth, that gain is extracted from consumers and effectively added to the cost of living fleecing. Consumers is not growth, and I fear that this may be the consequence of the asymmetry in rights that could arise under amendment 17 a and I may return to this with a. My own amendment at report.
17:24
None Portrait Speaker 12
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My Lord.
17:24
17:24
17:25
None Portrait Speaker 17
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Although it's.
17:26
17:27
17:28
None Portrait Speaker 9
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Oh la
17:28
17:28
None Portrait Speaker 11
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The government's reforms to the financial Ombudsman, the Fos, are aimed at ensuring the legislative framework in which it operates supports it to effectively perform the role it was established to do, providing quick, informal and impartial dispute resolution between financial service firms and their customers. Given the nature of the files and the way it operates, it can be effective at resolving the majority of disputes between customers and financial service firms. But it cannot do everything, and some things are more suited to other routes. The alternative routes include the courts and the Consumer Redress Scheme, established by the FCA.

These routes are more appropriate when addressing systemic issues such as widespread mis selling. The reforms that the Bill makes to section 404 of the Financial Services and Markets Act 2000 are designed to enable the FCA to act quickly to prevent disruption and uncertainty when it finds that mass redress event has occurred. 14 A my Lords, I thank the noble Baroness for raising an important issue. I recognise that there has been questions about the time limits that apply to claims brought under sections 140 A to 140 C of the Consumer Credit Act, 1974.

In the light of the ruling, the government understands that there is an interest and the desire for clarity in this area. The noble Baroness Neville-rolfe asked for me for the government's position following the ruling and its implications for the Consumer Credit Act 1974. The government's position remains that the limitation period runs from the end of the credit agreement. That approach provides legal certainty and reflects the nature of these claims. That understanding is consistent with the existing case law, including the Supreme Court's judgment in Smith VBS there is, however, an important nuance consistent with the way limitation operates.

More broadly, it would be suspended where there has been deliberate concealment. It is right that claimants should not be prejudiced in circumstances where relevant information has been intentionally withheld from them. The amendment before us would go significantly further. In effect, it would represent a substantial departure from the settled case law established in Smith v RBS, weakening the certainty that that judgment provides. And for those reasons, while I appreciate the intention behind the amendment, the government cannot support it, and I respectfully ask the noble Baroness to withdraw it.

Turning to amendment 44, I recognise that many of the stakeholders also desire clarity around the eligibility of older complaints for the FCA's consumer redress schemes under section 401 of Fsma, also known as redress schemes. Certainty around historic liabilities matters and the bar for regulatory action must be high. This is why the Fos, which was never intended to deal with complex systemic issues, will be made subject to an overall ten year limit for the age of complaints, subject to key exceptions set by the FCA for long term products like pensions.

But complex systemic issues often take time to come to light. By the time the harm is understood, an ordinary court timeline may already run out. To time. The FCA's power under section 401 to that timeline would mean that in exactly those cases, consumers had no route to redress at all. The wrong that the route would be would be clear, but nothing could be done about it. Consumers need to have confidence in the UK's financial system, and the ability for the FCA to act in systemic compliance failures wherever it finds them.

For that reason, the government can accept this amendment turning to a. Amendment 36, the government recognises and welcomes the desire to avoid introducing unnecessary steps into the case work process. The government has publicly stated its intention to require the FCA to provide a response to the falls within 30 days. In most circumstances, however, the government considers that it is appropriate to set the requirement in secondary legislation to provide flexibility and ensure that the new processes can be effectively operationalised the. FCA and the force are already trialling a version of the referral mechanism to learn lessons and ensure that when fully implemented, it works effectively in providing clarity for the force, whilst not leading to significant delays in their case work.

My Lords, the government recognises that it is important for firms to have certainty around historic liabilities, which is why this bill introduces a ten year backstop time limit for bringing cases to the force. However, the government is also clear that there are some circumstances where such a timeframe is not appropriate. Consumers must have the confidence that this will be treated. They will be treated fairly by the financial services sector, and the regulator must have the ability to act decisively in cases where there have been widespread issues.

These amendments will undermine this. I would therefore ask the noble lady to withdraw her amendment.
17:33
None Portrait Speaker 13
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My Lords, I'm grateful to noble Lords who have contributed to this brief debate, and I'm grateful to the Minister for his response and for his clarification of THG v Zebre, which I will certainly consider. My central point is that a redress and complaint system must be fair in operation. It must be capable of delivering justice for consumers, but it must also give firms a reasonable degree of certainty, certainty about the liabilities they face, the standards against which they are judged, and the time frames within which matters will be resolved.

If we create a system which liabilities are open ended, where regulatory redress powers can go beyond ordinary limitation principles, and where referrals can remain unresolved for an indefinite period. I don't think we will produce a better system for consumers, and I agree that we must look after consumers. That obviously is very important part of consumer law, but I worry that will produce a slower, more uncertain and more contested system for everyone. If we don't get these judgments right. Uh, I don't accept a bias towards business.

As the noble Lady Boz suggested. I mean, actually, I think we're seeing a shift the other way in some of these areas, which is why I've had the representations I've had on these points and why I think it's very important to find clarity. I know what my noble friend Baroness Altmann said about pensions, and I think the minister answered and explained that he sees pensions in a different in a slightly different way. I'm not sure what the limitation rules are there, so I hope the Minister will reflect further on the thrust of these amendments.

In particular, I hope he'll consider whether the government can provide a clearer statutory safeguard on limitation. Certainly, clarity is important and a firm a timetable for FCA opinions. I worry that just delegating it to them means that they're in charge of their own timetable. And if there were, for example, um, a. An enormous problem in the financial services industry, which required the diversion of staff elsewhere. Those time, those things could slip. And then redress for the consumer could slip as well.

Um, but I think all the amendments go in the same direction of fair, timely and certain and timely and certain decision making, um, and predictability both for consumers and for businesses involved. And for now, I beg leave to withdraw my amendments.
17:35
None Portrait Speaker 7
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Mr..
17:35
17:36
None Portrait Speaker 14
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Amendment 18 and I will also speak to my amendments 19, 20 and 25 in this group, and I'm grateful to the noble Lord, Lord Vaughan, for adding his name to those amendments I. Will now move to clause three of the Bill, and this gives a very wide power for the Treasury to make pretty well any provision. The Treasury feels like about providing access to banking services, my Lord. It is a fact of life that major banks in the UK have been reducing their branch footprint for several years.

In response from the massive shift from in-person banking to online and mobile banking, branch visits have fallen by over 90% since the 1980s. Debit cards overtook cash transactions in the 20 tens, and in 2024, only 9% of transactions were made in cash, while 93% in 2024 of adults used online or mobile banking. Same time, the activity that banks could conduct safely via branches diminished. Now, some might think nostalgic nostalgically of the era of autonomous bank managers making lending decisions and offering investment advice. My Lords, those decisions, those days have been largely risk managed out of retail banking.

Noble Lords will be aware that the act of 2023 gave the FCA powers to protect access to cash services. I did not think those powers were necessary because I could see that cash was definitely on its way out. But I do accept that banks have to continue to provide cash until cash only users drop to an insignificant number. The banks have agreements with the post Office and have voluntarily signed up to the provision of 350 joint banking hubs, which not only provide bank cash services, but also to a more limited extent, the services of community bankers.

Now, I know that some consumer lobby groups have had statutory protections for more than cash services in their sites for some time, but it is far from clear whether more needs to be done. Beyond the banking hubs, which are still being rolled out. I have never seen a clear exposition of what services are missing, and so I have no idea whether they are realistic or not in terms of continuing provision. Hence, I am unconvinced about the case for statutory intervention or for further regulatory powers.

Now, the case may be made when the review being undertaken by Mr. Richard Lloyd reports. But that is the time for the Government and Parliament to decide whether a statutory remedy is necessary. My Lord, it is frankly bizarre that the government set up the Lloyd review in the very month that they announced in the King's Speech that they intended to legislate. Normally we consider matters and then determine whether or not legislation is necessary, but not in this case. My Lords, even if Mr.

Lloyd's review does find that further banking services are needed, it does not inevitably lead to the need for further laws. Banking hub arrangements that I referred to are not in existence as a result of the 2023 act, as the banks had already started to set these up and the bank. Are generally well aware that they are an essential part of the fabric of our society, and that responsibilities go with that. I turn to my amendments. Amendments 18 and 19 in this group are straightforward.

Amendment 18 says that the Treasury has to consult the banks and anyone else who might be affected before making regulations. I'm quite sure that Mr. Lloyd will be diligent in discussing the issue of banking service provision with the banks. During his review, but that is no substitute for the Treasury itself being required to consult the banks before any regulations are made. Whatever Mr. Lloyd's review concludes, it is the Treasury in the first instance which needs to decide what, if any, burdens to impose on banks and hence it is absolutely necessary that they are consulted.

Amendment 19 requires the Treasury to be satisfied that the banking services, which might be covered by regulations, will not be required, will not be provided voluntarily. There is absolutely no need to create regulatory burdens where the desired outcomes can be achieved by other means. My Lords, as I've already said, retail banks are aware of their societal responsibilities and they will also be aware of the Treasury's power under clause three to require them to do things. Hence, it is highly likely that if Mr. Lloyd comes up with reasonable recommendations, there will be a voluntary agreement.

That would, in effect, leave the power in clause three to make regulations in place to make less than reasonable recommendations into law, which is in particular, why murmured 18, which requires consultation, would be essential. And my other amendments in this group, numbers 20 and 25, are intended to ensure that any use of the regulation making power in clause three is rooted in the findings of independent reviews. At present, the regulation making power is unlimited and its only restriction is to have regard to the findings of the Lloyd review.

It does not even have to follow the findings of the Lloyd review. Now that review might make recommendations which the Treasury does not wish to pursue at this time. Amendment 25 would ensure that if the Treasury wished to resuscitate such recommendations at a later date, or indeed pursue other approaches to the provision of banking services, the Treasury would have to have another independent review in order to validate the necessity for using the power. Now the noble Baroness Bowles of Berkhamsted Amendment 24 would tie the use of clause the clause three power to the Lloyd review.

Rationale for that, but I wonder whether that amendment might ossify the concept of banking service provision into mid 2026, and I am sure that the need for in-person banking services will carry on changing long after Mr. Lloyd has submitted his report. Now, I predict that we will end up with only a very small number of bank customers which actually need in-person services. And the last thing that we want to do is to make the banks carry on providing them. If those services are not generally needed, because the costs will be borne by all bank customers, not borne by the banks, they're borne by bank customers.

So we're shifting burdens from one set of one small set of consumers to another set. Now, the noble Lord, Lord of Harrowden has tabled clause three part, which I have very much sympathy. The government have stated in the explanatory notes, and the Minister repeated it at the despatch box during second reading, that the government intend to narrow the power during the Bill's passage. My own view is that it is unacceptable for the power to leave your lordships House in its current wide form. The government must narrow the power while we are scrutinising it in your lordships House, and it is unacceptably wide as it stands, I beg to move.
17:44
17:44
None Portrait Speaker 18
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In other words.
17:44
None Portrait Speaker 7
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The first time I've. spoken on this bill. Normally I would apologise for not taking part in second reading, but how can I put this?I was enjoying my temporary retirement from the house. Welcome home and it's very nice to be back to do a another Financial Services and Markets bill as. It's the first time I've spoken. I should declare a registered interest in Fidelity National Information Services, Inc., which is a large American company that provides services to and software to a wide range of financial services companies around the world.

I've tabled amendment 26, and I've also given notice of my intention to oppose the clause three stand part of the bill, and I've also added my name to a number of amendments. In the name of the noble lady, Baroness Noakes. My Lords, I also have another interest to declare, which is that I am someone who has already lost my bank branch in my local village some years ago, and I've just been informed that the last bank, last remaining bank in my local nearest town is also about to close to visit a bank branch for me will now involve a 100 mile round trip, so I am sympathetic with the idea that we need to do something to ensure continuation of access to banking services, especially in rural areas like mine.

At the same time, I am conscious that I probably actually visit a bank branch less than a couple of times a year. So I do understand why banks feel it necessary to close them. They are not economic. We do need to find a sensible balance to this. Um, so I accept that we may need to do something, but what?There is the old joke, my Lords, we need to do something. This is something. So let's do it.

But my Lords, clause three isn't even something. It's just a vague I was going to say promise, but it's not even that. It's just a vague intention to do something completely unspecified at an unspecified time, or indeed times in the future. This government has an unfortunate track record of putting sweeping powers into legislation before it's decided. Decided what it actually intends to do with them. And this is yet another example of this, as the delegated Powers and Regulatory Reform Committee has pointed out really very strongly.

This is a very sweeping power with no meaningful limitations at all other than, as we've heard, the need to have regard and only to have regard to the independent review currently being undertaken by Richard Lloyd, subsection three, which is which is only examples rather than limitations, is one of the widest I've seen, including the express ability to make changes to any Act of Parliament. A really strong Henry the Eighth power and the section subsection three starts by saying that the regulations under subsection 1st May. Among other things, do the things listed below could.

The noble Lord, the Minister, please explain what these other things might be. AM I being old fashioned to suggest this is not the right way to create law?It would surely be better to wait until after the review has been undertaken. Actually decide what is needed, and then legislate if indeed legislation is actually necessary. As the noble Lady Baroness Noakes says, we've got these banking hubs without legislation and subject to proper scrutiny of Parliament, which it won't be if we go down this route.

The noble Lord. The Minister will no doubt try to reassure us about how this power will be used. And of course, I, and I'm sure everybody else in this room will have. Faith in the Minister, and that he wouldn't try to misuse this power. But the noble Lord will not always be the minister. And that's maybe a comment that has particular resonance today. Who knows?It's even possible that this government may not always be the government, but this power is unlimited and will be the law for the for the foreseeable future.

Who knows what a future government might wish to do with such an unlimited power?Indeed. Actually, as written, it could even use it to reduce the rights of access to banking. So I have a few specific questions for the noble Lord. The Minister, if I may. Firstly, could he please explain in more detail how the government currently expects, subject to course, to the review, to use this power?What do they actually expect to do with it?And when?Secondly, could you please explain which acts of parliaments he has in mind that might be changed under the subclause three B and what changes he would expect to make to them?I put on record now that if I don't get a very convincing answer as to why this wide Henry the Eighth power is required, I would expect to push amendment 26.

That would remove the power to amend primary legislation to a division at report stage. And finally, the explanatory memorandum recognises this as a broad power. To quote. It says it is necessarily broad, but at the same time, and in contrast to that, it also seems to recognise that it is broader than really needed. As it goes on to say, and I quote, the government would expect a narrow, narrow it once the review has concluded, and I'm somewhat baffled by that. My Lords, we're in Grand Committee now, and the timetable for this bill seems pretty tight.

So could the noble Lord, the Minister, please explain how it would actually be possible to narrow it, given the Bill will likely have completed all its stages before the review is completed, and they've worked out what they want to do with it. Once the bill has become law, the power can't be narrowed. This is another example of the government trying to show it's doing something before it's actually decided what it wants to do, and therefore giving itself an inappropriately broad powers that avoid proper scrutiny. When it finally does decide it's not the right way to make laws that will outlast this government.

And I don't believe this clause should stand part of the bill without at least very significant narrowing and safeguards.
17:50
None Portrait Speaker 17
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My Lords, I will speak briefly to my amendments 24 and 27. In my name. I support what's just been said by the noble Lord Faulks. And, um, to some extent we're again fishing in the same constitutional pond that regulators are not. Parliament and Parliament should not give away powers. It cannot get back and it shouldn't make decisions before we know actually what we're deciding about. Um, amendment 24 would ensure that any regulations made under this clause can only make provision that arises directly from the statutory review.

A review is not a blank check. If Parliament asks for a review of access to banking services, then the regulation making power should be will, if not confined to, at least in some way, related to what the review actually identifies and not what a future minister or regulator might wish to do. And that is my real target. Um, maybe I've drafted it a little bit too tightly, but actually, as has been explained, this is a very open ended power to do anything. Looked at constitutionally, the fact that the consultation has not yet been completed and assessed already more than stretches, proper procedure amendment 20.

27 addresses a different but related concern. As drafted, the bill creates machinery in which the FCA rules effectively drive changes to legislation, including primary legislation. The FCA pulls the lever, the Treasury presses the button, and the law moves to reflect the regulator's rule book. Will no doubt say Parliament can always reject the regulations, but we all know how that plays out. Parliament is presented with take it or leave it. Statutory instruments Unamendable. And if it dares to reject them, we are told we are precipitating a constitutional crisis that is not meaningful.

Parliamentary control. I am not opposed to the FCA modernising rules or streamlining processes. Far from it. But where those rules have the effect of alteration, altering rights or obligations that were previously created by Parliament. Change the change must meaningfully come back to Parliament. Otherwise, we risk creating a system where the regulator can, in substance rewrite acts of Parliament by changing its own rule book. That's not proportionate regulation, it's law making without accountability. Again, this seems not to be the sort of thing expected under the legislative and Regulatory Reform Act.

These amendments do not prevent modernisation. They simply ensure that modernisation happens within a statutory framework. With Parliament retaining oversight of the rights it has created. It doesn't mean going into the detail, but it does mean monitoring the rights. I hope the Minister will recognise that these are modest but important constitutional guardrails. My Lords.
17:54
None Portrait Speaker 19
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I rise to speak to amendment 22 in my name, and I must start by apologising for not being able to speak at second reading. Um, as I was overseas on a parliamentary delegation, my. I also want to declare an interest as a member of the Financial Inclusion Commission and president of the Money Advice Trust and my. My amendment is very specifically about banking hubs, a subject I've been very interested in ever since they. They came on the scene and the need, as I see it, for a far clearer definition of what actually constitutes a banking hub.

Looking at the range of amendments, other amendments in this group. Um, I am very pleased that we are having a, I think a more, a broader and much needed debate on access to banking and in particular in-person services than we managed to have in the 2023 act. Despite, if I may say, my best efforts, which didn't really get us anywhere. But just to explain why, I think a definition of banking hubs is so important, I just want to briefly just look at the context here.

I mean, as we all know, over the past decade, banking in the UK has just changed profoundly. More than 6700 high street bank branches have closed since 2015. And of course, at the same time, the way people pay for goods and services has shifted dramatically. Ten years ago, more than half of all payments were made in cash. Today, that figure is closer to 1 in 10. And for many people, that transition has been quite manageable and indeed welcome.

For people who like the convenience of digital banking, online or apps or car payments, but for others, the shift away from local branches and cash based services has created very real barriers for someone who cannot use online banking. The closure of a local bank branch can mean losing independent access to their own money, and for someone who is blind or partially sighted, inaccessible digital systems can make everyday banking difficult or, frankly, impossible. And for an older person without reliable transport. The nearest banking services may simply be out of reach.

And for those who still. And my Lord, there are a proportion of people who do cash to budget, pay carers, support relatives or retain control over household spending. The disappearing of appearance of in-person banking is not just a minor inconvenience. It can affect that feeling of control, of autonomy and financial security. Now, banking hubs emerged as a response to this new reality, uh, providing shared in-person access to banking, to basic banking services, including cash withdrawals and deposits, as well as a limited amount of face to face support.

And I welcome, as I have throughout this debate, I've welcomed banking hubs. I've been very, very pleased to be able to visit one indeed, and see it involved. The government has committed to rolling out 350 hubs by 2029. But I think for me, the questions around banking hubs are what do they actually do?Are they doing enough?Are they being rolled out quickly enough?And are they addressing the needs of the people who make who need them most?And I think these questions are ever more pressing.

Following the announcement, which I very much welcome of an independent review into the impact of bank branch closures. Um, and looking at what further interventions may possibly be needed to protect access to in-person banking services. And if I, if I may, because the noble, the noble lady, um, Baroness Nokes raised this issue about is it about is this all about nostalgia?You know, looking back to how it was in the old days, a sort of Dad's Army view of banking, but I think we really do need to recognise it's not a question of nostalgia for traditional banking.

Banking services have and will continue to evolve, and digital services will remain central, in my view, to the future of financial services. But inclusion has to be built into that transition. And I think at the moment we just haven't seen quite enough emphasis on inclusion. That key gap remained and was baked into the 2023 legislation, um, and I that's why I think it's so important that the independent review looks at this comes up with good recommendations. Um, so that we, so that the FCA can actually specify what a banking hub is and what qualifies as a banking hub, because frankly, at the moment, the industry could meet all the terms of regulation without a single banking hub.

They can offer services virtually in theory, i.e. through video conferencing. And that might have some sort of merit in setting out the minimum requirements for a hub and holding the industry to it in the long term. And the FCA might also choose to define hubs to suit rural areas. It might be a lighter touch model. We've got to make sure it doesn't impact on the post office, and it does allow, um, further rollout. And I would say that everything I've all the evidence I've seen so far has really pointed to the importance of sustainability for the post office and the basic banking services that they provide under the, the framework agreement.

But moving forward, there are big challenges. Um, I think there are certainly at a recent all party group organised by Fair Banking, there were very strong calls for the FCA to prevent closures of, of, of banks. The last banking branch in town until replacement access is already in place. Um a feeling that the current approach is frankly too reactive, often responding only after the closure occurs. Communities losing their final branch should automatically receive a hub, i.e. not they shouldn't have to be a review.

Um, and certainly the post office was very much recognised as a key national asset in supporting access to cash and basic banking services. But my Lords, where, where hubs have been established, they have not always been suitably located or designed. Some are situated away from high streets or public transport links. They operate only on limited days and they do not. This is critically offer the full range of services previously available, and that's really what my amendment is designed to achieve. Some basic and agreed definition of what actually constitutes a banking hub.

And I would say that most people, what most people want is to be able people for whom being speaking to someone face to face is important, or accessing physical banking services, they might need help and support and advice on complicated issues. Yes, it might be to do with a loan or a mortgage. They're not all done digitally, but particularly on issues such as powers of attorney, probate, third party signatories where a family member becomes incapacitated or passes away. And, my Lords, at moments of great emotional stress, and I speak from personal experience here.

People want and need a real human being to talk to and navigate them through unfamiliar territory. They don't want to do this either. Over the phone, um, on live chat, or in a distant town. So I think everyone will have their own view of what that tighter definition, which I think is needed and which is what my amendment is all about. Um, should include. But I think for me, a sort of a minimum would be not only access to account to the account sort of payments and everything payments and transfers, support when fraud happens and scams, registration of deaths, probate inquiries, powers of attorney.

They're the sorts of things that I think there must still be some access to face to face services for.
18:02
None Portrait Speaker 20
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To follow the noble lady who's. As I've listened to her speech, I've been crossing off most of the things I was going to say because she said much more eloquently than I could have. And I'm very thankful for that. Um, I do think that we need to be able to provide people, everybody with the best possible services as locally available. The noble lady has said it's when people are at their most vulnerable, it's when they're at the most crucial moments of their, of their lives, taking the big decisions that actually being face to face makes makes all the difference.

I grant there's an article in The spectator at the moment that says that bishops don't mention the word Jesus enough. And we're speaking in your lordships house. Well, I've I've just covered that particular one for Hansard's benefit. But actually, you know, in my theology, at the heart of when God really had something important to do, he didn't send an email. He didn't he didn't send a text message. He didn't put writing in the sky. He sent a person in Jesus Christ to meet with other human beings face to face.

And I think we lose face to face services at our peril. Yes, occasionally I'm involved with the closing of a church, but very few churches, actually, the Anglican churches have been closed in England over the last 40 or 50 years, because we recognise the importance of providing face to face encounters for people to meet other people. And while I appreciate that we don't want to overregulate, I do find, as I said at second reading, that actually making banking services available to people face to face when that's what they need because they're it's a big decision and they're feeling vulnerable.

I do think that that, for me, gains priority over the convenience of the banks, who may yes, it may pass some small costs on to the rest of us. It may also affect the bonuses that some bankers get and the shareholders dividends at the end of the day. But I think that is a price to pay for seeing that everybody's included in the banking world.
18:04
18:06
None Portrait Speaker 18
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I write for the.
18:06
None Portrait Speaker 21
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First time in the committee stage on this. My third Financial Services and Markets bill. Um, and I have to reflect on the curious circumstances in which we find ourselves and offer to a reassurance to those who don't like clause three in particular of this bill that of course, um, surely under the new regime, which we expect to see in a month or so, um we're unlikely to see this bill in anything like its current form, given it is aiming overall to, um, deliver the so-called Leeds reforms, uh, of Chancellor Reeves, um, which aim to give the financial sector a boost of growth at the inevitable cost for the real economy, a boost to London and the tax havens at the cost of the rest of the country, and to reduce the regulations that were brought in as protections for the security of us all after the last financial crash.

However, I think there is still a point in all of us going through in detail as we're doing now, because we are also making bids for what the future government is going to look like. A new future government. And on that basis, I rise particularly to speak to amendments. 22 in the name of the noble lady, Baroness Tyler, and. 23 in the name of the noble Lord. Lord speaker, because we are expressing here really important issues as the right Reverend prelate puts so well, he, the right Reverend prelate was speaking about religion, but is also speaking about humanity and human need.

And that's what particularly these amendments. 22 and 23 address. And you don't have to listen to me with my radical voice on that. Uh, reading around this, I was looking to an article from March from the civil Service Pensioners Alliance, um, quoting the figures from which about 53 bank branches closing each month and pointing out that this was sentencing, forcing particularly older people into digital exclusion, stripping away their independence and leaving them highly vulnerable to scams, something I don't think anyone has yet brought up.

But it is an important local branches and speaking to a local person can be an important pressure against scams, and also the premium of having to pay more for things because you are poor and picking up the points made by the noble lady, Baroness Tyler, um the Pensioners Alliance talks about circumstances of bereavement or the need for a power of attorney. These are circumstances that can happen to any of us and will continue to happen. These are not something that is going to make technology. Technology is going to make disappear.

And on that point, um, I do want to, um, take, uh, issue. With a couple of points made by the noble lady, Baroness Noakes, particularly the noble lady who said that we can get rid of branches when cash users drop down to an insignificant number. Well, first of all, I don't think we should be treating anyone in our society as insignificant. But more broadly, that assumes that we're only heading both as individuals and collectively in one direction. You may be able to, at a certain age, cope very well with digital banking.

Be perfectly comfortable with that. But that's not to say later in life that you might not want to use a different kind of system. You might not be able to see the screen be able to manipulate the buttons on your phone, be able to hear on the telephone anymore. And at that point, cash being available is an absolutely crucial thing. And also, just finally, to pick up with a point from the noble lady, Baroness Noakes, which again, the right reverend prelate picked up.

Um, of course, it's not that customers have to pay for the provision of these services. I'll point out that the big four UK lenders made £14 billion total profit in the first quarter of this year, profits last year of £46 billion. The financial sector depends on the government to survive. It depends on government support. Uh, that is a licence. And we can say under what conditions that licence is held. And surely the provision of local banking services, a person to speak to when you really need it is something that we can put in this legislation if it does go forward.

But whatever future legislation comes, there clearly needs to be action in this area.
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None Portrait Speaker 18
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Thank you, my Lord.
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That's we really seem to have been two themes in today's discussion, and I'll address both because I actually agree with both that. The first is that do we value banking hubs that. And there have been so many voices that say we have, but are calling for a very much improved framework, whether that was Baroness Tyler, that, uh, Lord Davies, that, uh, the right Reverend Bishop of Manchester, that Baroness Bennett. Um, I suspect there is a universal consensus that we actually need to think this issue through, which is exactly why the Richard Lloyd Review is a now anticipated.

I think most people who see the value of banking hubs in their community, most people it's most MPs who've been asking for banking hubs in their community very much appreciate the direction of the Lloyd review, but, uh, and in terms of background and evidence for the need for banking hubs, I'll be addressing some of those issues much more when I talk about community development financial institutions in a later group. So I won't repeat all of that, but doesn't take away from the fact that we have a constitutional issue here.

And I was looking at the report from the Delegated Powers Committee that it is very concerned, that the problem hasn't been clearly identified, that, uh, and, uh, that a power is expensive as the one that's provided for here in the bill that, uh, a severely compromise is effective parliamentary scrutiny. And they ask for it to be removed from the bill. I think I would say to the government that, uh, it's going to be really important that there's some real clarity before this hits the commons. That or I think, uh, this clause is going to be very much in trouble.

I am a supporter of banking hubs. I suspect I will be very pleased when I read the Lloyd's review. But, you know, that's what's good for the goose, is good for the sauce for the goose is sauce for the gander. I can't just say to Parliament if it's something I like, then we don't need oversight, scrutiny, that we don't need a proper process. We don't need to consider what is the role of the regulator versus the democratic decision making that should be happening in Parliament?So let me say, here is a very good instance where I suspect I would be very much in favour of the Lloyds review, but I will be very sad if that is not brought before Parliament for discussion, for scrutiny, for proper oversight.

And I think it's unfortunate that this bill follows a procedure, it seems to me completely unnecessary, but follows a procedure and a process which doesn't allow for that oversight. It's valid whether or not you think you're going to like the outcome of of what either the of what the regulator will do.
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None Portrait Speaker 13
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My Lords, amendment 21 in. My name and that of my noble friend Lord Lady Noakes, would ensure that any government intervention in the provision of in-person banking services, evidence based, proportionate and properly balanced would require ministers to consider not only the needs of consumers, but the legitimate commercial reasons why firms may reduce their physical banking problem and, more widely, clause three raises two distinct but closely related concerns. So the first um to which the amendment speaks, banks do not close branches simply on a whim. Consumer behaviour has changed profoundly.

More banking is conducted digitally and maintaining a physical network carries substantial costs. The government may decide that wider social considerations justify intervention, but they can't responsibly make that decision while ignoring the commercial realities facing the firms they tend to regulate. There's a broad conservative principle at stake here. Private enterprise exists to serve customers successfully and generate a return, not to discharge social obligations imposed by government, regardless of cost. Adam Smith wrote. It's not from the benevolence of the butcher, the brewer or the baker that we expect our dinner.

But from their regard to their own interest, and I think that principle remains relevant. If banks like nationwide judge maintaining in-person services gives them a competitive advantage. I very much welcome that customers can reward that choice, but can compelling firms through law to provide services at a loss is a very different matter. Such an approach would not be cost free. These costs may ultimately be borne by customers through higher charges, poorer rates or reduced investment elsewhere. It would also send a damaging signal to business that the government are prepared to override commercial judgement, without clearly establishing the need.

Calculating the cost or considering less burdensome alternatives. The noble Lord, Lord speaker, as we've heard from the noble Lord, Lord Davis of Brixton, even wants this to be done through a levy on banks. You know, there's a public service element in many private private services, and yet we don't try to impose. Such levies on them. 21 asks for something entirely reasonable, in my view. Evidence before intervention. Proportionality in design and proper consultation with the firms that will be expected to deliver it now.

None of this is to deny the importance of access to in-person banking. And I've heard and agree with a lot of what has been said about the importance of that for some customers. I mean, I think particularly those with disabilities, people in vulnerable circumstances and those who are digitally excluded, it can be essential. We therefore very much welcome the banking sector's commitment to establish 350 banking hubs and the 240 or so, which are currently up and running. These banks recognise the power of direct access themselves, and like Lady Noakes, I see merit in a flexible and possibly a voluntary approach.

I understand that my noble friend Baroness Coffey, she can't be with us today because I think she's the Council of Europe, but would have liked to address the role of post offices and how they can provide further access to in-person banking service. Now, unfortunately, this has already been raised by the noble lady, Lady Tyler of Enfield, um with her amendment 22, and I hope the noble Lord, the minister, can address their role in his response. Our second concern is constitutional and is even more serious. I pick up where I left off in Group one.

Clause three three would give the government extraordinarily broad powers, including in clause three, the power to amend an Act of Parliament. Yet, as my noble friend has said, ministers are seeking those powers before they've decided what policy they intend to pursue. She called this bizarre. Consultation has not concluded. In fact, it's barely begun. The government's plans remain unknown, and we are told that clarity will come only after the summer and that the power may be narrowed. As we heard from Lord, my noble friend Lord Goodson, who is a member of the committee, the Delegated Powers and Regulatory Reform Committee has said that the power in clause three is inappropriately wide and should be removed, removed from the Bill.

Others have echoed that the government are effectively asking Parliament to sign a blank cheque to grant far reaching powers now, and trust ministers to determine their nature later. However much confidence we may have in the noble Lord, the Minister and I have every confidence in him. That is no substitute for proper legislation, constitutional safeguards exist because powers granted to government endure beyond the individuals who first exercise them. As I remember from some of the bills I put through Parliament, Parliament should be told what problems the government identify, what policy they propose as a result of Mr.

Lloyd's report, or indeed by whim, why dpas are necessary, and how they will be used, and what safeguards will constrain them. The proper sequence is straightforward complete the consultation, develop the policy, publish the evidence and then bring a defined proposal before Parliament. If legislation is needed. The noble Lord. Lord, put it very well. Now, in my view, what the government must do is to obtain the. Is not to obtain the power first, and decide what to do afterwards.

That is constitutionally outrageous. I therefore ask the minister, why do the government require powers of this breadth before the policy is settled?Why can they not return to Parliament once the consultation has concluded with a new bill?That both houses can examine properly what limits will apply to these powers, and what meaningful opportunity will Parliament have to scrutinise their use?We need a good answer on these questions and the others that the forensic Lord Vaux um set. Down this, my Lords, is a very serious matter, and I will be listening carefully to the response from the noble Lord, the Minister.

I'd strongly urge him to reconsider his approach, which risks entrenching a deeply damaging precedent to parliamentary oversight and will prove unpopular in this committee.
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None Portrait Speaker 11
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I'll begin by setting out why clause three should stand part of the bill the way UK Citizens banks has changed significantly in recent years, with many customers choosing to use digital channels such as mobile banking. As such, we have seen many firms reviewing how best to meet these changing needs, and banks are closing branches in response. However, for some people who require access to in-person banking services, these changes may have resulted in detriment. The government is committed to ensuring that people who need in-person banking, including vulnerable customers and those with specific needs, can continue to access essential services.

Last month, as I mentioned, the government launched an independent review into access to banking services led by Richard Lloyd, former executive director, at which and a board member of the FCA. I would encourage my Lords to engage with him. As they have already noted already, as he conducts this critical work, and I'm glad to hear much agreement from many of my noble Lords today, as this is a critical issue and the government is right to be exploring it. Clause three ensures that we can act swiftly and proportionately if the evidence to access to banking services reviews supports intervention.

Once the Access to Banking Services Review has concluded and made its recommendations, the government will assess whether any further, further legislative change may be required. I appreciate that the power is broad, and that many of the amendments in this group are aimed at scrutinising or reducing the breadth of that power. I also recognise the Delegated Powers and Regulatory Reform Committee has drawn clause three to the attention of the House, and has recommended that the power be removed from the Bill. The government has considered that report and will be responding in writing in the normal way before the report stage.

We accept that this is a broad power, but we consider that power is needed now so that once the independent review reports, the government can respond promptly and proportionately in light of the evidence and recommendations it provides. As the review is still ongoing, it is not yet known what detriment exists, which customer segments are indeed most affected, and whether further intervention is needed or what form it should take. The government is committed to keeping all aspects of this power under review, as the independent review completes. It works.

It completes, it works. I would like to pass on my personal welcome back to Lord for his comments about ministers. Change is indeed pertinent today. On a day like today, I'm not casting too far in the future. Indeed, I keep checking my phone just to see if I make it through the committee stage. Lord Vox asks whether this power could be narrowed. I can confirm that the government expects to now have this power once the review has concluded in October, and has had the opportunity to consider the recommendations, this will provide further clarity on any appropriate interventions, which will allow the power to be refined.

Lord.
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None Portrait Speaker 4
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The impacts on banks and other relevant businesses. If the Treasury brings forward regulations under this clause, it will publish impact assessments in which will consider the impact on firms as well as the proportionality of regulation in a similar way. Amendment 23. In the name of my noble friend, seeker and spoken to you by my noble friend Lord Davis of Brixton, would require the Treasury to have regard for the need of local banking services when making regulations under clause three. I can reassure my noble friends that the review will consider the need for in-person banking services and the impact on any specific cohorts or demographics regarding funding.

This is something to be considered once the review has identified the scale and nature of the consumer detriment, and the government has considered how to respond. Likewise, amendment 22 in the name of noble Baroness Baroness Tyler of Enfield, requires the Treasury to have regard to several matters relating to existing provision of banking services, including through banking hubs and the Post Office. The review will consider the sources of evidence as part of forming its recommendations regarding a specific point on the time between the bank branch closures and the opening of the bank.

I can reassure her that if a banking hub is recommended, the FCA rules already require banks to not close existing cash access services, such as branches, until the recommended solution is in place. Turning now to amendments 20 and 25. These amendments would require the Treasury to commission further independent reviews if it wishes to make subsequent regulations. After first exercising the power in this clause. There is an existing requirement in clause three for the Treasury to have regard for the recommendations of the current review when making regulations.

The review was commissioned to proactively bring together the evidence from across the UK, and to look at the trajectory for access to in-person banking services, not just the position as it currently stands. If the government considers it necessary to make further provision in the future, it would envisage this to follow the usual process of consultation and impact assessment, beginning from the baseline of evidence provided by the on going review. Further, wide ranging independent reviews are likely to be disproportionate. Amendment 24 in the name of noble lady Baroness Hampstead, is similar.

It would limit the power to only be used to implement matters arising directly from the independent Access to Banking Services Review. As I've made clear, the government's intention is for the power to be used to implement the recommendations of the review. However, it is important that the power is not limited solely for this purpose. In the case, further relevant evidence outside the scope of the view comes to light as ministers are considering the review's recommendations. The government should be able to consider all relevant evidence, not just the review itself, before making any regulations.

Turning to amendment 19, which would require the powers to be used to make regulations only if the relevant banking services will not be provided on a voluntary basis. The Treasury welcomes action taken by industry to support customers and welcomes the voluntary commitment, such as services provided in banking hubs, that the industry has taken forward. The Treasury will consider relevant information in determining any regulations to take forward following this bill, including any relevant voluntary arrangements already in place. Turning to amendment 27 in the name of noble Baroness Baroness Bowles of Berkhamsted, which removes the ability of regulations made to be ambulatory and requires the Treasury to update regulations if any rules they reference change.

However, it is necessary for the power to make ambulatory provision to provide sufficient scope for the regulations regulation to operate in a practical way. In particular, it may be necessary for regulations to reference other instruments that may be amended, such as FCA rules, in order to act rapidly. If there is no clear evidence of consumer detriment that this must be addressed. And finally, amendment 26 in the name of. In the name of the noble Lord. Lord box of Harrowden would remove the ability for regulations made under this clause to amend Acts of Parliament as the recommendations of the Independent review into access to banking services are currently unknown.

It is necessary for clause three to be able to amend primary legislation to respond to any recommendations that are made. I hope I have explained why the breadth of this power is necessary at this point, and given the reassurance that once the review has concluded, the government will consider how this power can be narrowed while still achieving the desired outcomes. The Treasury will engage with all stakeholders and carefully consider the evidence ahead of making any regulations. I therefore move that clause three stand part of the bill and ask the noble Baroness to withdraw her amendment.
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None Portrait Speaker 7
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Noble Lord. Have taken part in this debate. A number of noble Lords expressed their views on what kinds of services should be made available, but we have the Lloyd review and we now await the outcome of the Lloyd review. That may or may not answer questions to all noble Lords satisfaction, but at least we will have a starting point. And that brings me to the key. One of the key issues that arise from the debate we've had, which is sequencing.

It is normal to identify a problem, then decide whether or not legislation is required to deal with the problem, and then take legislation. That has been the way we have done business through Parliament for time immemorial. The government, not just in this case, but in other cases as well, are starting to flip that on its head. Let's take some powers then. Let's see if we've got a problem, and then see if we can use the powers to solve the problem. That is not responsible legislation.

And I think, uh, I think the minister has acknowledged that the breadth of powers, but I think he has failed to articulate in a way that will satisfy the committee the reasons, the rationale for having such a broad power. The minister has referred to the DRC report. It is a very clear finding of the DRC, and the minister will find that the House will generally take a lot of persuading not to follow such an explicit finding of the. The Delegated Powers Committee. I think.

This is not going to rest here. The Minister will be aware of that. This is a power that is taken at the. Wrong time without sufficient evidence or definition. Um and and is in consequence that had been taken in the wrong time without any evidence is being drafted in such a way that in fact is deeply offensive, constitutionally, the only thing I need to say in closing, my Lords, is that we will be returning to this at report. I beg leave to withdraw.
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None Portrait Speaker 21
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My lord.
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None Portrait Speaker 16
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Um. Amendments 28 and 29 are in my name. Amendment 30 is in the name of my good friend Baroness Bowles, and I'm very supportive of amendment 30. But I'm going to focus my remarks on amendments 28 and 29. Uh, my Lords, let me at the beginning thank the fair Banking for All campaign, a coalition of 38 organisations coordinated by the Finance Innovation Lab and bringing together civil society organisations, anti-poverty groups, community development, financial institutions, fintechs, researchers and people with lived experience of financial exclusion and their work on drafting amendments 28 and 29 assures that these amendments work both in law and in practice.

My Lords, access to Affordable Credit, which is the subject of these two amendments, is now one of the biggest challenges that we face in the UK. Millions of individuals and businesses are excluded from fair and affordable credit, despite being financially viable. Over 3.5 million people are handling this by taking out high cost credit. The consumer duty on banks does not result in any attempt by banks to fill this market failure, nor have they been directed to do so by the FCA. Now, my personal focus has been very much on SMEs, which need credit to grow as the backbone of our communities and source of new jobs.

The Federation of Small Business records that over half of all small businesses rate the availability of affordable credit as poor. To the conventional banks and talk to them about these customers, they will say to me that they are very open to lending to small businesses. And then I quickly find that they mean they will offer high priced loans backed by property, not by cash flow. And they want personal guarantees from the owners of the SMEs. It's a consequence of the change in the business model of the high street banks.

I think in many ways earlier, Baroness Noakes acknowledge that that's a local banking, as we once knew it has disappeared. Decisions are made by bankers or algorithms which don't know the customers or the businesses except on paper. They don't know that Joe has a convincing expansion plan that Jane always repays her debts. They are detached from the reality of a. Individual banking that's able to take individual proposals into consideration. Now, adding to that, that's a. Small businesses have become suspicious of the banks.

The way the banks behave to customers following the 2008 financial crisis, and I mean small customers. Um, I think shocked many people seizing assets, even when loans were being paid on time and in full. But because, uh, various, uh. Property to, to value ratios that a loan to value ratios, uh, had changed with, uh, with the fall in property values in that era, but paying on time and in full would seem to me to suggest you are a viable customer and to find that your loan is called and the assets seize was really destructive.

Many people, I think, thought that challenger banks and new fintechs would be willing to provide credit where the conventional high street banks failed. It hasn't turned out to be true. The new players market themselves primarily to the same pool of SM businesses that the banks seek to service, and indeed have now taken 60% share of that market because the new challenger banks and fintechs typically offer better products and efficiency. But the access to finance problem has remained and indeed gotten worse. It hasn't been resolved by the entry of these new players.

Now, I'm pleased that this bill makes some small moves to improve the situation by expanding the role of credit unions and mutuals, and strengthening open banking. But frankly, it doesn't begin to touch the scale of the problem. My amendments 28 and 29, follow the pattern of the United States, which dealt with the issue of exclusion head on with the Community Reinvestment Act of 1977. The act, in effect led to the creation of a layer of Community development financial institutions, mostly CDfi banks and credit unions, which tackle the problems of exclusion by the big banks in the USA, there are now 1400 cdfi's extending right across the whole nation, which manage more than 450 billion in loans, both to small businesses and to individuals.

They provide advice, financial education, patient lending and individual assessment. They are also the backbone of economic success in the United States, providing stability at any economic crisis, making sure disadvantaged communities are not ignored and that includes rural areas and growing the businesses of the future. The big American banks, which so oppose the scheme originally because they were required to fund it to remedy exclusion, are now strong supporters realizing that the Cdfi's develop their customers of the future. Have cdfi's in the UK and the British Business Bank, which is an enthusiast, has an enable fund from the government of £150 million over two years to expand the sector and and enable growth guarantee scheme to reduce borrowing costs.

But we still only have some 60 cdfi's in the UK. Lending by different estimates from something between 250 to 400 million a year. Now. It's an important contribution. Cdfi's report that 94% of the businesses receiving their loans have previously been rejected by a bank, but frankly, it is a pathetic number compared to the US. The government has set up a UK community bank, a community finance partnership task force to develop partnerships between banks and Cdfi's, and it's chaired by Bob Annibale, who is the former director of city.

And by that I mean Citibank. That's inclusive finance, who is a very strong advocate for this agenda. But frankly, I am fed to the teeth of small steps. My amendment follows the US Patent amendment 28 requires the FDA to set up a rating system to measure the performance of banks and building societies in providing affordable credit to individuals, households and small businesses and rating it against appropriate measures to test for exclusion. Rating systems like this are not a US invention. Similar setups are used in the UK by the Care Inspectorate and the Food and Health Inspectorate.

Amendment 28 would enable the FCA to require a. Oh, sorry, I'm moving on to amendment 29. So that's setting up the. The framework of the rating system. Amendment 29 goes beyond that and would enable the FCA to require a proportionate remedy where any bank or building society falls below the threshold required by the FCA, and the benchmarking is critical. The language permits the banks to avoid changing their business model, and this speaks in a sense, to something that Baroness Neville Rolfe raised earlier, that which is that banks that have changed very fundamentally, and we're not asking them to change back.

What we're doing with this system is giving them the opportunity to find another way to deal with the exclusion. So the language permits the banks to avoid changing their business model, and instead allows them to support other arrangements for affordable credit, including credit unions and cdfi's. As I have said, the model is tried and tested in the United States and is understood by every major bank. Now, I anticipate that some people will say this proposal is burdensome gathering, data gathering, exercise for the banks, but it isn't.

In 2013, this House passed an amendment drafted by me and by Lord Sharkey to set up a voluntary scheme for banks to report most of the relevant data and by postcode so very granular to UK finance, with a few tweaks, the relevant data for the rating scheme proposed. An amendment 28 is already available and in usable format. The problem is that the data hasn't been used to create a remedy. Another example of the way the FCA does nothing in the face of market failure without being dragged kicking and screaming, usually by this house.

And that is why the Remedy Amendment Amendment 29 is so important. Now it's second reading. A number of peers spoke out in support of Cdfis and credit unions. Many of us recognise that the high street banks will never return to their local roots, and dragging them to lend when it doesn't fit their business model means poor service. New challenger banks and fintechs haven't filled the gap. The government is committed to a growth agenda. I can think of few measures that would drive growth more rapidly and sustainably across all parts of the country than these amendments to fix the loss of local and community banking, I beg to move.
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None Portrait Speaker 7
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Proposed amendment.
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None Portrait Speaker 10
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I'll speak briefly to amendment 30 in. In my name, which would introduce a fiduciary style duty on firms in their dealings with consumers and small businesses. This group is about affordable credit and consumer protection. And the problem that we see again and again is not that firms set out to behave badly, but the good intentions drift under pressure to increase revenue, under pressure from internal incentives, and sometimes under pressure from government to deliver growth. When that drift occurs, the cost is pushed on to consumers.

And as I said earlier, passing costs on to the people is not growth in any meaningful national sense. Motor finance, the example that keeps on giving shows this. Clearly the FCA did not intend to create misalignment. Firms did not intend to breach the law, but because the rules were not anchored in a well understood legal framework, the system drifted. The FCA's rule rules permitted non-disclosure of commission unless asked. The statute required disclosure. The gap widened over time and nobody noticed until the consequences were enormous.

We see similar patterns in insurance add ons and premium finance arrangements. These products did not begin as bad faith practices. They began as convenience, but over time, margins, accumulated, incentives shifted, and the products drifted into a place where the consumer's interests were no longer the anchor. That is not malice. It is drift, the same drift as we saw in motor finance. And it happens when rules are not anchored in well understood legal principles. And this is the point.

This is what happens in a rules based system, which is what we have. However, we may pretend rather than a principles based system. Has been here before, and as Baroness Kramer has already explained, when this House supported Lord Sharkey's proposal for a duty of care, the intention was to create a principle, a relationship based obligation that firms must must not exploit unequal bargaining power or information asymmetry. What emerged instead was the FCA's consumer duty valuable?Well, I suppose so. But fundamentally, a rules based construct shaped in part by industry pressure for something that their compliance departments could tick.

Rules can be changed, narrowed, or reinterpreted. Principles such as duty of care and fiduciary duty are legally understood, durable and resistant to drift. My amendment does not attempt to rewrite the consumer duty. It simply provides a well understood statutory anchor, a benchmark against which which to assess products and detect the kinds that end up exploiting imbalance. The test becomes is it fair?Not merely, not merely. Is it the next step on a path that might already have drifted.

In other words, fairness versus incredible, incredible incrementalism?I beg to move here.
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None Portrait Speaker 11
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Very good.
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Apart from.
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Incrementalism.
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My Lords, I declare my interest as as a shareholder and a director of financial services companies in asset management and in wealth management, um, I have considerable sympathy with the objectives that the noble lady, Baroness Kramer, is seeking to advance access to. Affordable credit is a genuine problem in this country, as in many others. And the House is right to view financial exclusion as a problem. However, I am unable to support amendments 28 and 29 on the grounds that the proposed solution will not actually solve the problem and may in fact exacerbate the issue.

That this bill is partly designed to alleviate, which is excessive and complex regulatory demands on our final, on our financial institutions, which are making us less competitive. My first concern is one of basic commercial economics. Banks and building societies are not lending to certain sections of the community, however deserving they might be, because of a lack of understanding of the opportunity or a lack of data. They are not serving those clients at scale because the risk adjusted returns of lending to higher risk borrowers at affordable interest rates, and indeed, the compliance risk of so doing do not work commercially.

A rating framework published by the FCA will not change that calculus, but what it does is create yet another compliance exercise, another box to be ticked, another issue to be managed without addressing the underlying economic reality which makes such lending unworkable. My second concern is the risk of unintended consequences, a rule that would rate banks on their willingness to provide credit to financially excluded populations, in some cases, very high risk borrowers could create an implicit incentive to lend more to people and companies who can't really afford the loan. The amendment contains no credit quality safeguard and no minimum standard of affordability assessment.

Yet banks could be incentivized to lend just to improve their ratings. The impression the pressure to improve ratings would not be cost free. Of course, in practice, banks won't be carrying out this lending for solid financial reasons. So if they feel forced to extend credits into markets with reduced or zero margins, they will seek to restore those margins elsewhere through higher charges on other products, reduced rates on savings or increased lending spreads in other parts of the business. The cost will not disappear.

It will be redistributed invisibly to existing clients who also deserve protection. Moreover, I draw my Lords attention to the stated purpose of this bill, which is to reduce regulatory burden, not add to it. Yet here we are being invited to add a new mandatory framework, new data collection requirements, new publication obligations, and new performance ratings, all enshrined in primary legislation. This is precisely the regulatory ratchet, the cumulative, seemingly endless new measures that damage our competitiveness. Financial Services Regulation Committee of this House, chaired by my noble friend Baroness Noakes, concluded in their report last June that the cumulative burden of regulatory compliance in the UK is perceived to be disproportionately high.

Diverting resources that could otherwise support growth as a serving practitioner sector, I strongly agree with this finding diverting lending from growing businesses to those effectively in financial need is not going to improve our economy. If anything, it will lead to loan losses for the banks and encourage excessive borrowing from those who can't afford it, while piling on even more costs and regulatory obligations on financial firms. We should resist the urge to reach for intervention every time a market imperfection is identified. Not every problem has a regulatory solution.

Indeed, those solutions can often have unintended consequences, which increase bureaucracy and undermine growth. So I cannot support these amendments.
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None Portrait Speaker 13
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I rise. Support amendment 28, to which I have added my name. As we've heard, this amendment would require the FCA to establish a framework for assessing banks and building societies, provision of affordable credit. I spoke at some length on the importance of equal access to credit at second reading. I welcome what is already on the face of the bill as I did then, but I think we can and should do more to witness. A crisis of deepening economic inequality in this country.

The most vulnerable communities. It's worsened by a lack of choice, struggling to meet their most basic day to day needs. Long term financial planning is not an option for so many families. Today. Daily life is a battle to put food on the table and to keep the house warm in winter. Perhaps not today. So it's often the most impoverished then, who are forced to accept riskier loans to turn to loan sharks. Many of those operate in my Diocese of Manchester, or to enter credit agreements which are unable to pay back, and in doing so, they find they're paying a poverty premium, which then exacerbates ratchets the problem round and round again, deepening the financial injustice.

As I said earlier, my Lords, I'm trying to be more overtly religious in my speeches on this bill today. So let me assure you, this is not merely a modern phenomenon. I could point out specific places in the Hebrew and Christian scriptures, but very specific rules are set out to ban the most egregious practices around unfair credit arrangements. Things like extortionate interest charges or the taking of essential items like protective clothing or workers tools as a pledge for credit. Yet, my Lord.

Adds the alternative to unfair credit can't be no credit. It has to be fair and affordable. Credit across the country, in churches and food banks and charitable organisations, the impact of financial exclusion on human dignity. Another important biblical concept and well-being is being made apparent. We also see how certain communities who are particularly disadvantaged. If you're a migrant with not a longstanding credit history, if you're an adult with less financial literacy, unable to navigate complex financial systems on your own, if you're a family experiencing life where you're living from paycheck to paycheck.

And my Lord, we've passed about ten years ago the point when most families who are working age families in poverty are actually working families and not families, where nobody is in work. The service is community institutions provide to these communities are essential, but enough in order to truly flourish. Individuals and households facing financial insecurity need access to credit that gives them choice and independence. That creates opportunities for them to become full participants in economic life. One thing I learned when I was working on responsible investment for the Church of England's National investment bodies was the phrase social licence to operate.

And I think that's an important part of this conversation today, although I haven't heard it mentioned as yet. But the banks, not only those who were bailed out, so expensive to the taxpayer, uh, less than 20 years ago, they are required to operate not simply as best turns a profit, but as fits the needs of the society in which they're working. And that requires a willingness to provide social goods, not merely the most profitable products, to the most eligible customers. What set out in amendment 28 would not only enable us to measure where affordable credit is and isn't reaching people, but would lay the foundation to make targeted improvements.

I'm told that much of that data the banks already have, it's simply a question of making it available, providing it, publishing it with a clearer understanding of the barriers that minoritized communities are facing. We can then work beyond this bill towards financial policy, which tackles financial exclusion at its very root, creates new opportunities for families in debt and promotes economic growth on a wider scale.
18:57
None Portrait Speaker 7
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What my noble friend Lord Massey said earlier on on these amendments, in particular on amendment 28, um, when people talk about affordable credit, what they mean is subsidized credit because of the. The terms on which financial institutions are prepared to advance money to the kind of individuals and organizations that have been referenced so far are always provided on, on a risk adjusted basis. And that will reflect the, um, the likelihood of default and the amount of loss given default. And that's what drives pricing.

And that's what drives people to say that they can't afford the prices at which credit is advanced to them. So we need to be clear about this. What we're saying is that we think that some groups in society need to have access to credit at below a risk adjusted rate. And so there's a fairly simple, uh. Question is whether we think we should, we should impose on banks the requirement to subsidize one way or another, whether it's through the vehicle of community finance organizations or whether it's directly by charging lower non-risk adjusted rates to certain groups, whether we think that's something that should be imposed.

My answer to that would be that it should not be. The banks already have quite considerable, um, costs imposed on them. Uh, for example, the banking hubs that we discussed earlier, they're not, uh, things that. Would be set up in pure for pure economic reasons. Another is the provision of basic bank accounts. Um, there has to be a point at which we stop saying banks can just provide more things to groups of people who couldn't otherwise afford access to them.

So I'm very much opposed to amendments. 28 and 29. I think that's an unreasonable imposition. Um, turning to the noble Baroness Bowles, is amendment 30. Um, I am very unclear about exactly how the noble Baroness sees her amendment relating to the consumer duty, which has only been in existence a couple of years and we haven't yet seen the full effect of the consumer duty. Um, and I assume that the noble Baroness is trying to set up an actionable um.

Uh, right. For consumers, though she is not explicit in saying that. And I think that would be taking regulation, uh, one step too far. We already have the complicated, um, arrangements of the, the FCA overseeing consumer requirements with their enforcement powers to set up another parallel, uh, ability of giving individual, consumers, uh. Rights of action under a rather ill defined fiduciary duty, as in this amendment, I think would be, um, a. Wise addition to the regulatory landscape.
19:00
None Portrait Speaker 5
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My Lords.
19:00
None Portrait Speaker 11
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I am.
19:00
None Portrait Speaker 19
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Grateful to the noble Baroness, Lady Kramer and Lady Bowles, and also to the right Reverend prelate for his, uh, reference to Scripture in Group five. For bringing these amendments, the amendments raise important questions and will facilitate a useful debate about access to finance, the responsibilities of financial institutions, and the right way to support small businesses and undeserved communities. I will begin with amendments 28 and 29 in the names and the name of the noble Baroness, Lady Cramer, and in the case of amendment 28, also the right Reverend prelate, the Bishop of Manchester.

These amendments seek to require the FCA to establish and maintain a framework for assessing and rating banks and building societies performance in providing access to affordable credit, including for underserved groups. Amendment 29 would go further and require firms falling below a minimum performance threshold to take proportionate remedial action. Access to financial services and to appropriate credit is, of course, extremely important. That is particularly true for small and medium sized businesses, Micro-businesses and those parts of the country where access to finance can be more difficult.

If we can improve the flow of capital to productive businesses, we can stimulate growth, increase employment, allow firms to develop and generally improve the health of our economy. Many of the most successful businesses in this country began as small enterprises. They require confidence, access to working capital and a banking system willing to support their growth. When credit is unavailable or available only on unreasonable terms. Good businesses can be held back. Investment can be delayed and opportunities for employment and innovation can be lost.

However, my concern is with the mechanism proposed. I am not convinced that this can or should be done from a centrally mandated position. Banks and building societies have to make lending decisions on the basis of risk, affordability, regulatory capital, commercial judgement and the circumstances of the borrower. Those are complex assessments. They are not straightforward public policy levers that can simply be pulled from the centre if banks. Are going to make these decisions on the basis of their commercial interests, then in many cases they will already have done so.

Where lending is not happening, to the extent that the noble Baroness would like, there is a reason for that. It may relate to risk appetite. It may relate to capital requirements. It may be relate to information gaps, the lack of security, regulatory burdens, compliance costs or wider economic uncertainty. But the answer, it seems to me, is to work out why that is the case and then address those underlying barriers. Answer should not be to move towards a system in which the government, through statute, begins to direct the lending priorities of banks from the centre.

Once we go down that road, we risk blurring the line between commercial banking and public policy. Allocation of credit. That is not a small step. It could have unintended consequences for financial stability, for risk management, and ultimately for consumers and taxpayers. This would also send a worrying signal that the UK is a jurisdiction in which private interests are essentially subordinate to political objectives, I. Support efforts to promote investment into SMEs, microbusinesses and underserved communities, but I do not think the right mechanism is one enforced by the government in statute through ratings thresholds and mandatory remedial action.

I would therefore be grateful if the Minister could explain what work the government is doing with banks and financial service providers to improve access to affordable credit, particularly for SMEs and underserved groups. I hope he can reassure the committee that this work is being done with those organisations, rather than over them. I turn briefly to amendment 30 in the name of the noble Baroness, Lady Bowes, and follow. Follow the words of my noble friend Lady Noakes. Would introduce a fiduciary duty requiring firms to act in the best interests of retail customers, including small businesses.

It would include duties around avoiding exploitative practices, ensuring suitability and in fairness, and taking reasonable steps to prevent foreseeable harm. I understand the concern that sits behind this amendment. We all want financial services to treat customers fairly. We all want to prevent exploitative practices. We all want suitable products, clear terms and proper regard to foreseeable harm. Those are important principles. However, I am against imposing a broad fiduciary duty of this kind across regulated financial services.

The concept of fiduciary duty carries with it a particular legal character and a potentially very wide set of implications, if applied broadly to all retail customer relationships, including small business relationships, it could create significant uncertainty about the legal obligation of firms. The interaction with existing FCA rules, and the extent to which ordinary commercial relationships have been recast as fiduciary ones. We are also concerned that this step could lead to a serious increase in the regulatory and compliance burden, which would fall on firms who are already struggling.

Indeed, that there already is a substantial framework governing conduct consumer protection, fairness, suitability and foreseeable harm. The question for the government and the FCA should be whether that existing framework is operating properly and proportionately, not necessarily whether adding a new and overarching fiduciary duty should be imposed on top of it. My concern is such a duty could invite litigation, uncertainty and defensive behaviour. It might also make firms more reluctant to serve marginal or higher risk customers if they fear that any adverse outcome could later be characterised as a breach of fiduciary duty.

That would be the opposite of what many of us want to achieve in this group, which is broader and better access to financial services. Indeed, it would make both providers and regulators more risk averse, my Lords. As these amendments raise an important debate about access to credit, the treatment of customers and the role of financial institutions in supporting growth, I support the objective of improving access to finance for SMEs and microbusinesses and underserved communities, and hope to hear support for this from the Minister, but we should not seek to achieve that by central direction of lending decisions or imposing broad new legal duties whose consequences would be uncertain, and work against the government's broad objective of simplifying regulation and reducing burdens.
19:07
None Portrait Speaker 4
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My Lords amendments 28, 29 and 30, aimed at increasing access to finance and ensuring that customers of financial services firms are protected. I recognise the intention behind these amendments. However, I do not believe that either solution is workable. Turning first to amendments 28 and 29, I agree that data on access to finance and holding the sector to account is important. However, these proposals would introduce a new, prescriptive and burdensome framework on the FCA and firms, which I am not persuaded will deliver the desired output.

Amendment 29 would require the FCA to establish a framework to monitor, assess and publicly report on certain banks and building societies performance in providing access to affordable credit and amendment 29 requires that the FCA to take action against firms that do or do not meet a minimum standard. This approach resembles as noble. Baroness Kramer referenced the United States Community Reinvestment Act of 1977, but we should not assume it would have the same effect here, as our starting point is different. Nearly 50 years later, in the digital age, with far more diversified credit market.

In any case, lenders already published significant data and. Chapter seven of the FCA's Banking Conduct of Business sourcebook requires extensive disclosure on personal and business current accounts. We are also have the FCA's Financial Lives Survey, the SMA, SME Financial Monitor, and the British Business Bank's annual SME finance publications, amongst others. To amendment 29. This would require the FCA to act against firms that do not meet a minimum lending standard, striking the right balance on access to credit has long been a challenge.

We want consumers to be able to access credit where it supports financial resilience and businesses to secure their financial needs. Finance needs to grow, but inappropriate credit can lead to overindebtedness with serious consequences. This amendment could effectively compel lending to more vulnerable groups or to SMEs. Even a well-designed regime could be a blunt instrument with a risk of unintended outcomes. It would also represent a very serious, significant intrusion into firms commercial decisions. More fundamentally, it is difficult to see how firms could increase lending, taking on greater risk without raising prices to reflect that greater risk.

If firms don't price risk appropriately, then this opens us up to financial stability risks. The FCA would be well placed in the invidious position of having to mandate affordable credit, while the mechanism required to expand provision would tend to increase costs and potentially increase risk, both the borrower and to the firm that runs directly counter to the intended objective for vulnerable customers and SMEs, whilst I. Cannot accept these amendments, I wanted to stress to noble Lords that the government is not complacent about financial inclusion or availability of SME finance.

Lord Altrincham also asked me to set out what the government is doing and I'm happy that noble Baroness, Lady Cramer, has mentioned several of these interventions already. The government published its financial inclusion strategy last autumn, and we are supporting practical interventions for consumers, including a small sum credit pilot, enabling mainstream lenders to test lending to customers outside their usual risk appetite, Monzo has announced. As the first participant in that scheme. Earlier this month, we have also launched a transformation fund for credit unions alongside common bond reforms in this bill to strengthen their lending capacity.

And we are advancing. We are also advancing targeted SM finance measures to improve competition and supply, including enhancing the Consumer Credit data sharing scheme, including through clauses 40 to 41 and 43 of this bill, were supporting up to £150 million of lending through Community Enable funding programme over the next two years, we are establishing a CDfi task Force and working with industry to improve bank referrals. Indeed, tomorrow I'm meeting with several large asset managers as chair of the the place Based Impact Investment Scheme as well. We will set out next steps to open finance later this summer, and this has a significant potential to support SME lending across a wide range of providers, alongside broader work with the Bank of England on capital and ring fencing.

I would also highlight community development finance institutions, which I know have priority for the noble lady, Baroness Kramer. In addition to CDfi, Task Force and the Community enabled funding programme that this government has funded, the sector benefits from Fair for all finance, Affordable Credit Scale up programme, which has committed over £40 million in social investment in England to date. The financial inclusion Strategy further includes measures to strengthen community finance, including promoting partnerships with mainstream lenders. Taken together, these measures support access to finance in the UK in an appropriate and responsible way.

Moment 30. This amendment would introduce a new fiduciary duty on firms when carrying out the FCA regulated activities, it would place specific, legally binding requirements on firms. I agree with the noble Baroness that this is vital for firms to act in a way that delivers good outcomes for consumers. However, I believe the FCA regulation is able to achieve this and I am concerned that this new duty would risk creating overlapping requirements, causing confusion and reducing consumers access to finance. The FCA's consumer duty is designed to set a high standards of protection for retail customers by requiring firms to act to deliver good outcomes in line with the outcomes sought by this amendment.

It requires firms to put consumers needs at the heart of their business, including by acting in good faith, avoiding foreseeable harm and supporting consumers to pursue their financial objectives. In practice, this means firms must design products and services that meet consumers needs, provide fair value, communicate clearly and offer effective support. I am concerned that the requirements set out in this amendment would risk making more vulnerable customers more expensive and risky to serve, which would reduce the access to products such as credit and insurance. Introducing a novel statutory duty, the precise scope of which would fall to be settled through litigation over a number of years, would create significant legal uncertainty and uncertainty itself would carry a cost which firms would be likely to manage by withdrawing from or repricing services to higher risk customers.

I recognise that there is some precedent for fiduciary duty and trust based pension schemes. However, the dynamics of the market are very different to wider consumer financial services. Typically, employer pension schemes do not choose which individual customers to serve, and the fiduciary duty applies at the membership level. My Lord, I genuinely understand the importance of lending for all parts of the economy, and I understand the need for borrowers to be protected. But I am convinced the government is taking the right set of actions, and I am afraid that amendments 28, 29 and 30 would bring significant unintended consequences.

I would therefore ask the noble Baroness to withdraw her amendments.
19:14
None Portrait Speaker 16
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I thank the Right Reverend Bishop of Manchester, both for signing amendment 28 and for speaking so eloquently in this debate that, um, other than that, I wanted to say something very specifically to a Lord Massey and to, uh. To Baroness Noakes. Both of them are very involved in the world of finance. They meet international financiers, and I'm going to give them a challenge when they meet American financiers and bankers, whether it's here or it's in the United States, would they please raise the issue of Cdfi's?I think Lord Massy will find that basically everything that he said is completely in the place of the US experience.

And I would say the same thing to Baroness Noakes. The loss ratio for Cdfi's in the States is in fact slightly lower than for banks as a whole, but they have a capacity to manage risk because they know their customer in a way that many banks do not know their customers. And because they build structures around their customers. So if somebody comes in with a good business idea, they enforce that with advice, with, uh, a. Uh, with, with help on marketing, whatever else is necessary because they see their role as making that entrepreneur a success.

And so they bring in those additional resources. That's a loan book of 450 billion. That is, to me a great success. This is not some marginal experimental idea that has floated around and that I'm echoing back. I'm talking about almost the premier strategy to provide the background and backbone of small business and small business growth across one of the most successful economies on the globe. And when the minister says, well, you know, we're a different place in this area, we're almost identical.

That's an exclusion by banks. Is is not based necessarily. Of course, there would be some customers who come in. The risk is assessed. It's not appropriate to lend them money. But our high street banks today do not have the capacity. It's not in their business model to do that kind of detailed, individual, detailed digging, understanding if it's a if it's a shop that wants to open a second premises, what that business is about, what they do, that what the owner is like, what their record is like, understanding and working with them.

They no longer have the capacity for any of that. And this is the remedy to be able to fill that very substantial missing layer of community banking. And I suggest if we want growth in this country, we will have to do that. That. So I recommend that everybody who thinks that this was some sort of, you know, not applicable here idea talk with the American financial institutions, because I can tell you whether you're talking to JP Morgan Chase or whether you're talking to the smallest bank, whether you're talking to the largest multinational or to the smallest business, the person you will get confirmation from them of the effectiveness and success of this sector.
19:17
None Portrait Speaker 11
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Is it does.
19:17
None Portrait Speaker 16
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I have to withdraw.
19:17
19:17
19:18
19:19
None Portrait Speaker 3
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I said. These amendments. This group of amendments, this extensive group of amendments is focused on the role and functioning of the Financial Ombudsman Service, Fos. We've already had a taste of that debate with Group two. But, um, I, I'm concerned there isn't going to be enough time, uh, for me in my 15 minutes. Perhaps the whip is already thinking, get on with it. But, uh, that, that I won't be able to finish it all. And I have said that I will take the opportunity if I haven't been able to ask my noble friend the minister all the questions that I want within my allotted time.

Um, I will come back to some further questions when we get to, uh. Clause eight. Stan part. Um, but starting this group of amendments deals with three issues time limits for taking cases to follows the proposed system for referral of issues to to the FCA and significantly the changes to the fair and reasonable test. This is a lot to to deal with. And in fact, it's the interaction between these three different changes. They might appear separate, but the overall impact has led to real concern that the interests of consumers are not being given sufficient attention.

And I must pay tribute to the support I've received. I'm vice chair of the, uh. Investment, finance and financial investment fraud and Financial Services, uh, All-Party parliamentary Group. I'm officer, but but also from, uh, money which and from, uh, fairer finance. They've all expressed concerns that consumers interests are being adversely affected. And those concerns most definitely do need to be addressed, starting with clause six and my amendment 31. Um, I am concerned about the changes to the ten year long stop on complaints to the Financial Ombudsman Service to fuzz the case for some kind of time limit is not unreasonable in itself.

Firms do not wish to face indefinite exposure to complaints about events that happened decades earlier. And I understand why the Treasury wants certainty on that point. But clause six, as drafted creates a hard structural barrier that applies regardless of when the consumer could reasonably have known they had grounds to complaint. That is the floor. It's not a long stop exists. It takes no account of discoverability. Now this matters most for long term products such as pensions and mortgages.

Areas where I've had personal and professional experience, where consumers often do not find out for years, sometimes decades, that they've been poorly advised or mis sold something. Now, the explanatory notes accompanying the bill suggest that allowing complaints years later creates problems with data retention. I don't think that holds up. If we look at the appropriate rule. 952 in the FCA's conduct of Business sourcebook, it sets. Out the record keeping requirements for firms that give personal recommendations on certain pension related transactions.

The rule, as it stands, requires firms to retain their records that were the basis of a personal recommendation indefinitely in cases of pension transfers, pension conversions, pension opt outs and FCA. Those that aren't up to the jargon free standing, additional voluntary contributions for other types of advice. Cobs sets shorter retention periods, but these for pension categories are singled out precisely because of the long term nature of the harm that can arise, and originally because of the personal pensions mis selling scandal of the late 80s and early 90s, a scandal that is too often forgotten but led to an amount a £13 billion being paid in compensation.

The. Significance for the clause six argument is this the ten year. Just. Justification does not stand out, does not stand up. Firms advising on pensions. Pension decisions are already legally required to hold the records, so the ten year rule does not serve that data problem. The indefinitely formulation is worth noting. Most compliance obligations come with a defined shelf life that the fact that the FCA made an exception here reflects a considered regulatory judgment that pension transfer advice is different, and other forms of pensions advice.

The consequences can take many years to materialize, and records need to be available. When the problems are eventually seen. Now, of course, I'm most familiar with the issue in relation to pensions. But it's not just pensions, endowment, mortgages, a good past example where time, were the problems that were arising and were compensation had to pay, were found outside the ten year. So for the very products most exposed to long delayed discovery of harm, the data firms would need to defend themselves.

Already have to have the information which is being required. Now it's worth asking how this is being played out against real cases. If a strict. I believe and suggest I'd be interested in a. Response from the Minister on this. If a strict ten year limit. Without exceptions had been in place during the PPI scandal, I think it would have blocked the mass redress exercise altogether. The worst mis selling happened between 98 and 2005, but public awareness did not peak until after 2011.

Now, this wasn't a case of deliberate concealment. It was total misunderstanding and wishful thinking on the part of the PPI people being sold. But compensation was still due. A rigid long stop could well have disqualified millions of older claims in law before most of the consumers involved would have known that they were affected. So I'm grateful, as I say, if the minister could say how these new arrangements will affect on cases like that, and also, as I mentioned, endowment insurances, the appropriate personal pensions and the discretionary commission scandal in car finance, which is more recent now as it stands, clause six does give the FCA a power to create exceptions to the ten year limit, but it does not say that the legislation will not say what those exceptions must be.

At a minimum. So there is no statutory obligation on the regulator to build in protection for the consumers most likely to need it. Now, my amendment goes further than that. In the name of noble Lord, Lord Sharkey, by writing two specific circumstances into primary legislation itself, rather than leaving them to be worked out later in the FCA rules. First, it's just cases where the consumer faced exceptional circumstances, such as serious ill health or other incapacity, so people will know that they have special, uh, claim in those circumstances.

And secondly, cases where the consumer could not reasonably have known about the financial detriment within the ten year window, these could be exercised on a discretionary basis. But my argument essentially is those cases should be laid down in statute, doesn't preclude the possibility of other exceptions being made. But I think consumers is a question of trust. And the trust requires consumers to know that those exceptions will be available. Putting these exceptions on the face of the bill removes the ambiguity, gives firms the certainty that thereafter, and make sure that deserving consumers are not shut out of redress by an accident at drafting, rather than a deliberate policy choice.

Moving on to clause eight and the powers of the Ombudsman, I want there to be a proper debate about what is actually being changed here, and I look forward to guidance from my noble friend, the Minister. But the question underneath this debate is a simple one. What is the Ombudsman for, and why do we have one instead of just relying on the courts?Uh, for people to get redress for the Fos, the fair and reasonable test isn't something that's been put into and been invented by the Fos itself.

It comes from statute section two, two, eight of the Financial Services and Markets Act 2000 and provides. The complaint is to be determined by reference to what is in the Ombudsman opinion, fair and reasonable in all the circumstances of the case now. What the test displaces is important. The court applies the law strictly. The relevant statute regulations, contract terms and case law. They're on the courts. That's what the courts do. The Ombudsman is not bound to decide a case the way a court would.

That's the whole point of having the Ombudsman that it is not a court, that it is able to take a view as to what is, in the circumstances, the overall circumstances, what is fair and reasonable.
19:29
None Portrait Speaker 18
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Now the rules are the rules for the Ombudsman are. Require the Ombudsman to take into account the relevant law regulator's rules and guidance, code of Practice and good industry practice at the time. But none of them is determinative on its own. Followers can currently find out that if a firm acted within the strict letter of its contract or the relevant regulations or guidance, it can still rule and say on behalf of the consumer, the consumer who is in a much weaker position both financially and in terms of knowledge than the provider that is being questioned.

Can say overall it was not fair and reasonable. All the guidance might have been followed, all the rules might have been followed, but it still seems to the Ombudsman that is not fair and reasonable. And that is the point of the Ombudsman. And effectively, unless I'm mistaken and I'm happy to hear an explanation from my noble friend the Minister. That is the problem. It's taking away the ultimate discretion for the Ombudsman to decide in all the circumstances that it's not fair and reasonable.

There is this asymmetry of knowledge and power. Now, my amendment is intended to be a probing one. I want the government to explain why clause eight is the right way to deliver greater clarity and certainty in those decisions, and what evidence base justifies a change of this scale, and how they can assure the committee that the consumer's access to fair, impartial and timely redress will not weaken as a result. Now, as I've drafted, clause eight raises several risks. First, it weakens the ombudsman impartiality.

Current wording removes that discretion. As I've explained. It undermines the way in which Fos can act as a fast, informal dispute resolution. Body. And third, and I'm. Rushing at this stage. Third, it creates a structural weakness that could erode consumer protection over time without Parliament having decided in any way that it should be weakened. If a future regulatory shift dilutes high level protection, the consumer duty being the obvious example, because clause eight ties forces decision making to FCA rules, consumers access to address will shrink automatically alongside it.

Parliament will have no way to intervene short of primary legislation. And fourth and last, it puts falls out of step with every other consumer ombudsman scheme in the UK. What I really like the Minister to address is the absence of any thematic evidence to justify a change of this scale, despite the scope of what is proposed and the risk it carries for consumers. No public evidence of systematically problematic decisions has been presented. So just to conclude, the government three questions. What historic cases have actually driven the need for change?How many decisions are expected to come up differently as a result of it?And if the answer is many, whether the government accepts that this comes at consumers expense, or if the answer is not many, what the change is actually for, given how many consumer groups are concerned by it.
19:33
19:34
None Portrait Speaker 13
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I'll speak to my amendments. 33, 35, 37, 42 and 43 in this group. And all of these amendments. And my clause seven not stand apart. Motion relate to the force and its regime. And I will try very hard not to repeat too much of what Lord Davis was saying a moment ago, but it is the case that the proposed reforms of the regime are extensive and fundamental. But there is nowhere a clear and convincing explanation of why such fundamental changes are necessary.

In fact, I see no real evidence at all of the need for reform on the scale being proposed here. What we do see looking at the far reaching proposals in the Bill, is an assault on the four key pillars designed into the forest by Parliament. These pillars are independence, speed and simplicity. Time limits on bringing complaints and the fair and reasonable test for determining those complaints. Taken together, part two replaces each of those pillars with subordination to the FCA, a rather undefined change to time limits and the heavy qualification of the fair and reasonable test amounting to its entire abandonment.

This raises the question of why such a radical reform can be seen as necessary and or beneficial. And I did ask the Minister at second reading what evidence there was of systemic failure in the current operation of the Fos and for evidence, for example, that the Fos was acting as a quasi regulator?I've had no reply. But the obvious question in all this is who benefits?The answer is not the ordinary consumer. My amendments are aimed at eliminating or at least reducing the weakening of consumer protection.

To that end, my amendments in clause six, 33 and 35 address time limits for complaints to the Fos, which Lord Davis has also dealt with extensively, and I agree with most of what he said. What my amendments offer as an alternative to his. Is, perhaps they are not quite as strong, but that may be their virtue. It's often very difficult to get things written onto the face of the bill, and sometimes easier to deal with them as I do rather obliquely, via secondary legislation.

Um. The bill proposes in part two other very substantive changes to the way the force operates. One of these changes in clause seven sets out the circumstances under which the Fos must notify the FCA of a matter relating to a complaint under which the Fos must request an opinion from the FCA as to the interpretation of FCA rules. It then sets out in detail how consultation should take place on the matter. And there really is detail. Five whole pages of the bill set out in great detail the various stages required in the referral process.

It adds complexity for no obvious gain, and subordinates the Apos judgements to the FCA's. I have no doubt that the Byzantine array of subclauses or qualifications will introduce overall greater complexity for no foreseeable benefits, and will greatly increase the worse, increase the workload of the FCA and the FCA, of course, is already under pressure and is planning to absorb the PSR. The last thing we need is the creation of new systems, rules and powers that show no promise, no clear promise of benefit, or at least no benefit to the retail complainant.

And as to necessity, we have to take into consideration whether the current methods are faulty or unproductive. And I've seen no compelling evidence that this is the case, only a rather unconvincing summary of the consultation responses. Was received 214 000 new complaints in 2526. It's projecting a resolution of 207,000 complaints in the coming year, of which 206,000 are banking and consumer credit companies, and it has a target of 70% of cases resolved within three months and 90% resolved within six. It doesn't seem as though it's having difficulty operating, and I'm not aware of any significant problems for the average consumer.

But I do hear from the industry that the Fos acts inconsistently, and that it has strayed into becoming a quasi regulator. I've seen no evidence of that, and I'm unconvinced by the simple assertion taken as a whole. Clause seven effectively subordinates the FAS to the FCA, removing yet another foundational pillar independence. We should remove clause seven. I now turn to amendments to clause eight. I will speak to amendments 37, 42 and 43, which deal with how a complaint to the Fos is to be determined.

And this is a controversial matter. The Bill proposes very significant changes. This has already provoked calls to have the whole clause removed from the Bill, and I recognise the strength of feeling behind that. However, the Fos decides on complaints. It's absolutely critical to its operations and to their general acceptability. At the moment, an. Historically, the Fos rules on complaints on the basis of what is fair and reasonable under all the circumstances. The Bill changes that.

It says that a complaint may be determined in favour of the complainants only if, in the opinion of the Fos at the time of the disputed act or omission, either the act or omission did not comply with an FCA rule applying to the respondent, or there was no FCA rule applying to the respondent that related to the act or omission, and the disputed omission was not fair and reasonable in all the circumstances of the case. This adds one of two requirements not present now, in addition to the fair and reasonable test, and it essentially removes the Fos current and critical independent status and reduces the scope to a subset of FCA rules.

And if you ask who benefits from all this, the answer, it seems to me, is not likely to be the consumer. And the small print of the bill makes the situation for the complainant even less attractive. The bill specifies a long list of other requirements to be considered in making a determination. Most of them tilting the scales in favour of FCA rule based compliance. This long list includes any other matters specified in regulations made by the Treasury, and the general principle that consumers should take responsibility for their decisions.

We are here a very, very long way from the fair and reasonable under all circumstances, test. The net effect of the bill's proposals will inevitably be to increase bureaucracy, to increase our remoteness from practical circumstances and a reliance on box ticking procedures. It will convert the independent Fos into a compliant subsidiary of the FCA. And we haven't seen spelled out any evidence justification for such a radical narrowing of the FCA's reach and independence. Could I ask the minister again to provide the evidence that supports these radical changes?By evidence, I mean hard data and not simply a head count of consultees opinions as interpreted by HMT.

As I noted at second reading, the UK's financial sector thrives not merely because it is competitive but because it is trusted to be trusted. Consumers must have confidence that when things go wrong, there is. An independent, accessible and effective route to redress. We have one of those already. It's the Fos. My amendments 37, 42 and 43. Remove the new bureaucratic and complex restrictions and qualifications and subordinations contained in the bill. In their place.

The amendments restore a simple and clear operating framework. They restore the primacy of the fair and reasonable test, and they update the list of things the Ombudsman must or may take into account.
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None Portrait Speaker 3
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My Lords, I'll speak to my amendment 34, which concerns, again the issue of symmetry of enforcement and redress periods. The bill introduces a ten year hard stop on companies on complaints to the Financial Ombudsman Service. But the problem is that the ten year figure is already riddled with exemptions for long dated instruments, for latent harms, for products with extended maturities, and for situations where the consumer could not reasonably have known they had a claim. And the government has already conceded that the ten year period cannot sensibly apply in a wide range of cases and.

I do have a concern that once Parliament writes ten years into statute, that becomes the headline and consumers may assume they have ten years even when they are in one of the many categories where the long stop does not apply. And that creates a real risk that people will time themselves out because they believe the headline rather than the detail. And then there is the deeper structural issue that I've already referenced before, that firms enforcement rights do not end at ten years. They can enforce debts, pursue arrears, securitized portfolios, and benefit from long tail revenue streams well beyond that period.

Yet the consumers ability to challenge an unfair relationship or to bring a complaint may fall away far earlier. That is the same kind of symmetry that I asymmetry that I raised before. So my solution is that at least the starting point should be the duration of rights, remedies and enforcement powers for firms must be aligned with the duration of rights and remedies for consumers arising from the same act or relationship. Now, I've only done that aspect of asymmetry in my amendment. I haven't attacked the ten year hard stop and the impact that might have on consumer perception.

Um, so my amendment doesn't interfere with the exemptions the government has, has already accepted. It simply ensures that where a firm retains enforcement rights beyond ten years for the for various circumstances, the consumer retains the same corresponding right to challenge the fairness of that relationship for the same period. In other words, symmetry. I don't need to say any more because I've been. We've been round this loop again, but it's the same argument in a different place.
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None Portrait Speaker 21
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My Lords. I'm grateful to noble lords across the committee and have noted the variety of concerns expressed on this part of the Bill. As noble Lords have heard, my party has announced proposals to remove the Financial Ombudsman Service and replace it with a new financial adjudication service. That proposal is not before the committee in this group, but we haven't agreed amendment and we will have the opportunity to debate it properly at a future stage. Start by speaking to amendment 32 in my name and that of my noble friend, Lord Altrincham.

The amendment would retain the existing six year long stop rather than extending it to ten years as clause six would do. And as I've already said, I'm very concerned about this move, albeit for different reasons. To some other peers who have spoken. I accept that there is a balance to be struck here. Consumers must have access to proper, effective and fair redress mechanisms. Where a consumer has suffered detriment because of misconduct, poor practice or a failure by a firm, there should be a clear route through which a complaint can be considered and, where appropriate, redress can be provided.

But that does not mean that time limits are unimportant. On the contrary, time limits are an essential part of a fair system. Claims can only be heard fairly when sufficient information is available to both sides to allow them to mount a proper case. And that means records, correspondence, product documents, internal decision making, staff recollections and the wider factual context in which the relevant decision was made. The further back in time a complaint goes, the more difficult that becomes. Evidence may be incomplete documents may no longer exist.

The people involved may have left the organisation. Systems may have changed. Products may no longer be offered. The regulatory contact itself may have moved on. A complaint may still be sincerely brought, but the ability of the firm to respond fairly and fully may be materially impaired. And that is why limitation periods exist. They reflect a basic principle of justice that after a certain period of time, it becomes harder to determine matters fairly and reliable. That principle applies in the courts, and I believe it should continue to be properly reflected in the Ombudsman framework.

I am concerned that extending the Longstop from six years to ten years is pushing the system beyond that fair balance. I have, um, noted the comments made by the noble Lord, Lord Davis of Brixton, um and in particular his references to pensions. And endowment mortgages. Um, and I will be interested in the minister's response on how those particular products are dealt with and whether exemptions would are intended to cover that. That area. Um but on this occasion, um I have to say, I don't agree with the noble Lord, Lord Starkey, who we often agree on matters.

Um, and that is because there is a genuine concern in the industry about vexatious and speculative claims. We shouldn't be naive about this. There is a whole claims management industry dedicated to identifying and pursuing potential claims, and some of those claims may be legitimate and consumers should not be denied redress where it is due. But others may be weak, opportunistic or based on very limited evidence. And if the time period is extended significantly, the volume of such claims may increase and firms will have to devote more and more resources to investigating and defending matters from many years ago.

All of this has a cost and makes all concern more risk averse, so it becomes more difficult for providers to accept customers at the margin. That matters not only for firms but for the wider economy. We can't stimulate growth, support lending and encourage investment and improve productivity. If banks and financial services firms are pouring over more resources in ever more resources into fighting historic claims, rather than serving customers lending to businesses, supporting economic activity and innovating, there's a real opportunity cost. My noble friend Lord Roborough is unable to be here today, but I understand that his amendments, 38 to 41, were intended to probe whether the reforms in the Bill provide sufficient certainty for regulated firms that, where they have complied with the relevant rules and requirements, the Financial Ombudsman Service should not be able to go substantially beyond that framework in finding fault or imposing redress.

This is not to question the proper role of the Ombudsman in cases such as car finance commissions, where the courts have confirmed the relevance of undisclosed conflicts of interest, but rather to test whether the current fair and reasonable jurisdiction risks giving the FAS a quasi regulatory role, including through inconsistent interpretation, retrospective application of standards or decisions which go beyond the rules in force at the time. This is the core issue that has been raised time and again. The Fos needs to be reined in. And does the bill do it at the same time, I recognise that there are a number of views on this question, and it's for the Minister to show that the proposed changes do not weaken the ability of consumers, including vulnerable consumers and in particular.

Those in serious circumstances such as terminal illness, to obtain fair redress. I've been told there's a variance, for example, between companies over acceptance rates. In such cases, the minister might want to look into that. Serious concerns have been raised, and I look forward to hearing the minister's response to this group. My own concern remains that the Bill is drafted, shifts the balance too far. It extends exposure to firms in a way that may appear consumer friendly at first sight, but risks generating delay, uncertainty and large volumes of contested claims.

The six year long stop strikes the right balance. So why is it why ten years?What evidence has led the government to conclude that six years is insufficient?And can the minister break that down by product or financial services type?What assessments has been made of the impact on firms on on complaint volumes and on the claims management sector and on the resources of the Ombudsman itself?And how will the government ensure that extending the long stop does not simply create a larger backlog of older and more difficult cases?I'd also be grateful if the minister could address the practical point about record keeping.

Do the government now expect banks and other firms to retain detailed customer records for ten years in anticipation of a potential foes complaints?If so, what assessment has been made of the cost and operational burden of doing so?And I speak as a former company secretary in a large company and know about the problems of data, of keeping data. And indeed, what about doing it retrospectively. So I hope the Minister will think reflect carefully on the points that I've raised on the possibility of retaining the six year long stop, and I very much look forward to his response.
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None Portrait Speaker 19
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My Lords. As we've heard today, the Financial Ombudsman Service plays a vital role in providing quick, informal and impartial dispute resolution between customers and their financial services providers. It offers an accessible route for dealing with complaints that is designed to act as an alternative to resolving cases through the courts, which can be costly, lengthy and a process that often doesn't work for firms and consumers. The government is clear that an effective ombudsman provides consumers confidence in our financial services sector, and is a key element of an effective system.

The government's review of the Fos found that while the majority of cases the force fulfils this role in a small but impactful minority of cases is acted as a quasi regulator. This conclusion was supported by the Financial Services Regulation Committee, chaired by the noble Baroness Noakes in its report Growing Pains, clarity and Culture Change Required, published in June 2025, where it recognised that the Fos actions have regulatory impacts by creating precedents that the FCA requires firms to follow, and that this generates an unacceptable level of uncertainty for firms, stakeholders and investors.

I want to be clear that the review was not suggesting that the force was acting improperly. Rather, it concluded that the way in which the legislative framework operates made such issues unavoidable by creating a disconnect between the FCA's rules and the decisions giving rise to unpredictability and a lack of certainty across the regulatory environment. This unpredictability is damaging for everyone and harms both consumers confidence in the financial services, products and services they rely on, and firms confidence to invest and innovate. In the UK, there's a large number of amendments before us.

I will start with amendment 31. This proposal would substantially extend the time frame for bringing complaints to the Fos, and require the force to spend even more of its time and resources investigating, considering and attempting to resolve historic cases than it does today. We know from its current experience that this would substantially increase costs while delivering comparatively very limited increases in redress awarded, further extending the time frame beyond ten years and an open ended way to accommodate complainants. Reasonable awareness of an issue would increase the uncertainty for firms about historic liabilities.

Reducing appetite to invest in the UK's financial services businesses. The Treasury's analysis of the files on historic Places care is clear they are more likely to be withdrawn or abandoned, and have lower success rates than the average, often due to limited evidence and information available. My Lords, the government's analysis concluded that complaints to the files that were over ten years old cost firms on average £18 million a year in case fees, but deliver only £600,000 per year in redress for consumers. This is not a proportionate or balanced approach, nor is it consistent with the quick and simple purpose.

Extending the time frames would slow down the resolution of cases that are more recent and have a higher impact or chance of being upheld, delaying customers access to redress that they are owed. Turning to amendment 32, the government considered carefully the options for different time limits to be set in the legislation, including the six year time limit, and published his analysis in the impact assessment. While this is a matter of judgment, the government concluded that a ten year time limit would strike the appropriate balance of consumer protection and providing certainty to firms with a six year limit, resulting in too many people losing access to redress.

However, I want to reassure the noble Baroness and the noble Lord that the new limit introduced by the Bill is designed to act as a backstop to the existing limits set in rules made by the FCA. In most cases, the time limit will remain at the existing six years, with the ten year backstop kicking in for cases where a customer could only reasonably have become aware of the problem at a later date. Amendments 35 and 30 sorry, 33 and 35. The government agrees that where the cause for complaint may take longer to come to light, such as pensions, it is important that complaints can continue to be brought to the Fos.

This is why the Bill gives the FCA discretion to make exceptions to the time limit specified circumstances, where it is appropriate to do so. The government carefully considered its approach in defining exceptions and determined that the FCA is best equipped to develop proportionate and fair exceptions, and to define these in its rules. Given the FCA's supervisory role and oversight of the sector and the level of technical detail required for the definitions, the noble Lord is right to recognise the careful balance needed between ensuring that we do not undermine the certainty that reform is intended to deliver, whilst maintaining consumers trust and confidence that will have access to, they will have access to redress when things go wrong.

The government is working closely with the FCA as it develops these exceptions, and the FCA will set out its proposals in due course. Turning to amendment 34, which relates to cases where the ongoing relationship with the consumer and the firm. Some complaints may be about acts or omissions which continue to occur or have effect in the context of an ongoing relationship between a consumer and a firm. The Financial Services and Markets Act 2000 does not place a restrictive definition on acts or omissions, so there is no reason why such an ongoing act or omission could not be the basis for a complaint within the time period limits.

The government's reforms in the Bill will not change the discretion to identify the act or omission to which a complaint relates for the purposes of applying relevant time limits, it will continue to be the first to make those judgments based on the circumstances of the case, and in line with the rules set by the FCA. I will now explain the government's purpose behind clause eight and why it should stand part of the bill. Both Lord Davies of Brixton and Lord Sharkey, asked about the evidence base behind the government's policy.

The government's review has found that in a small but significant minority of cases, it has acted as a quasi regulator. This means that in some cases, the force has held firms to a standard which is different to those set by the FCA. The majority of responses from the government's consultation on proposals to reform the legislative framework in which the force operates, were broadly supportive of aligning the fair and reasonable test with the FCA rules.
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None Portrait Speaker 4
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That.
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None Portrait Speaker 19
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It's a right. I believe this definitely needs clarification, but the note that we have here is that in the case where the omission being complained about is governed by the FCA rules, and if the if the firm has met its obligations under those rules, then the force will be required to find it acted fairly reasonably. All of the FCA rule books are relevant here for the principles of businesses and therefore consumer duty. But there'll be a coherence between those determinations, but only when they don't believe they have met.

If they believe that the fair and fair, uh, fair test has not been met, then they can challenge the FCA. But I'm going to come back and write to you if that's okay, because I believe that this is an important point that needs definitive answer. So apologies for that. Um, two amendments, 37, 42 and 43. I've set out the reforms to the fair reasonable test are designed to preserve the existing discretion in areas not covered by FCA rules. The bill specifies that matters must take into account when making determinations.

Taking this out of the FCA rules and making it subject to parliamentary oversight. The matters listed included the law, relevant guidance and codes of practice, and further material is published by the FCA or other regulators. This provides greater clarity about the. Decisions. As explained earlier, the government's view is that when the. There are relevant FCA rules, then there are benefits from ensuring the FCA decisions are consistent with those rules. But again, I will write to further clarify.

Um. In case I have created confusion in this conversation. Amendments 38 and 41 the government recognises the important role the Fos plays within the wider financial services regulatory environment. The reforms included in the bill are not about making sure that the falls in the FCA are able to carry out their respective roles, effectively cooperating where necessary, but maintaining their separate responsibilities. These amendments would go further and require the FCA to become involved in the determination of individual complaints. This is a role for the FCA, not designed nor equipped to undertake a role that should continue to be the role of the force as an independent, impartial dispute resolution services.

Turning to amendments 39 and 40, the government's review of the force concluded that the fair and reasonable tests works well in the majority of cases to enable a quick and fair resolution of complaints. Removing the fair and reasonable test, as proposed by these amendments, would undermine the quick and informal role and put in its place a more legalistic approach based on a strict adherence to the FCA's rules. This could introduce additional costs and delays and reduce the effectiveness as an accessible, simple alternative to the courts. Turn to clause clause seven and the new referral mechanism, which the.

Require the Fos to seek a view of the FCA, where it considers matters relating to a complaint may indicate ambiguity in the FCA's rules, or have a wider implications for consumers and firms, as well as enabling the force to make decisions that are consistent with FCA rule. The referral process will ensure that systematic questions and issues are identified at early stage, and the FCA can consider whether a regulatory or supervisory intervention may be appropriate rather than continually consider each individual complaint separately. Alongside the new reporting requirements provided for in clause nine.

This will improve understanding of the FCA's rules and the standards expected of firms, in turn improving confidence in financial services and ultimately reducing the number of consumers who experience poor treatment, which all noble peers will agree is preferable to providing redress after the fact. My Lords, given the important role the forest plays, this is clearly a matter of huge interest, and there are a range of views on exactly what the best system would look like. Um. Notwithstanding that, I will write on the specific things that I might.

Of course, confusion on. We've listened carefully to the representations, the government's view that the reforms set out in this bill strike an appropriate balance, improving the clarity and consistency of redress arrangements, while allowing the force to continue to make specific decisions on individual complaints. They ensure that both the force and the FCA are equipped to fulfil their respective roles and responsibilities, so that consumers have the confidence in the key financial services on which they rely, and firms can understand what is expected of them and can act on it.

I therefore move that clauses seven and eight stand part of the bill, and ask the noble Lord to withdraw the amendment.
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None Portrait Speaker 18
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An answer. But I think this is what the minister will need to make clear in the letter. I think in that situation, I'm just urging the minister to make that point clear. Who decides whether the principles have been followed, or is that one of the issues that are going to have to be referred to the FCA?Under clause seven, is that right?I think I've I'm there. Um, on the question of time limits, I'm disappointed the minister didn't address the specific, uh, cases that I addressed now.

Some figures were provided. I'm going to start a war on or. People providing figures in this sort of debate because they whistle past you. And it's very difficult to make a quick assessment. Um, the. Problem is that. Um. What is the counterfactual. If the existing system didn't didn't exist, would those same figures apply?The minister has effectively said that some people under this change of rules, who previously would have received compensation, won't receive compensation.

That's absolutely clear. And the Minister's statement, and that is. Reasonable because the providers will save an even larger sum of money. But of course, that's under the existing system. What would be those figures under the new system is what we have to think about. Um and so again, I hope the minister will be able to write to me about the specific examples that could be where large sums of compensation, 13 billion in the case of appropriate personal pensions.

Um, was paid by compensation, would those have been possible to bring under the revised rules?Because 13 billion is quite a figure to miss out on for ordinary policyholders.
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None Portrait Speaker 9
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An encouragement just to to speak essentially to my amendment and just say the other amendments in the group from Lord forks and Lord hunt. That, uh, make a great deal of sense to me, but mine is slightly different. They're dealing with the issues of, uh, reporting, review duties that are. And requirements. Um, I'm addressing the same underlying issue of authorised push payment fraud that, uh. And my Lords, I'm coming from the perspective of who that, uh, who needs to, uh, act.

To prevent that, uh, and, uh, be on the hook that, uh, when there is abuse, my Lord, the tech firms and it's primarily the US tech giants and now major payments players in the payment system. Are not merely an inanimate part of the plumbing. The way they set up and police their systems or fail to makes them significantly responsible when their platforms are used to initiate, facilitate or communicate fraud. And with AI, the risks become yet greater for ordinary people. Unless proper guardrails are put in place.

So I think we have to be looking ahead, not just putting in place that protections for the current and the past that. Is, are the financial incentives to tech firms to ignore fraud is huge. Some analysts have estimated that in 2025 in the UK alone, scam ads generated income of 3.8 billion for the tech companies. Now, my amendment dealing with authorised push payment fraud uh is. With a sector of that, but a huge one that authorised push payment fraud in the UK exceeds £576 million a year and under present legislation, victims are reimbursed most of that money by the banks.

But the techs who have provided the mechanisms are off the hook. And I think that is preposterous because the techs are typically best placed to prevent the fraud. Amendment 46 requires the FCA to apportion reimbursement by reference to which part each player contributed to the fraud occurring. I strongly suggest that this amendment, if passed, would lead to the tech companies suddenly finding that it's in their interest to prevent app fraud. Uh, so, um, obviously, as I say, I have great respect for the other amendments in this group, but the payment system is a complex one.

There are now many new participants and everybody should be playing their appropriate role, not just the banks, in providing both protection and reimbursement.
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None Portrait Speaker 25
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This group, on the subject of fraud and scams and I've also added my support to the amendment tabled by the noble lady, Baroness Kramer, that she's just spoken to. Most of my amendments arise, at least in part, from the abolition of the PSR and the absorption of its activities into the FCA, and I'm. Just quickly run through each, if I may, the noble Lady Cramer has already explained the need for her amendment 46, which would require the FCA to make rules that would ensure the tech or communications company on whose platform was serviced the fraud arises would be responsible for a proportion of the cost of reimbursing the victims.

Now, whether or not the mechanism in her amendment is the right one, the principle here is obvious at the moment. It's the banks that must compulsorily fully refund victims of fraud. And there is some sense in the banks having to reimburse victims because almost every fraud goes through some sort of bank account to allow the fraudsters to cash out. And I think it is clear that the mandatory reimbursement requirement has incentivised banks to do more to protect customers. But we also do know that fraud does not originate from bank services.

According to the UK Finance's latest report, some 66% of scams arise on online services and a further 17% are originated via telecoms. And let's be clear, the highest proportion of that arises on meta platforms. Despite voluntary charters, this is not improving at all. Your Lordship's Committee on digital on the Fraud Act 2006 and Digital Fraud, of which I was a member, recognised in its report nearly four years ago. And if the Minister hasn't read it, I recommend some bedtime reading. That I quote it recognised, I quote, until all fraud enabling industries fear significant financial, legal and reputational risk for their failure to prevent fraud.

They will not act. My Lords, we were right. Nothing has changed then to change that conclusion. If anything matters continue to worsen as technology such as AI starts being used by the criminals. It's time that the platforms were at last forced to step up and take financial responsibility for the losses that arise from their platforms, and not just leave it to the banks to pick up the full liability. And please, minister, in your answer, don't tell us that the Online Safety Act will solve this.

It is too limited. It covers only directly paid for advertising and it is unlikely to make much difference. And the government's fraud strategy recognises all of this. And it says if industry partnerships and market incentives alone remain insufficient to drive improvements, the government will take legislative action within this Parliament. Minister, this has been going on for years. The voluntary Online Fraud Charter was signed three years ago. Nothing material has improved. Fraud is still around 45% of all crime, and the percentage of rising on tech platforms has not fallen.

If anything, it has risen. This bill is the perfect opportunity, finally, to take action on this and not leave it until thousands more people have fallen victim. We know the tech companies won't take action unless they have to. They continue to prove that, which is why the government is at last taking action and in response in respect of child protection, this is no different, and it is now time to act without further delay. Moving on to my amendment 47, it would introduce a requirement that the mandatory reimbursement rules for app fraud that came into force in October 2024 should be reviewed after three years of operation.

It is unlikely that we got everything right at the first attempt, so a review of how effective they've been in meeting their objectives of protecting consumers and incentivising the banks to improve protections, and also, importantly, whether there's been any unintended consequences must make sense. I've tried to set out an amendment, and I won't go through all the detail. The key matters that were discussed at the time the requirement was introduced back in 2020 223, as the matters that ought to be reviewed. And I would also have included the the tech platforms, but I didn't want to duplicate the the amendment that we've just discussed.

I also completely agree with the noble Lord, Lord Holmes, who sadly isn't with us at the moment on his amendment 58 to add specific fraud prevention duties on payment service providers. I also have a lot of sympathy with the principle behind his amendment one, two, five, which would introduce a financial fraud prevention secondary objective to the FCA. Although I caveat that by saying I'm not sure that adding yet more objectives to the regulators is necessarily the right way to go. My amendment 59 is designed to ensure that the FCA continues to collate and publish the fraud data that the PSR has been collecting and publishing for the last few years.

This has been extremely valuable. It's identified several tsps who were clearly not taking their fraud prevention duties seriously, and led to action being taken against them, and the pressure of shining a light on some of the bigger players has clearly incentivized them to step up and improve their systems. The information identifies very clearly which SPS are protecting their customers best and which are doing it worst, which is important information for consumers when choosing a bank or payment provider. There's just one example to show the value of this reporting.

The last report by the PSR identified that for every 1 million transactions received by guava pay, 109,744 were app scam payments. That's more than 10%. As a result of that information, the company has been forced to close by the FCA, and in the meantime, consumers would have been able to clearly see this was an unsafe operator. If the report had been issued on a timely manner, which we'll come to in a second. This reporting was started as a result of efforts by members of this House during the passage of the Fsma 23 act, and it followed undertakings by the then Minister.

But there are already signs that since moving. Of the Sers activities into the FCA that this has started to slip. As I say, the last report of this nature was for the period up to 7th of October 2024, when the mandatory reimbursement requirement was introduced. Actually published until February 26th. Some 16 months later, and my amendment would put a time limit of three months for the publication of these reports. No further report has been published since, so I hope the noble Lord, the Minister, will recognise the value of this reporting and will confirm that it should continue and that this amendment, which actually doesn't create any new burdens at all, it just continues.

The status quo should be accepted. Amendment 64 would reverse the deletion of clause 72 from Fisma 2023, which was the clause that introduced the requirement to introduce a mandatory reimbursement requirement. In the explanatory memorandum, the government explains that this is being removed because it's already happened, but clause 72 doesn't only introduce the requirement, it also has in its subclause nine, if I remember rightly, um, the ability to vary or revoke the requirement or to impose further relevant requirements. So I'm not sure that deleting it in full actually works.

Um, something to look at. But most importantly, could the noble Lord, the minister, please confirm that the mandatory reimbursement requirement is intended to continue, even if reviewed and amended in the future, particularly in relation to tech companies?As we've talked about, and that this bill is not intended to change anything in that respect.
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None Portrait Speaker 21
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For reasons that will become apparent, I start by referring to my register of interests and my shareholding in meta. Um. I'm grateful to the noble Baroness, Lady Cramer, the noble Lords Lord fo and the absent Lord Holmes. Um, and thank them for bringing forward this important group of amendments. I'm sorry this debate is so late and Grand Committee so thin under the new five hour arrangements, which I'm personally not a fan, because collectively these amendments raise an important and very timely point as online retail platforms and digital marketplaces become more popular and AI makes fraud easier, there's been a concurrent increase in the risk that people face from an online fraud.

We've heard from the noble Lord LVO concerning figures suggesting that Facebook Marketplace is now the single most scammed UK consumer platform, that very large sums are stolen through it every day in the UK, and that a very high proportion of UK purchase fraud begins there. We've also seen banks such as Santander taking active steps to block suspected marketplace transfers in order to protect customers, and these examples raise some very important questions. How easy is it for consumers to obtain redress when they're defrauded in this way?Who holds ultimate responsibility when a fraud is facilitated through an online platform?And how can the regulatory framework ensure that the firms best place to prevent fraud have a real incentive to do so?It's also important to consider how changes can be made without introducing new rafts of regulation that put up costs and prices, banks and payment service providers have significant responsibilities, and rightly so.

They process the payment, they have duties to their customers, and they have tools available to detect and prevent suspicious transactions. But they're often not the place where the fraud originated. They may see only the final payment instruction, by which point much of the harm has already been set in motion. By contrast, technology companies and online marketplaces may be much closer to the source of the problem. They host the listings, they provide, the communications infrastructure they enable, the interaction between buyer and seller, and in many cases, have access to data, which could help identify suspicious behaviour before money ever leaves a consumer's account.

46 is based on the principle that fraud should be paid for by those best placed to prevent it, not simply by those who happen to process the payment at the end of the chain. If platforms know that they may share liability where fraud is facilitated through their systems, they'll have a much stronger incentive to identify fraudulent listings, to remove scam accounts, to improve verification, to share data and cooperate with banks and regulators, and indeed help consumers to avoid fraud. Because a lot that we as consumers can do ourselves.

So this is not about saying technology firms should always be liable in every case, nor is it about absolving banks of responsibility. But it is about recognising that the current model may place too much of the burden on one part of the system while allowing other actors, including very large and profitable tech companies, to avoid the financial consequences of fraud, which can begin on their often begins on their platforms. The goal should be to stop fraud before it happens, and that means better consumer warnings, better transaction monitoring, better real time data sharing, and better use of technology by all relevant firms.

It also means transparency. If particular platform channels, platforms, channels or types of transaction are consistently associated with fraud, that information should be visible. Because sunlight is an important tool of accountability. And that's why amendment 59 is valuable in principle as the experience law, Vo has explained. Publication of data on app fraud performance, including where fraud originates, would help Parliament, regulators, firms and consumers to understand the real shape of the problem. And it would put pressure on firms whose systems are repeatedly linked to fraud to improve their performance.

Before we take a definitive view on all these amendments, I'd be grateful if the minister could address several questions. First, what is the government's view on the principle of shared liability for app fraud across the wider ecosystem, including technology companies and online marketplaces?Second, is there a place for greater transparency on app for performance?Third, um tech. Reform. Third, what discussions have the government had with the tech platforms about fraud originating on their services?And what more does the minister believe these firms should be required to do?Fourth, does the minister accept that online platforms should have stronger incentives to prevent fraud where they host the marketplace, the listing or the communication through which the scam takes place?And finally, how does the government envisage tackling this problem?Do they have plans to introduce legislation on this issue, or do they believe that changes within the existing framework will be sufficient?App fraud causes real harm to individuals, families and businesses.

It can undermine confidence in digital payments and online commerce, which is increasingly the direction of travel. It also imposes costs on the wider financial system. I recognise this may go even wider than our bill, but. This is an important group and I look forward to the minister's responses and to seeing how we can improve this important area.
20:29
None Portrait Speaker 19
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I'm grateful for the noble Baroness and the noble Lords for tabling these amendments, and all noble Lords who have contributed to this important debate. Um, the scale of the fraud and the devastating impact of crime on victims remains a concern for this government. The government takes the issue of fraud very seriously and is dedicated to protecting the public and businesses from this appalling crime. The amendment, tabled by Baroness Kramer, number 46, would require the FCA to make rules so that where a victim of authorised push payment fraud is reimbursed, some or all of the costs can be recovered from technology companies.

When an online service is used to facilitate fraud. The government has been clear that every sector must play their part in preventing fraud. Technology companies should take robust action to stop services being abused by criminals, but the government does not consider this amendment the right vehicle to achieve that. The government has already taking a broader programme of action the Online Safety Act, whilst not a catch all, the noble Lord points out, it requires tech companies to catch proactive, to take proactive steps to stop fraudulent content appearing and remove it quickly when they become aware of it.

This government is committed to ensuring that Ofcom is sufficiently resourced to undertake swift and decisive action against illegal online harms, including fraud. And we catch that, and we agree that tech companies should rightly bear the relevant cost of Ofcom's regulatory oversight under that regime. This summer, Ofcom will publish a register of categorised services subject to more stringent rules on consultant fraudulent advertising codes to come into effect in 2027. And earlier this year, we published a new fraud strategy announcing an online advertising task force to improve transparency, new fraud prevention metrics to build platform accountability, and an online crime centre to strengthen intelligence services.

As tech companies are already liable for the cost of implementing the systems and processes to prevent, detect and remove online fraud. Alongside the cost of Ofcom's fraud prevention work and any penalties for non-compliance, this amendment is not necessary. Moving on to amendments tabled by Lord Holmes, numbers 58 and 125, the government agrees that it is important that sufficient fraud prevention and protection measures are in place. However, it does not believe these amendments are necessary. In recent years, we have seen welcome advances in firm systems and controls to detect and prevent fraud, including the use of advanced technology such as AI.

Payment firms have also implemented confirmation of payee, the name checking system, which matches account information to the name of the account holder. This applies to nearly all payments made over the faster payments and Chaps payment systems. Furthermore, dot UK, the operator of faster payment system, has been working on enhanced data exchange, which involves the exchange of specified data points between payment service providers before payment transaction is made, providing more available data in the payment journey and moving forward. The government is clear that fraud prevention must be built into the future payments infrastructure the strategy for future retail payments infrastructure published in November 25th, notes that a key outcome must be that consumers and businesses can trust that their payments are protected from fraud and wider financial crime.

The Retail Payments Infrastructure Board will soon be consulted on the design of the future infrastructure and how to meet that outcome. Um, finally, I'll come to the amendments tabled by Lord numbers 47 and 59 are authorised. Push payment, fraud reimbursement and the PSR for performance data publications. Since 2024, the PSR has required that all In-scope payment systems providers must reimburse the victims of app scams within five business days and up to the value of 8500 £0. Where these scams take place over the faster payment system, subject to specified exemptions, the Bank of England has introduced equivalent requirements for the payment system.

Luvox. Asked about the mandatory reimbursement requirement. The bill provides for the requirement to transfer to the FSA once the consolidation is complete. Therefore, firms will continue to be responsible for the reimbursing victims of app fraud. Once the Psrs functions are consolidated into the FCA. The FCA will be able to make further rules regarding app reimbursement. The PSR is also commissioned an independent review of reimbursement requirement, the results of which will be published shortly. And regarding the amendment to require the FCA to publish an annual report on payment services providers, authorised push payment for performance, the government agrees it is important that payment service providers are taking adequate measures to prevent fraud.

The PSR has previously published data regarding the performance of individual payments. Provides, alongside data on where fraud was initiated, the PSR will consider its approach to these data releases following the conclusion of the independent evaluation of its app scams policies, and will shortly provide a public update on its future plans. The noble Baroness lady asked a number of questions, including on shared liability. In the interest of time, I will write to her.
20:34
20:34
None Portrait Speaker 20
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My Lords. Can I say.
20:34
None Portrait Speaker 25
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To Lord Faulks and Baroness Neville-rolfe gave far better speeches than I am and covered the whole area very substantially, so I'm grateful to them for that. But this gives me the opportunity to have a few moments for reply that. Did I understand the Minister to say that the responsibility, the financial responsibility that will fall on the tech and platforms is the cost of prevention, detection and removal, and that he considers that's all they need to do, as far as I could see, because he didn't answer this question on shared liability or for reimbursement that, uh, and I find that reasonably preposterous, to tell you the truth, that if.

These firms were effectively initiating or putting in place prevention, detection and removal, we wouldn't have very much app fraud and therefore they wouldn't be making very much reimbursement. So you're not asking them to double up what they pay. You're asking them to pay effectively. So. So I really think that there's a lot more that the government needs to take note of on this. And remember, the victims of amongst the most vulnerable people that are in our society, as well as other people who think of themselves as very capable and then find they've fallen for a scam that a can I suggest that something far more vigorous is required, that it's got to be effective in making the tech companies respond, because, as Lord Faulks said, their history is that the tech companies simply absorb the various requirements on them that, uh, make little move to act because of the income that comes when they simply look the other way.
20:36
None Portrait Speaker 20
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Is it your.
20:36
20:37
None Portrait Speaker 13
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We do now adjourn.
20:37
None Portrait Speaker 8
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Stands adjourned.
This debate has concluded
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