Financial Services and Markets Bill [HL]
House of Lords · Grand Committee · 22 Jun 2026 · 189 speeches · Official Report
Committee (1st Day)
Northern Ireland and Scottish legislative consent sought . Relevant document: 2nd Report from the Delegated Powers Committee .
My Lords, before we start the debate on the first group, I remind the Committee of the rules on declaring interests. Noble Lords should declare any relevant financial interest the first time they speak at each stage of a Bill. This means that, in Committee, relevant financial interests should be declared during the first group on which a noble Lord speaks. Thereafter, the declaration does not need to be repeated in debates on later groups at this stage. Declarations should be specific and brief. Members should briefly indicate the nature of their financial interests, not simply refer to their entry in the Register o f Lords’ Interests . I also remind noble Lords of guidance at paragraph 8.82 of the Companion : when withdrawing amendments, noble Lords should “be brief and need not respond to all the points made during the debate”. Clause 1: Consumer credit Amendment 1
Moved by
1: Clause 1, page 1, line 4, leave out subsection (1) Member’s explanatory statement This probing amendment, along with another in the name of Baroness Neville-Rolfe, seeks to allow for a debate on the Government’s intentions around a new regime to be laid down in the regulatory rule book in place of that established by the Consumer Credit Act and associated legislation.
My Lords, it is a pleasure to open our deliberations on the Financial Services and Markets Bill. I thank the Minister for his constructive engagement so far and I thank noble Lords across the House who have shared their initial views with us. These conversations have been very helpful and have underscored a shared objective: 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 it pays. However, I think this first group of amendments will challenge the Minister on a very important issue that we will want to address at several points throughout Committee: oversight and parliamentary scrutiny. We have approached this with slightly different amendments, but I believe that the noble Baroness, Lady Bowles, shares the concern, which also applies to her amendments in group 2. Clause 1 is short, but it is the gateway provision that introduces Schedule 1. It provides for the repeal and recasting of significant parts of the remaining Consumer Credit Act framework into FCA rules. The reasoning behind this desire for reform, as we said at Second Reading, is broadly understandable. The Treasury’s policy statement on CCA reform says that the current framework is increasingly out of date because it...
My Lords, as this is my first contribution in Committee, I declare my interests as recorded in the register, in particular that I hold listed shares in financial services companies and technology companies that may be affected by the Bill or amendments tabled to it. I am 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, are being given significant regulatory powers. This theme certainly applies to Clause 1 and Schedule 1, because of the vast new powers in relation to consumer credit being given to the FCA, but the theme is pervasive and we will debate it several times in Committee. I should start by saying that I agree that consumer credit legislation needs a massive overhaul. The current 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, it does not have the concept of a vulnerable customer. It is crying out for change. Indeed, when we scrutinised the Financial Services and Markets Bill in 2023, I tabled an amendment to give the Treasury 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...
The Minister will be aware that I wrote to him on behalf of the Financial Services Regulation Committee last week. That 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 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 and may not be aware that it is a very unusual step for a committee to take, so I hope that he will respond positively. I am pleased to take this opportunity to place that letter on the record. Democratic oversight and regulator accountability are issues that will run through almost all our consideration on the Bill.
My Lords, I will speak briefly as a member of the Delegated Powers Committee, which has produced a report on this Bill. That report concerns especially Clause 3, but it raises general issues that fall within the scope of the amendment that my noble friend has moved from the Front Bench. My noble friend is essentially asking what the purpose of the Bill is and what it will do. On the committee we have heard again and again, where government Bills are introduced, quite correctly, that this is a fast-moving world, that the Government need the flexibility and room to move quickly, and that it is therefore appropriate to do these manner of things and those manner of things by regulation. That is far from being a contemptible argument. The Government have a good point, and I suspect that Ministers in other political parties have made the same point from the Dispatch Box in the past. However, there are some important general issues to consider. First, as my noble friend indicated, it is not generally a good thing to bring in legislation if you do not know quite what the intention is and you propose to proceed by regulation. Secondly, Ministers at this point tend to say, “Trust us”, which is fine, but the Minister may change. Another Minister may come with a different approach, and we are about, I read, to have a change of Prime Minister, and the Government may decide that there is some alteration in their approach to these matters. Thirdly, you may have a change of political party,...
My Lords, I declare my interests as a significant shareholder in Lloyd’s Banking Group, of which I was formerly chairman. Although I recognise the concerns raised by my noble friends, it is important that we tackle the confusion caused by the dual roles of the courts and the regulator in the regulation of consumer credit. The regulation of consumer credit is not a black and white issue. A balance 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 risk that, if the courts are unpredictable in the way they interpret the Consumer Credit Act, suppliers will either withhold products or build an insurance premium into the costs. We have had too many incidents over the past few years where what financial institutions thought was a settled issue, as determined by the regulator, has been altered retrospectively by decisions in the courts. We can have a choice one way or the other, but it is important that we tackle the confusion caused by the dual responsibility. As I see it, the Consumer Credit Act is an outdated piece of legislation, as the Government have set out. It was based on conditions that have changed radically. We have since set up the financial services regulator, with devolved responsibilities for regulation. We may or may not think that the regulator is doing well or want to increase supervision of it, but the Government should try to make it clear through these amendments to...
Baroness Bowles of Berkhamsted
My Lords, this and the following group dwell on the same territory; I will make my main intervention in the next group alongside my detailed amendments. I am sorry that I had to separate them out, but that was only because of the Chief Whip’s speaking-time restrictions on non-movers, which ironically mean that the debate will take longer overall. I have both general points and points on the substantive amendments. I agree very much with many other speakers, and in particular the noble Baronesses, Lady Neville-Rolfe and Lady Noakes. Overall, the Bill is extraordinary for the manner in which it does and undoes many things with questionable process. My general approach on the point about the Consumer Credit Act 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. Here I depart from what the noble Lord, Lord Blackwell, would wish to have. In the first instance, the FCA made rules that were not in line with statute. It said that commission did not have to be disclosed unless asked about. We have ended up with a situation where firms which thought they were following the rules have been caught out because the statute said something different. The moral lesson is simple: if you find yourself thinking, “Oh good, I don’t have to tell them about this nice little earner”, something is already unfair. In...
It is a great privilege to wind up for the Lib Dems. People will know from Second Reading that I am very strongly of the same mind as the noble Baronesses, Lady Noakes and Lady Bowles, and I think the noble Baroness, Lady Neville-Rolfe, takes a very similar view on this first clause. The others speak with some sense of diplomacy; I will be slightly more direct, because, from my perspective, the Bill, by repealing the CCA, basically removes consumer credit protection from law and moves it to the FCA rulebook with no meaningful accountability and, frankly, little visibility. Peers will remember that in 2021, many of us in this House and the other place were getting very frustrated with the FCA. It had some very good people but it was definitely neglecting consumer protection, and this House consequently passed an amendment to instruct the FCA to consult on a duty of care. The FCA chose not to consult on a duty of care, despite that direct instruction. It consulted instead on what it said was the equivalent, which was a consumer duty, the key difference being that a duty of care has a meaning in law, with a private right to action. In other words, an individual can turn to the courts if he or she believes that they have been wronged. This is a right that, as we heard from the noble Lord, Lord Blackwell, the FCA, at the behest of the industry, did not want the consumer to have, despite it being a long and very well-established tradition in English law. The Bill now achieves the...
I very much hope that the Government will seriously consider the amendments in this group and the next. I am not sure that they have fully understood the implications of the approach being taken, so I hope that we can find some movement in that area.
My Lords, I will make my first contribution to this Bill. This is also one of my first in Committee, so I beg noble Lords’ forgiveness for any errors I will make. I do not have vast experience in the banking sector, but I have spent almost 25 years in technology, during which I worked with a number of firms in the banking sector. I support the comments from my Front-Bench colleague, my noble friend Lady Neville-Rolfe, and from the noble Lord, Lord Blackwell, on the impact of this broad-ranging Bill. Later, I will comment more on the technology aspect, but at this point I highlight that, as we move forward, a degree of regulatory burden is continuing to build, especially for the future of banking around fintech, innovators, start-ups and scale-ups, a world I have worked in significantly. I look at this Bill through that lens, seeking to understand what we are doing around the posture we are requesting from these new future banking institutions, as they see different requirements from different regulators based on a loose-or, sometimes, as in the case of this Bill, unclear-focus. I say that because we are hearing that from the industry. The past couple of years have required significant consultation on start-ups and scale-ups, particularly in the area of digital assets. Regulators have undertaken extensive questioning of the industry, but there seems to be some gap between parliamentary oversight and regulatory direction. That has been fed back and has resulted in ad hoc...
I will speak just briefly. I find myself in the unusual situation of agreeing with the noble Baroness, Lady Noakes, on the role and functioning of the Financial Services Regulation Committee, of which I am a member. The committee was created to undertake a particular task, and what is in the Bill makes that task virtually impossible. We very much hope that the Minister will listen to what the committee has said on this subject.
I thank noble Lords 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. Before we start, my interests are set out in the ministerial register. I invest in a number of funds that are regulated by the FCA. I start by addressing why Clause 1 and Schedule 1 should stand part of the Bill. The case for reform is straightforward. The Consumer Credit Act-the CCA-is more than 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 in an increasingly digital world. It too often results in people being sent lengthy, complex documents that they do not read, do not understand and cannot use with confidence. It is important to say that one in seven adults has literacy skills at or below those expected of a 9 to 11 year-old and 34% of adults have poor or low levels of numeracy involving financial concepts, yet the CCA regime means that some of the information provided on credit cards requires a far higher reading age. Debt advice charities have criticised the way in which the CCA requirements often result in borrowers being sent arrears notices even when they have agreed a repayment plan, causing confusion and alarm. To address the point raised by the noble Baroness in her amendments, this demonstrates that it is not just the content of the arrears notices that is the problem but the inflexible...
My Lords, I thank all noble Lords who have contributed to this debate and the Minister for his response. I particularly thank my noble friend Lady Noakes, the noble Baroness, Lady Kramer, and my noble friends Lord Goodman and Lord Ranger of Northwood, all of whom, I think, echoed the Opposition’s concern about overdelegation. In fact, I appreciated and enjoyed their interesting historical and contemporary perspectives, which 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 will not repeat all the points made by my noble friend Lady Noakes, but we need to look at Parliament’s oversight. There is a democratic deficit. We will no doubt debate her letter when we come to Clause 17. I noted the support of the noble Lord, Lord Davies of Brixton, for bottoming out the role of the committee and the points that he made. We support the objective of modernising the consumer credit framework-I would like to emphasise that-but reform cannot mean that Parliament approves the removal of existing protections without seeing what will replace them. Nor should moving provisions into a regulator’s rulebook place it beyond meaningful parliamentary scrutiny. We will continue to apply these...
Amendment 1 withdrawn.
Debate on whether Clause 1 should stand part of the Bill.
Member’s explanatory statement
This opposition to Clause 1, together with my opposition to Schedule 1, would remove the changes to the Consumer Credit Act 1974.
Baroness Bowles of Berkhamsted
My Lords, I oppose Clause 1 and Schedule 1 standing part of the Bill. I shall speak also 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. Nowadays, it is often impossible to speak to a person rather than a bot. If you do get a person, it is a call centre with scripted questions and answers, often including a recital of terms and conditions faster than it is possible to understand. You cannot get to the next stage without saying, “Yes, I have understood and agreed”, when, in truth, you have not. You do not even see the terms and conditions until after you have clicked “Yes”, 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-one that I fear we have now replicated in the legislative procedures in the Bill, only here, once Parliament ticks the box, there is no cooling-off period and no right to withdraw. The Bill repeals parts of the Consumer Credit Act. It gives the Government open-ended regulation-making powers before there has been any consultation and 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 am signing...
My Lords, I must apologise: I was not in the country for Second Reading, so this is my first intervention on the Bill. I support wholeheartedly the amendments in the name of the noble Baroness, Lady Bowles, and the rationale that she has just explained. I thank Which? for the work that it has been doing on the Bill and to try to help consumers. I cannot support this leap in the dark for parliamentary scrutiny and I cannot support imposing this leap in the dark on consumers. At the end of the day, that is what the provisions in Schedule 1 are at risk of doing. I believe that the noble Baroness, Lady Bowles, with her amendments, and the amendments that we have seen from other noble Lords in the first group, are seeking to help the Government to achieve their aims more safely for consumers. I believe that what the Government are trying to do has the right motive; it is about whether the manner in which this is being done is safe for us to agree to-and I do not believe that it is. If we think one step ahead, what protection will consumers have against the FCA making a significant error 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 along its current lines? 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...
My Lords, I am more sympathetic to the approach that the Government are taking here. I think that we need to be careful what we ask for when we interpret parliamentary oversight as potentially meaning Parliament being involved in the drafting and redrafting of every detailed regulation. Not only is that time-consuming and likely to lead to long delays, but I fear that the political process will inevitably mean that it is weighted to the highest level of consumer protection regardless of the costs or the side consequences. There are other ways of having parliamentary oversight of the regulator. The Government can appoint the chairman, the chief executive and the board members. It does not have to be ex ante writing and approval of all the rules in primary legislation or committee. Parliament can excise oversight by holding the FCA ex post to account on whether it is fulfilling its remit in a sensible and proportionate manner. We have chosen this system of having regulators. We should allow those regulators to operate properly and then hold them to account. When Members refer to the long list of 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 risks of action against them if they do not ensure that the consumer has satisfied every detail of the consumer protection. The role of the regulators here is...
My Lords, I disagree with what my noble friend Lord Blackwell has just said. 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 why there are other amendments later in this Bill to find other mechanisms for improving accountability. It is important to differentiate between those areas where Parliament has a right to be democratically involved in the decisions and those areas that can safely be left to the regulators to carry out the detail and to be held accountable for that. It is the balance that we are concerned about. I would probably end up with a different decision on whether certain of the protections in the existing legislation need to be retained as well as on improving the way in which the legislation works by updating it to a modern digital age. There is genuinely a case for looking again at whether the sanctions that exist in the consumer credit legislation are right for today’s world. I believe that some of them are too severe or can be disproportionate to the issues that are involved in practice-for example, minor breaches in relation to enforcement notices. I would not necessarily end up with the view that what is currently in the legislation must be preserved for all time, but I think that Parliament needs an involvement in some of those...
My Lords, I speak with diffidence on this matter, as I am not an expert on consumer credit. 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 that there was a serious breach of contract. I am concerned that we are suggesting here that parliamentary process is the answer to many consumer credit complaints, even though parliamentary process is just about the least living instrument in our possession. It seems that the purpose of Clause 1 and Schedule 1 is to ensure that what is created is a living instrument that 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 has been suggested that FCA rules are not subject to the courts, but there is already an elaborate system in place in the FCA rules. In this debate so far, no one has mentioned the Consumer Duty , an extremely detailed document that has been in existence for three and a half years and that has, in my view, served the FCA well. If you look at the comments from law firms, which one can find all over the internet, the result is that there has been a much more informal resolution of difficulties than relying on the old system before the Consumer Duty was created. Therefore, I believe that FCA rules are part of a living instrument: they are binding, enforceable and subject to...
My Lords, I hesitate to follow the noble Lord, Lord Carlile, who, although he is not a specialist in this area, is a lawyer. I will speak in support of this group of amendments; I would have done the same for the first group, had I been here. It is important that businesses and consumers alike have the protection of a law that is predictable and transparent and where no doubt arises about its interpretation. Many doubts have arisen around the judgments and rulings of the FCA and its lack of consistency. Therefore, I am sympathetic to the wish of the noble Baroness, Lady Bowles, to have something done on paper, so that we can see something before putting it through. Both businesses and consumers are used to having a legal surround for such transactions. They go back to the 1850s in the Bills of Sale Act 1854, which was modernised throughout the end of the 19th century and then followed by the Money-lenders Act 1900, obliging the registration of moneylending and allowing the courts to be involved. It is important that we have judicial oversight, not just by updating the process-although I agree with noble Lords on that-but with a legal framework that is transparent and consistent and that allows people to see what is expected. I am also concerned about the impact of rushing through legislation to empower an as yet uncertain regime of rule-making, about which nothing of substance is known. The FCA appears to be as unprepared for this as others. In its response last month to the...
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, and my noble friend Lady Neville-Rolfe have argued, it is for the Government now to 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 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. Notwithstanding the comments made by the Minister, moving them into regulatory rules may reduce their visibility, create uncertainty about their permanence and make their enforceability less clear. I hope that the Minister will be able to assure us further on how the proposal before us will avoid that issue. There is an important constitutional principle at stake. If rights established by Parliament can, in effect, 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 on protections being visible, accessible and readily...
My Lords, I thank noble Lords for the opportunity to set out the Government’s position on this important set of issues. I start by addressing why Clause 1 and Schedule 1 should stand part of the Bill. However, I do not want to duplicate what I said on the previous group, where I set out at length the Government’s policy for the CCA. Suffice it to say that the case for reform is straightforward. The Consumer Credit Act is more than 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 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 are fit for this digital age. I understand the strength of feeling on the question of delegation, but I note that the noble Lord, Lord Blackwell, 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 believe that those replacement rules should, in the main, reside in the FCA rulebook, not in primary legislation. The noble Baroness, Lady Bowles, expressed concern about how the FCA will replace some key protections, including information requirements. In the last group, I already explained the process that the FCA will follow....
Baroness Bowles of Berkhamsted
My Lords, I thank the Minister and all who have spoken in this debate. I am sorry that, to some extent, having it in two separate bits has made it more awkward. We are at a kind of impasse here. The Minister replies as though we are saying that nothing in the Consumer Credit Act can be changed and it will all have to stay there. In fact, all I am saying is that there are some basic core rights in statute, similar to the sorts of core rights that exist in many other Commonwealth countries, that should remain, because you do not have rights with the regulator. As my noble friend Lord Sharkey explained, the consumer duty does not give you any rights. It is about the opinion of the FCA, and it can change how it will apply it. The main thing that we are objecting to is that the Bill is shoot first, ask questions later: “Give us all the power now and we’ll consult and tell you what we’re actually going to do later”. That is not the way to make legislation right-it is not how you would hire a telly, for heaven’s sake. We are being asked to tick the box on behalf of the public for something that is fundamentally unseen. The Bill does not retain core rights. It says that some things will change and gives an open-ended power to change everything else automatically when the Government want to. The fact that the Government are not taking rights away now does not mean that they cannot take them away later. That is the impasse that we are at. We need some core rights that stay. The rest...
Clause 1 agreed.
Amendment 2 not moved.
Schedule 1: Consumer credit
Amendments 3 to 17 not moved.
Amendment 17A
Moved by
17A: Schedule 1, page 65, line 35, at end insert- “38A In section 140A (unfair relationships between creditors and debtors), after subsection (4) insert-“(4A) An application under section 140B(2)(a) shall not be made, and no action for an order under section 140B shall be brought, after the expiration of six years from the date on which the relationship between the creditor and the debtor ends.””Member's explanatory statement This amendment would retain the six-year limitation period, running from the end of the creditor-debtor relationship, for applications or actions seeking relief under sections 140A and 140B of the Consumer Credit Act 1974 in respect of an unfair relationship.
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 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 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, timeliness and 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. I turn first to Amendment 17A, which relates to unfair relationships under Sections 140A and 140B of the Consumer Credit Act 1974. Its purpose is to retain the six-year limitation period running from the end-I emphasise “end”-of the creditor-debtor relationship for applications or...
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. Is the Minister 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, the Committee is entitled to ask how the Government expect the new referral mechanism to improve certainty rather than introduce a new source of delay.
Finally, Amendment 44 has echoes of Amendment 17A, but makes a different point, so I hope that 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 address schemes under Section 404 of FSMA. The immediate issue arises from Clause 6, 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 will 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 6 goes further. It increases the overriding time limit from six years to 10 years. That is a significant change in itself, but the real concern arises when Clause 6 is read with Clause 10. 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. 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. 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 a redress scheme to revive claims that would be time barred. That is an important safeguard. It means that the regulatory redress powers broadly track the position that would apply in court.
Clause 10 changes that. It removes the requirement that redress must be available in legal proceedings. Instead, the FCA need only have regard to the possibility of consumers obtaining redress under the ombudsman scheme, but Clause 6 extends the ombudsman time limit to 10 years. I do not think that the Government have justified that change. The six-year limitation period exists for good reasons. 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 10 years for the purposes of consumer redress schemes is a serious step. Amendment 44 therefore provides a simpler proportionate safeguard. It would ensure that the FCA cannot impose a consumer redress scheme in respect of loss or damage where, by reason only of 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 is about ensuring that the FCA’s redress powers do not become a route to overriding ordinary limitation principles without Parliament clearly and expressly deciding that that should happen.
Will the Minister explain the Government’s position on three points? First, do the Government accept that the combined effect of Clauses 6 and 10 is to extend, in practice, the period within which the FCA may impose a consumer redress scheme from six years to 10, and does he anticipate that the change we described in Amendment 17A has an effect on these notices and on the time limits applicable? Secondly, if they accept that, what is the justification for such a significant extension? 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 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 that the Minister will be able to provide the clarity that we seek. This is very much a Committee-style discussion, and I beg to move.
Baroness Bowles of Berkhamsted
I would like to join in this discussion because it is probing thoughts. I shall make a few comments on Amendment 17A, because the issue overlaps with an amendment of mine that comes later in the main FOS group. Amendment 17A 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. I understand the intention, but 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, securitised or enforced years after the practical relationship has ended, yet the consumer’s ability to challenge an unfair relationship may already have fallen away. That is an asymmetry. As I said at Second Reading, while I 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, 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...
My Lords-
Sorry. Were you winding?
Yes.
I just wanted to say that I have a lot to say on the Financial Ombudsman Service but I shall save it all for group 6.
My Lords, first, I declare an interest, which perhaps I should have done at the beginning. I am a director of a pension company that is regulated by the FCA. I apologise for not having declared that earlier. I will reflect on an issue that could arise because the Financial Ombudsman Service is in charge of complaints about pensions. We know that many people who are taking out pensions products may have problems that do not become apparent to them for six or 10 years or beyond. Perhaps we could consider an amendment that would carve out the extent to which the Financial Ombudsman Service deals with a pension complaint in relation to this element of the Bill.
My Lords, I have only a few comments on this group. As I listened to the comments on Amendment 17A, particularly those of my noble friend Lady Bowles and the noble Baroness, Lady Altmann, I understood what reminded them of mortgage prisoners. In that case, people who held mortgages with banks that failed, and who were rescued by the Treasury, were then sold on to private holders who were not themselves lenders of mortgages. In effect, they lost the ability to refinance, and so they remained imprisoned in very high-rate mortgages at a time when everyone else was able to remortgage. We can see echoes of that in some of the limitations that would be introduced by these amendments. I am therefore always concerned about those time limitations, particularly in situations where assets can be sold on, as they often and increasingly are today. Amendment 44, from the noble Baroness, Lady Neville-Rolfe, seeks to deal with the issue of consumer redress. If a consumer has been abused in some way and has a moral right to redress-a right in law-should that be lost simply because we have a regulator that fails to act promptly and within a reasonable time? I understand that it is tough for the industry, because it leaves it with uncertainty, but some of these products are life-changing for individual consumers and have life consequences. That is what made me think of mortgage prisoners; their lives were completely ruined by that process. Where there are such consequences for the individual,...
My Lords, I begin by considering Amendments 17A and 44. The Government’s reforms to the FOS are aimed at ensuring that the legislative framework in which it operates supports it to perform effectively the role that it was established to do, providing quick, informal and impartial dispute resolution between financial services firms and their customers. Given the nature of the FOS and the way it operates, it can be effective at resolving the majority of disputes between customers and financial services firms, but it cannot do everything, and some things are more suited to other routes. The alternative routes include the courts and a 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 a mass redress event has occurred. Turning to Amendment 17A, I thank the noble Baroness for raising this important issue. I recognise that there have been questions about the time limits that apply to claims brought under Sections 140A to 140C of the Consumer Credit Act 1974 in the light of the Zedra ruling. The Government understand that there is an interest in and desire for clarity in this area. The noble Baroness, Lady Neville-Rolfe, asked me about the Government’s position following the Zedra ruling and...
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. For those reasons, although I appreciate the intention behind the amendment, the Government cannot support it. I respectfully ask the noble Baroness not to press it.
Turning to Amendment 44, I recognise that many stakeholders desire clarity around the eligibility of older complaints for the FCA’s consumer redress schemes under Section 404 of FSMA, also known as mass 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 10-year limit for the age of complaints, subject to key exceptions set by the FCA for long-term products such as pensions.
However, complex, systemic issues often take time to come to light. By the time the harm is understood, an ordinary court timeline may already have run out, so tying the FCA’s power under Section 404 to that timeline would mean that, in exactly those cases, consumers had no route to redress at all. The wrong would be clear but nothing could be done about it. Consumers need to have confidence in the UK’s financial system and the ability of the FCA to act on systemic compliance failures, wherever it finds them. For that reason, the Government cannot accept this amendment.
Turning to Amendment 36, the Government recognise and welcome the desire to avoid introducing unnecessary steps into the FOS’s casework process. The Government have publicly stated our intention to require the FCA to provide a response to the FOS within 30 days, in most circumstances. However, the Government consider that it is appropriate to set this requirement in secondary legislation to provide flexibility and ensure that the new process can be effectively operationalised. The FCA and the FOS 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 FOS while not leading to significant delays in its casework.
The Government recognise that it is important for firms to have certainty around historic liabilities, which is why the Bill introduces a 10-year backstop time limit for bringing cases to the FOS. However, the Government are clear that there are some circumstances where such a timeframe is not appropriate. Consumers must have confidence that 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 would undermine this. I therefore ask the noble Baroness not to press her amendment.
My Lords, I am grateful to all noble Lords who have contributed to this brief debate and to the Minister for his response and clarification of THG v Zedra, which I will certainly consider. My central point is that a redress and complaints 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 about the liabilities they face, the standards against which they are judged and the timeframes within which matters will be resolved. If we create a system in 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 do not think it will produce a better system for consumers. I agree that we must look after consumers-this is obviously a very important part of consumer law-but I worry that we will produce a slower, more uncertain and more contested system for everyone if we do not get these judgments right. I do not accept a bias towards business, as the noble Baroness, Lady Bowles, suggested. Actually, we are seeing a shift the other way in some of these areas, which is why I have had the representations I have had on these points and why I think is it is very important to find clarity. I note what my noble friend Lady Altmann said about pensions. The Minister has answered and explained that he sees pensions in a slightly different way. I am not sure what the limitation...
Amendment 17A withdrawn.
Schedule 1 agreed.
Clause 2 agreed.
Clause 3: Access to banking services
Amendment 18
Moved by
18: Clause 3, page 1, line 21, at end insert- “(1A) Before making regulations under this section the Treasury must consult persons which provide banking services and such other persons as the Treasury consider may be affected by the regulations.”Member’s explanatory statement This amendment requires the Treasury to consult banks and others who might be affected by regulations on access to banking services.
My Lords, in moving Amendment 18, I will also speak to my Amendments 19, 20 and 25 in this group; I am grateful to the noble Lord, Lord Vaux, for adding his name to them. We now move on to Clause 3, which gives a very wide power for the Treasury to make pretty well any provision it feels like about providing access to banking services. It is a fact of life that major banks in the UK have been reducing their branch footprints for several years, in response to the massive shift from in-person banking to online and mobile banking. Branch visits have fallen by more than 90% since the 1980s, and debit cards overtook cash transactions in the 2010s. In 2024, only 9% of transactions were made in cash, while 93% of adults used online or mobile banking. At the same time, the activity that banks could conduct safely via branches diminished. Some might think nostalgically of the era of autonomous bank managers making lending decisions and offering investment advice, but those days have been largely risk-managed out of retail banking. Noble Lords will be aware that the 2023 Act gave the FCA powers to protect access to cash services. I did not think that those powers were necessary, because I could see that cash was definitely on its way out, but I 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 that provide not...
My Lords, as this is the first time I have spoken on the Bill, I would normally apologise for not taking part in Second Reading but-how I can put this-I was enjoying my temporary retirement from the House.
Noble Lords
Oh!
It is very nice to be back to do another Financial Services and Markets Bill. As it is the first time I have spoken, I should declare a registered interest in Fidelity National Information Services, Inc., which is a large American company that provides services and software to a wide range of financial services companies around the world. I have tabled Amendment 26 and given notice of my intention to oppose that Clause 3 stand part of the Bill. I have also added my name to a number of amendments in the name of the noble Baroness, Lady Noakes. I have another interest to declare. I lost my local bank branch in my village some years ago, and I have just been informed that the last remaining bank in my 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 to the idea that we need to do something to ensure continuation of access to banking services, especially in rural areas such as mine. At the same time, I am conscious that I probably visit a bank branch less than a couple of times a year, so I understand why banks feel it necessary to close them. They are not economic. We need to find a sensible balance to this. I accept that we may need to do something, but what? There is the old joke: “We need to do something; this is something, so let’s do it”, but Clause 3 is not even something. It is just a vague-I was going to say promise, but it is not even that-intention to do something completely unspecified at...
Baroness Bowles of Berkhamsted
My Lords, I will speak briefly to Amendments 24 and 27 in my name. I support what has just been said by the noble Lord, Lord Vaux. To some extent, we are again fishing in the same constitutional pond that regulators are not Parliament. Parliament should not give away powers it cannot get back, and it should not make decisions before we know what we are deciding about. 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 cheque. If Parliament asks for a review of access to banking services, the regulation-making power should be, if not confined to, at least in some way related to what the review identifies and not what a future Minister or regulator might wish to do. That is my real target. It may be that I have drafted he amendment a little too tightly but, 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 more than stretches proper procedure. Amendment 27 addresses a different but related concern. As drafted, the Bill creates machinery in which 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 rulebook. The Government will no doubt say that Parliament can always reject the regulations, but we all know how that...
My Lords, I shall speak to Amendment 22 in my name. I apologise for not being able to speak at Second Reading, as I was overseas on a parliamentary delegation. I declare an interest as a member of the Financial Inclusion Commission and president of the Money Advice Trust. My amendment is specifically about banking hubs, a subject I have been very interested in ever since they came on the scene. There is a need, as I see it, for a far clearer definition of what constitutes a banking hub. Looking at the range of other amendments in this group, I am pleased that we are having a broader and much-needed debate on access to banking and, in particular, in-person services than we managed to have on the 2023 Act, despite my best efforts, which did not really get us anywhere. To explain why a definition of “banking hubs” is so important, I will briefly look at the context. As we all know, over the past decade banking in the UK has changed profoundly. More than 6,700 high street bank branches have closed since 2015. Of course, at the same time, the way that people pay for goods and services has shifted dramatically: 10 years ago, more than half of all payments were made in cash, and today that figure is closer to one in 10. For many people, that transition has been quite manageable, and indeed welcome, if they like the convenience of digital banking online, apps or card payments. But, for others, the shift away from local branches and cash-based services has created real barriers. For...
Where hubs have been established, however, they have not always been suitably located or designed. Some are situated away from high streets or public transport links, or they operate only on limited days. Critically, they do not offer the full range of services previously available. My amendment is designed to achieve some basic and agreed definition of what constitutes a banking hub.
Most people want to be able to speak to someone face to face and access physical banking services; that is important. They might need help and advice on complicated issues to do with a loan or mortgage-they are not all done digitally-or, in particular, on powers of attorney, probate or third-party signatories when a family member becomes incapacitated or passes away. 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 do not want to do it over the phone, on live chat or in a distant town.
Everyone will have their own view of what that tighter definition, which I think is needed and is what my amendment is all about, should include. For me, the minimum would be not only access to accounts for payments and transfer, but support when fraud or scams happen and for registrations of death, probate inquiries and powers of attorney. There must still be some access to face-to-face services for those sorts of things.
My Lords, it is a great honour to follow the noble Baroness., Lady Tyler. As I listened to her speech, I was crossing off most of the things that I was going to say, because she said them much more eloquently than I could have, and I am thankful for that. We need to be able to provide everybody with the best possible services, locally available. As the noble Baroness said, when people are at their most vulnerable, at the most crucial moments of their lives and taking the big decisions, being face to face makes all the difference. I gather that an article in the Spectator says that Bishops do not mention the word Jesus enough when we are speaking in your Lordships’ House-well, I have just covered that one, for Hansard ’s benefit. In my theology, when God had something really important to do, He did not send an email or text message or put writing in the sky. He sent a person, in Jesus Christ, to meet other human beings face to face. We lose face-to-face services at our peril. Occasionally, yes, I am involved with the closing of a church. But very few churches, certainly Anglican ones, have been closed in England over the past 40 or 50 years, because we recognise the importance of providing face-to-face encounters for people to meet other people. While I appreciate that we do not want to overregulate, I feel that, as I said at Second Reading, making face-to-face banking services available to people when that is what they need, because they have a big decision and are feeling...
I shall speak to Amendment 23 in the name of my noble friend Lord Sikka. He very much regrets not being able to be here, but I hope that the Minister will still respond to the point that it raises. The key issue is that there is a public service element in banking. It goes beyond commercialism; it is reasonable to ask that the review which is taking place should consider that issue, and specifically whether it requires an amendment to the Bill to effectively pre-empt the issue and say that villages, towns and districts need some form of banking services. I think there could well be broad agreement on that-the issue is that banks are competitive commercial organisations and so are not going to do it. They will do it only if there is some sort of collective scheme, funded by a levy, that provides good services for people where they live. I very much enjoyed the contribution of the right reverend Prelate, and indeed churches have closed down far less frequently than banks and post offices. I hope my noble friend will respond positively to that point on the public service element.
Baroness Bennett of Manor Castle
My Lords, I speak for the first time in Committee on my third Financial Services and Markets Bill. I reflect on the curious circumstances in which we find ourselves and offer reassurances to those who do not like Clause 3 in particular. Surely under the new regime, which we expect to see in a month or so, we are unlikely to see the Bill in anything like its current form given that it aims overall to deliver the so-called Leeds reforms of Chancellor Reeves. Those intend to give the financial sector a boost of growth, at an inevitable cost to the real economy-a boost to London and the tax havens at a cost to the rest of the country-and to reduce the regulations which were brought in as protections for all our security after the last financial crash. However, there is still a point in all of us going through the Bill in detail as we are doing now, because we are also making bids for what a future Government will look like. On that basis, I will speak in particular to Amendment 22, in the name of the noble Baroness, Lady Tyler, and Amendment 23, in the name of the noble Lord, Lord Sikka. We are expressing very important issues, as the right reverend Prelate put so well. He was speaking about religion but also about humanity and human need, which these amendments particularly address. Your Lordships do not need to listen to me with my radical voice; reading around this, I found an article in March from the Civil Service Pensioners Alliance. It quoted figures which state that...
My Lords, there seem to have been two themes in today’s discussion; I will address both because I agree with them both. The first is on whether we value banking hubs. There have been so many voices that say that we value them, but they are calling for a much-improved framework, including the noble Baronesses, Lady Tyler and Lady Bennett, the noble Lord, Lord Davies, and the right reverend Prelate the Bishop of Manchester. I suspect that there is a universal consensus that we need to think through this issue, which is exactly why the Richard Lloyd review is now anticipated. I think that most people who see the value of banking hubs in their community-most MPs have been asking for banking hubs in their constituencies-very much appreciate the direction of the Lloyd review. On the background and evidence for the need for banking hubs, I will address some of those issues much more when I discuss community development financial institutions in a later group, so I will not repeat all that. That does not take away from the fact that we have a constitutional issue here. According to its report, the Delegated Powers and Regulatory Reform Committee is very concerned that the problem has not been clearly identified and that a power as extensive as the one provided for here in the Bill severely compromises effective parliamentary scrutiny. The Select Committee asks for the power to be removed from the Bill. I say to the Government that it is important that there will be some real clarity...
My Lords, Amendment 21, in my name and that of my noble friend Lady Noakes, would ensure that any government intervention in the provision of in-person banking services is evidence-based, proportionate and properly balanced. It would require Ministers to consider not only the needs of consumers but the legitimate commercial reasons why firms may reduce their physical banking provision. More widely, Clause 3 raises two distinct but closely related concerns. Our amendment speaks to the first: 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 cannot responsibly make that decision while ignoring the commercial realities facing the firms they intend to regulate.
There is 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. As Adam Smith famously wrote:
“It is 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”.
That principle remains relevant. If banks such as Nationwide judge that maintaining in-person services gives them a competitive advantage, I welcome that, and customers can reward that choice. However, compelling firms through law to provide services at a loss is a very different matter.
Such an approach would not be cost-free. Those 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 judgment without clearly establishing the need, calculating the cost or considering less burdensome alternatives. As we heard from the noble Lord, Lord Davies of Brixton, the noble Lord, Lord Sikka, even wants this to be done through a levy on banks. There is a public service element in many private services, yet we do not try to impose such levies on them.
Amendment 21 asks for something entirely reasonable: evidence before intervention, proportionality in design and proper consultation with the firms that will be expected to deliver it. None of this is to deny the importance of access to in-person banking; I have heard and agree with a lot of what has been said about its importance. For some customers-particularly those with disabilities, people in vulnerable circumstances and those who are digitally excluded-it can be essential. We therefore welcome the banking sector’s commitment to establish 350 banking hubs, as well as the 240 or so that are currently up and running. These banks recognise the power of direct access. Like my noble friend Lady Noakes, I see merit in a flexible, and possibly voluntary, approach.
I understand that my noble friend Lady Coffey, who cannot be with us today because she is at the Council of Europe, would have liked to address the role of post offices, and how they can provide further access to in-person banking services. This has already been raised by the noble Baroness, Lady Tyler of Enfield, with her Amendment 22. I hope that the Minister can address their role in his response.
Our second concern is constitutional and even more serious. I pick up where I left off in our debate on group 1. Clause 3(3) would give the Government extraordinarily broad powers, including, in Clause 3, the power to amend an Act of Parliament. Yet, as my noble friend Lady Noakes said, Ministers are seeking those powers before they have decided what policy they intend to pursue. She called this “bizarre”. The consultation has not concluded-in fact, it has barely begun-and the Government’s plans remain unknown. We are told that clarity will come only after the summer and that the power may be narrowed then.
As we heard from my noble friend Lord Goodman, who was a member of the committee, the Delegated Powers and Regulatory Reform Committee has said that the power in Clause 3 is inappropriately wide and should be removed from the Bill, and other noble Lords have echoed that. The Government are, in effect, 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 Minister-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 have identified and what policy they propose as a result of Mr Lloyd’s review-or, indeed, on a whim-as well as why powers are necessary, 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, then bring a defined proposal before Parliament if legislation is needed. The noble Lord, Lord Vaux, put it very well.
In my view, what the Government must not do is obtain the power first and decide what to do afterwards. That would be 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 noble Lord, Lord Vaux, set out. This is a very serious matter, and I will be listening carefully to the response from the Minister. I strongly urge him to reconsider his approach, which risks entrenching a deeply damaging precedent to parliamentary oversight and will prove unpopular in this Committee.
My Lords, I will begin by setting out why Clause 3 should stand part of the Bill. The way that UK citizens bank 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 are 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 mentioned, the Government launched an independent review into access to banking services led by Richard Lloyd, former executive director at Which? and a former board member of the FCA. I encourage noble Lords to engage with him. As they have noted, he conducts this critical work. I am glad to hear much agreement from many noble Lords today as this is a critical issue and the Government are right to be exploring it. Clause 3 ensures that we can act swiftly and proportionately if the evidence from the Access to Banking Services review supports intervention. Once the Access to Banking Services review has concluded and made its recommendations, the Government will assess whether any further legislative change may be required. I appreciate that the power is broad and that many of the amendments in this group are...
If the review is going to be completed in October, presumably there will then be a period of time when the Government will consider it. In my experience, that usually takes several months, by which time the Bill will be law. I struggle to understand how the power can be narrowed, given that we are probably at the end of the year before proposals have come forward.
I was coming on to that point. The noble Lord asked what the power can do and how that scrutiny can take place. It allows the Government to introduce targeted secondary legislation or to confer functions on the FCA, including the power to make rules in the future. When using this power, the Treasury must have regard to the recommendation made by the Lloyd review. I think the noble Lord made a point about what legislation could be amended. I can only answer this in part at this time: the Treasury expects to use the power if needed to amend relevant legislation, for example, financial services legislation.
I would just like to clarify this. Is the Minister saying in effect these powers are going to be one time only? Is that the implication?
No, that is not what I am concluding.
Then I cannot see how they can be narrowed.
My Lords, the Minister said that they may need the power to change financial services legislation. Since financial services legislation is in the hands of the Treasury, I think we are entitled to a slightly more specific explanation of how the power might be used to change primary legislation. Can he be more specific about which bits of financial services legislation the Treasury will likely use the power for?
With all these examples, I will have to come back in some detail at a later stage. The idea of narrowing the powers means that we can take into consideration the conversation and debate, while acknowledging that there will be some work to do in the intervening period. We believe we have the time to do that before the Lloyd review comes into play, allowing us to make the amendments necessary. On Amendment 18, from the noble Baroness, Lady Noakes, I reassure noble Lords that the Treasury engages very regularly with the retail banking sector as part of its policy-making process. In addition to the Treasury’s ongoing regular engagement, the Access to Banking Services review will engage closely with as wide a range of stakeholders as possible, including the industry, consumers, local authorities, small and medium-sized businesses, and trade bodies. Furthermore, if regulations are made under this power to confer functions on the FCA, the Government would expect the regulator to follow its usual processes and to fulfil its statutory duty to consult before it imposes any new requirements. Amendment 21, in the name of the noble Baroness, Lady Neville-Rolfe, contains a similar requirement for the Treasury to consult before making any regulations. It would require the Treasury to have regard to other sources of evidence, including the burdens that any regulations would place on banks, and for the Treasury to publish a statement alongside any draft regulation summarising its...
Amendment 27, in the name of the noble Baroness, Lady Bowles of Berkhamsted, would remove the ability of regulations made to be ambulatory and would require 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 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 clear evidence of consumer detriment that must be addressed.
Amendment 26, in the name of the noble Lord, Lord Vaux of Harrowden, would remove the ability for regulations made under this clause to amend Acts of Parliament. As the recommendations of the independent Access to Banking Services review are currently unknown, it is necessary for Clause 3 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 reassured 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 suggest that Clause 3 stand part of the Bill and that the noble Baroness does not press her amendment.
My Lords, I thank all noble Lords who took 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 its outcome. That may or may not answer questions to all noble Lords’ satisfaction, but at least we will have a starting point. That brings me to one of the key issues that arise from our debate: sequencing. It is normal to identify a problem, then decide whether legislation is required to deal with it, and then legislate. That has been how we have done business through Parliament for time immemorial. Not just in this case but in other cases as well, the Government 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. The Minister acknowledged the breadth of the powers but he has failed to articulate in a way that will satisfy the Committee the reasons or the rationale for having such a broad power. He referred to the DPRRC report, which gave a clear finding. The Minister will find that the House will generally take a lot of persuading not to follow such an explicit finding of the Delegated Powers Committee. This will not rest here; the Minister will be aware of that. This power is being taken at the wrong time, without sufficient evidence or definition. In consequence of it being taken at the wrong time and without any...
Amendment 18 withdrawn.
Amendments 19 to 27 not moved.
Clause 3 agreed.
Amendment 28
Moved by
28: After Clause 3, insert the following new Clause- “Access to affordable credit(1) The Financial Conduct Authority must-(a) within 12 months of the passing of this Act, establish, publish and maintain a framework for assessing and rating the performance of relevant deposit takers in providing access to affordable credit, and(b) annually publish updated ratings and scores produced by the Authority under the framework.(2) The framework must-(a) assess the extent to which relevant deposit takers serve the credit needs of individuals, households and small businesses, including those who are underserved by mainstream financial services, and(b) enable comparisons to be made between relevant deposit takers.(3) In developing the framework, the Authority must have regard to-(a) the distribution of lending across income groups, geographic areas and customer characteristics,(b) the availability of affordable credit to consumers who may otherwise be at risk of financial exclusion,(c) the provision of affordable credit to small and medium-sized enterprises, and social enterprises,(d) the extent to which a bank supports access to affordable credit through partnerships, referral arrangements and funding agreements, with credit unions, Community Development Finance Institutions or other community-based lenders, and(e) such other matters as the Authority considers relevant to the objective of promoting access to affordable credit.(4) For the purposes of subsection (2), the Authority...
My Lords, Amendments 28 and 29 are in my name. Amendment 30 is in the name of my noble friend Lady Bowles and I am very supportive of it, but I am going to focus my remarks on Amendments 28 and 29. I thank the Fair Banking for All campaign, a coalition of 38 organisations co-ordinated by Finance Innovation Lab, bringing together civil society organisations, anti-poverty groups, community development financial institutions, fintech researchers and people with lived experience of financial exclusion. Their work on drafting Amendments 28 and 29 assures that these amendments work in law and in practice. Access to affordable credit, which is the subject of these two amendments, is now one of the biggest challenges we face in the UK. Millions of individuals and businesses are excluded from fair and affordable credit despite being financially viable. More than 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. My focus has been very much on SMEs, which need credit to grow as the backbone of our communities and the source of new jobs. The Federation of Small Businesses records that more than half of all small businesses rate the availability of affordable credit as poor. When I talk to conventional banks about these customers, they say to me that they are very open to lending to small businesses, then I quickly find that...
Moved by
29: After subsection (4) insert- “(4A) Where a relevant deposit taker receives a score or rating below a minimum threshold prescribed by rules made under this section, the Authority must require the deposit taker to take proportionate remedial action to improve its rating.(4B) The Authority may-(a) make such rules or issue such guidance applying to designated persons as appear to the Authority to be necessary or expedient, and(b) give a direction under this section to a designated person if it considers that it is desirable to give the direction;for the purpose mentioned in subsection (4A).”Member’s explanatory statement This amendment to Baroness Kramer’s amendment gives the FCA a duty to ensure, through rules and guidance, that relevant banks and building societies which fall short of a minimum threshold performance in providing access to affordable credit are required to take proportionate steps to remedy the situation.
I beg to move.
Baroness Bowles of Berkhamsted
My Lords, I shall speak briefly to Amendment 30 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. The problem that we see time and again is not that firms set out to behave badly but that 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 rules permitted the 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 but drift, the same drift that we saw in motor finance, and it happens when...
My Lords, I declare my interests as a shareholder and a director of financial services companies in asset management and wealth management. I have considerable sympathy with the objectives that the noble Baroness, Lady Kramer, is seeking to advance. Access to affordable credit is a genuine problem in this country, as in many others, and the Committee 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 solve the problem and may in fact exacerbate the issue that the Bill is partly designed to alleviate: excessive and complex regulatory demands 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, not 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 it creates yet another compliance exercise, another box to be ticked and another issue to be managed without addressing the underlying economic reality that makes such lending unworkable. My second concern is the risk of unintended...
My Lords, I support Amendment 28, to which I have added my name. As we have heard, the amendment would require the FCA to establish a framework assessing banks’ and building societies’ provision of affordable credit. I spoke at some length at Second Reading on the importance of equal access to credit. I welcome what is already in the Bill, as I did then, but we can and should do more. We are witnessing a crisis of deepening economic inequality in this country. For the most vulnerable communities, it is 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 many families today. Daily life is a battle to put food on the table and to keep the house warm in winter, though perhaps not today. It is often the most impoverished 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 that they are unable to pay back. In doing so, they find that they are paying a poverty premium, which then exacerbates and ratchets the problem round and round, deepening the financial injustice. As I said earlier, I am trying to be more overtly religious in my speeches on the Bill today, so I assure the Committee that this is not merely a modern phenomenon. I could point to specific places in the Hebrew and Christian scriptures where specific rules are set out to ban the most egregious practices around unfair credit arrangements-things...
My Lords, I support what my noble friend Lord Massey said earlier on these amendments, and in particular on Amendment 28. When people talk about affordable credit, what they mean is subsidised credit, because the terms on which financial institutions are prepared to advance money to the kinds of individuals and organisations which have been referenced so far are always provided on a risk-adjusted basis. That reflects the likelihood of default and the amount of loss given a default, which drives pricing and causes people to say that they cannot afford the prices at which a product is advanced to them. We must be clear on this: we are saying that some groups in society need to have access to credit at below a risk-adjusted rate. A fairly simple question is whether we think we should impose on banks the requirement to subsidise one way or another-whether through the vehicle of community finance organisations or directly by charging lower non-risk-adjusted rates to certain groups. My answer is that it should not be; the banks already have quite considerable costs imposed on them, such as the banking hubs which we discussed earlier and which would not be set up for pure economic reasons, or the provision of basic bank accounts. There must be a point at which we stop saying that the banks can just provide more things to groups of people who could not otherwise afford access to them, so I am very much opposed to Amendments 28 and 29, which are an unreasonable imposition. On...
My Lords, I am grateful to the noble Baronesses, Lady Kramer and Lady Bowles, for bringing these amendments-and to the right reverend Prelate for his reference to scripture. They 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 underserved communities. I will begin with Amendments 28 and 29 in the name of the noble Baroness, Lady Kramer, and in the case of Amendment 28 also in the name of 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 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 simulate 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...
My Lords, Amendments 28, 29 and 30 are aimed at increasing access to finance and ensuring that the customers of financial services firms are protected. I recognise the intention behind these amendments. However, I do not believe that either solution is workable. On Amendments 28 and 29, I agree that data on access to finance and holding the sector to account are important. However, these proposals would introduce a new, prescriptive and burdensome framework on the FCA and firms that I am not persuaded would deliver the desired output. Amendment 28 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. Amendment 29 would require the FCA to take action against firms that do not meet a minimum standard. As the noble Baroness, Lady Kramer, said, this approach resembles the United States’ Community Reinvestment Act 1977, but we should not assume that it would have the same effect here. Our starting point is different: we are working nearly 50 years later, in a digital age, with a far more diversified credit market. In any case, lenders already publish significant data. Chapter 7 of the FCA’s Conduct of Business Sourcebook requires extensive disclosure on personal and business current accounts. We also have the FCA’s Financial Lives Survey, the SME Finance Monitor and the British Business Bank’s annual SME finance publications, among others. Amendment 29...
I thank the right reverend Prelate the Bishop of Manchester for signing Amendment 28 and for speaking so eloquently in this debate. The noble Lord, Lord Massey, and the noble Baroness, Lady Noakes, are both involved in the world of finance and meet international financiers. I will give them a challenge. When they meet American financiers and bankers, whether here or in the United States, will they please raise CDFIs? The noble Lord, Lord Massey, will find that basically everything he said flies completely in the face of the US experience, and I say the same thing to the noble Baroness, Lady Noakes.
The loss ratio for CDFIs in the States is in fact slightly lower than for banks as a whole. They have capacity to manage risk because they know their customers in a way that many banks do not and because they build structures around their customers. If somebody comes in with a good business idea, they enforce that with advice, help on marketing or whatever else is necessary because they see their role as making that entrepreneur a success, so they bring in those additional resources. A loan book of $450 billion is to me a great success. This is not some marginal experimental idea that has floated around and that I am echoing. I am 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.
The Minister says that we are a different place, but I say that in this area we are almost identical. Exclusion by banks is not necessarily risk-based. Of course, there will be some customers who come in and when the risk is assessed it is not appropriate to lend them money. But our high street banks today do not have the capacity, and it is not in their business model, to do that kind of detailed individual digging and to understand, if it is a shop that wants to open a second premises, what that business is about, what it does, what the owner is like and what its record is like-and then work with them. They no longer have the capacity for any of that. This is the remedy to fill that substantial missing layer of community banking. I suggest that, if we want growth in this country, we will have to do that. I recommend that everybody who thinks that this is some sort of “not applicable here” idea should talk with the American financial institutions because I can tell you that-whether you are talking to JPMorgan Chase or to the smallest bank, or whether you are talking to the largest multinational or to the smallest business-you will get confirmation from them of the effectiveness and success of this sector. I beg leave to withdraw the amendment.
Amendment 29 (to Amendment 28) withdrawn.
Amendment 28 withdrawn.
Amendment 30 not moved.
Clauses 4 and 5 agreed.
Clause 6: Time limits for making complaints under the compulsory jurisdiction
Amendment 31
Moved by
31: Clause 6, page 5, line 10, leave out from the second “the” to end of line 16 and insert “end of the period of ten years beginning with the act or omission to which the complaint relates, determined in accordance with the rules (which may provide for different times in relation to different cases). (1B) Among other things, rules made under sub-paragraph 13(1) must provide in specified circumstances for the applicable time limit to end at a later time where-(a) in the opinion of the Financial Ombudsman, the failure to comply with that time limit was due to exceptional circumstances;(b) the complainant only became aware (or ought reasonably to have become aware) of material facts or detriment to them relating to the act or omission complained of after the expiry of that time limit.”Member’s explanatory statement This amendment amends Clause 6 to ensure that the ten-year longstop is the default position for Financial Ombudsman complaints, in line with the preferred option in the Impact Assessment and as opposed to the six-year provision in current FCA rules (DISP 2.8).
This extensive group of amendments is focused on the role and functioning of the Financial Ombudsman Service-the FOS. We have already had a taste of that debate with group 2, but I am concerned that there is not going to be enough time for me in my 15 minutes-perhaps the Whip is already thinking that I should get on with it-and I will not be able to finish it all. I have said that I will take the opportunity, if I have not been able to ask my noble friend the Minister all the questions that I want within my allotted time, to ask further questions when we get to Clause 8 stand part. This group of amendments deals with three issues: time limits for taking cases to FOS, the proposed system for the referral of issues to the FCA and, significantly, the changes to the “fair and reasonable” test. This is a lot to deal with, and in fact it is about the interaction between these three different changes. They might appear separate, but their overall impact has led to real concern that the interests of consumers are not being given sufficient attention. I must pay tribute to the support that I have received from the All-Party Parliamentary Group on Investment Fraud and Fairer Financial Services, of which I am vice-chair, as well as Which? Money and Fairer Finance. They have all expressed concerns that consumers’ interests are being adversely affected, and those concerns most definitely need to be addressed. Starting with Clause 6 and my Amendment 31, I am concerned about the changes to...
The FCA rules require the ombudsman to take into account relevant law, regulators’ rules and guidance, codes of practice and good industry practice at the time, but none of these is determinative on its own. FOS can currently find 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, a consumer who is in a much weaker position, both financially and in terms of knowledge, than the provider that is being questioned, that overall, it was not fair and reasonable. All the guidance might have been followed, all the rules might have been followed, but still it may seem to the ombudsman that it was not fair and reasonable. That is the point of the ombudsman. Unless I am mistaken, in which case I will be happy to hear an explanation from my noble friend the Minister, that is the problem. It is taking away that ultimate discretion for the ombudsman to decide, in all the circumstances, that it is not fair and reasonable. Is this an asymmetry of knowledge and power?
My amendment is intended to be probing. Can the Government explain why Clause 8 is the right way to deliver greater clarity and certainty in FOS decisions? What evidence base justifies a change of this scale? How can they assure the Committee that the consumer’s access to fair, impartial and timely redress will not weaken as a result? As drafted, Clause 8 raises several risks. First, it weakens the ombudsman’s impartiality. The current wording removes that discretion, as I have explained. Secondly, it undermines how FOS can act as a fast, informal dispute resolution body.
Thirdly-I am rushing at this stage-it creates a structural weakness that could erode consumer protection over time without Parliament having decided that it should be weakened. If a future regulatory shift dilutes high-level protection, the consumer duty being the obvious example, then because Cause 8 ties FOS’s decision-making to FCA rules, consumers’ access to address would shrink automatically alongside it. Parliament would have no way to intervene, short of primary legislation. Fourthly, it puts FOS out of step with every other consumer ombudsman scheme in the UK. Will the Minister address the absence of any thematic evidence to justify a change of this scale? Despite the scope of what is proposed and the risk that it carries for consumers, no public evidence of systematically problematic FOS decisions has been presented.
To conclude I have three questions for the Government. What historic cases have driven the need for change? How many FOS decisions are expected to come up differently as a result of it? If the answer is “many”, do the Government accept that this comes at consumers’ expense? If the answer is “not many”, what are the changes for, given how many consumer groups are concerned by it?
I have to advise noble Lords that if Amendment 31 is agreed, I cannot call Amendments 32 or 33 because of pre-emption.
My Lords, I will speak to my Amendments 33, 35, 37, 42 and 43 in this group. All these amendments, and my Clause 7 not-stand-part question, relate to the FOS and its regime. I will try very hard not to repeat too much of what the noble Lord, Lord Davies, was saying a moment ago. The proposed reforms of the FOS 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 see, looking at the far-reaching proposals in the Bill, is an assault on the four key pillars designed into the FOS by Parliament: independence, speed and simplicity, time limits on bringing complaints, and the “fair and reasonable” test for determining those complaints. Taken together, Part 2 replaces each of those pillars with subordination to the FCA, a rather undefined change to time limits, and a 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. At Second Reading, I asked the Minister 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 have had no reply. The obvious question in all this is: who benefits? The answer is: not the ordinary consumer. My amendments are aimed at...
Baroness Bowles of Berkhamsted
My Lords, my Amendment 34 again concerns symmetry of enforcement and redress periods. The Bill introduces a 10-year hard stop on complaints to the Financial Ombudsman Service, but the problem is that the 10-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. The Government have already conceded that the 10-year period cannot sensibly apply in a wide range of cases. I have a concern that, once Parliament writes “10 years” into statute, that becomes the headline. Consumers may assume they have 10 years, even when they are in one of the many categories where the long stop does not apply. That creates a real risk that people will time themselves out because they believe the headline rather than the detail. Then there is the deeper structural issue that I have referenced before: firms’ enforcement rights do not end at 10 years. They can enforce debts, pursue arrears, securitise portfolios and benefit from long-tail revenue streams well beyond that period. Yet the consumer’s ability to challenge an unfair relationship or to bring a complaint may fall away far earlier. That is the same kind of asymmetry that I raised before. My solution is that at least the starting point should be that the duration of rights, remedies and enforcement powers for firms must be aligned with the duration of rights and remedies for...
My Lords, I am grateful to noble Lords across the Committee. I 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 have an agreed amendment; we will have the opportunity to debate it properly at a future stage. I 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 longstop rather than extending it to 10 years, as Clause 6 would do. As I have already said, I am 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. However, this does not mean that time limits are unimportant. On the contrary, time limits are an essential part of a fair system. Claims can be heard fairly only when sufficient information is available to both sides to allow them to mount a proper case. That means records, correspondence, product documents, internal decision-making, staff recollections and...
My Lords, as we have heard today, the Financial Ombudsman Service-the FOS-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 does not work for firms and consumers. The Government are clear that an effective ombudsman provides consumers with confidence in our financial services sector and is a key element of an effective system. The Government’s review of the FOS found that, although the FOS fulfils its role in the majority of cases, in a small but impactful minority of cases, it has acted as a quasi-regulator. That conclusion was supported by the Financial Services Regulation Committee, chaired by the noble Baroness, Lady Noakes, in its report, Growing Pains: Clarity and Culture Change Required , which was published in June 2025. It recognised that the FOS’s “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 FOS 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...
Can the Minister clarify something? Is he saying that, provided you comply with an FCA rule, you are then always fair and reasonable? That is what I am taking away from this. I can list so many examples, such as Libor and mini-bonds-all kinds of things-where the perpetrators ticked every single compliance box. I am curious to know.
I apologise for taking a moment to ask my officials a question; I want to make sure that I give the right answer. Where the FOS has complied with the FCA rules, it still has the discretion to make judgments, as long as it believes them to be fair and reasonable.
Would the Minister mind repeating that?
Certainly. We are trying to align the FOS’s “fair and reasonable” test with the FCA rules, but it retains some discretion. I apologise for taking another moment to consult my officials. For clarity, where the FOS has aligned with the FCA rules, it has to believe that that is the case, and that determination has to be upheld.
For absolute clarification, “fair and reasonable” must be interpreted by the FOS as a standard that is met if there is compliance with FCA rules. I just want to understand because we can then go back historically and see where FCA rules might not have been perceived as fair and reasonable. It is interesting.
To pursue that, are we being misled by the use of the word “rules” here? There is guidance as well as rules. The principles are not rules, but the principles have to be followed, and they include things such as treating the customer properly. Is that right? There are some general principles within what the FCA lays down-
I am not sure that is what the legislation says; I think it says “rules”.
Looking at the legislation itself, it seems clear that if the act or omission is in breach of the FCA’s rules or the consumer duty that absolutely qualifies it as being okay. There is no subordinate reference to “fair and reasonable”.
I will take the opportunity to write because this definitely needs clarification. The note that I have says that in cases where the omission being complained about is governed by FCA rules, if the firm has met its obligations under those rules, the FOS will be required to find that it acted fairly and reasonably. All the FCA’s handbook is relevant here, including the principles for businesses and, therefore, the consumer duty. There will be coherence between those determinations but only when the FOS believes that the fair test has not been met can it challenge the FCA. I will write to noble Lords because this is an important point that needs a definitive answer. I apologise for that. On Amendments 37, 42 and 43, as I have set out, the reforms to the FOS’s fair and reasonable test are designed to preserve the FOS’s existing discretion in areas not covered by FCA rules. The Bill specifies the matters that the FOS must take into account when making determinations, taking this out of FCA rules and making it subject to parliamentary oversight. The matters listed include the law, relevant guidance, codes of practice and further materials published by the FCA or other regulators. This provides greater clarity around how the FOS makes its decisions. As I explained earlier, the Government’s view is that where there are relevant FCA rules, there are benefits from ensuring that FOS decisions are consistent with them. I will write to clarify further in case I have created confusion in...
As one always says in this situation, I will read what the Minister said with care. I have to admit that I was a little disappointed on the “fair and reasonable” test, but on close analysis it may prove to be better. In particular, I hope I will have a copy of the letter. It is clear that the rules include the principles, such as: “A firm must observe proper standards of market conduct”. Is it the ombudsman who would decide what was the proper standard of market conduct, or is that one of the issues that will have to be referred to the FCA? I am not expecting an answer now, particularly as-
I have a question for the noble Lord, Lord Davies. My understanding of the principles is that they sit at the top, and the rules are derived from them. But this is a focus on the rules, so it is only as derived. I do not know, and we will get an answer.
That is what the Minister will need to make clear in the letter. I urge him to make that point clear. Who decides whether the principles have been followed-or is that one of the issues that have to be referred to the FCA under Clause 7? On time limits, I am disappointed that the Minister did not address the specific cases that I addressed. Some figures were provided-I will start a war on people providing figures in this sort of debate, because they whistle past your ear and it is very difficult to make a quick assessment. The problem is the counterfactual: if the existing system did not exist, would those same figures apply? The Minister has effectively said that, under this change of rules, some people who previously would have received compensation will not do so. That is absolutely clear from the Minister’s statement, and that is reasonable because the providers will save an even larger sum of money. But of course that is under the existing system. We have to think about what those figures would be under the new system. Again, I hope the Minister will write to me about the specific examples, which could be large sums of compensation-in the case of inappropriate personal pensions, £13 billion was paid in compensation. Would that have been possible under the revised rules? I say that because £13 billion is quite a figure to miss out on for ordinary policyholders. I beg leave to withdraw the amendment.
Amendment 31 withdrawn.
Amendments 32 to 35 not moved.
Clause 6 agreed.
Clause 7: Referral of matters to the FCA
Amendment 36 not moved.
Clause 7 agreed.
Clause 8: Determination of complaints under the compulsory jurisdiction
Amendments 37 to 43 not moved.
Clause 8 agreed.
Clause 9 agreed.
Clause 10: Consumer redress schemes: general
Amendment 44 not moved.
Clause 10 agreed.
Clauses 11 and 12 agreed.
Amendment 45 not moved.
Clause 13 agreed.
We are about to move on to the last group of amendments and we have 35 minutes to go. I hope we can finish this group before we finish at 8.45 pm. If we do not, unfortunately we will have to break mid-group and reconvene on the same group on Wednesday, so it is in noble Lords’ hands what we do. Amendment 46
Moved by
46: After Clause 13, insert the following new Clause- “Reimbursement of fraud: liability of technology companies(1) The FCA must make rules providing that, where a person is to be reimbursed in respect of losses arising from an authorised push payment fraud, the cost of that reimbursement is to be borne, in whole or in part, by any relevant technology company on whose service the fraud was initiated, facilitated or communicated.(2) Rules under subsection (1) must provide for-(a) the apportionment of the cost of reimbursement between relevant technology companies and payment service providers, by reference to the extent to which each contributed to the fraud occurring,(b) a process by which a payment service provider that has reimbursed a victim may recover the apportioned cost from a relevant technology company, and(c) the information that a relevant technology company must provide to the FCA and to payment service providers for the purposes of the rules.(3) In making rules under this section, the FCA must have regard to the principle that the cost of reimbursing victims of fraud should fall, so far as is reasonable, on the persons best able to prevent the fraud.(4) In this section-“authorised push payment fraud” means a transfer of funds executed by a payment service provider on the instruction of a payer, where the payer was deceived into giving that instruction;“relevant technology company” means a person who provides-(a) a user-to-user service or a search service within...
My Lords, I will take that as an encouragement to speak only to my amendment, so I shall just say that the other amendments in the group from the noble Lords, Lord Faulks and Lord Hunt, make a great deal of sense to me, but mine is slightly different. They are dealing with the issues of reporting, review duties and requirements; I am addressing the same underlying issue of authorised push-payment fraud, coming from the perspective of who needs to act to prevent that and be on the hook when there is abuse. The tech firms-and it is primarily the US tech giants-are now major players in the payments system. They are not merely an inanimate part of the plumbing; the way that 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. With AI, the risks become yet greater for ordinary people unless proper guardrails are put in place, so we have to look ahead, not just put in place protections for current circumstances and the past. The financial incentive for 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. My amendment dealing with authorised push-payment fraud deals with a sector of that, but a huge one: authorised push-payment fraud in the UK exceeds £576 million a year. Under present legislation, victims are reimbursed most of that money by the banks, but the techs...
My Lords, I have a number of amendments in this group on the subject of fraud and scams. I have also added my support to the lead amendment, which was tabled by the noble Baroness, Lady Kramer, and to which she has just spoken. Most of my amendments arise, at least in part, from the abolition of the PSR and the absorption of its activities into the FCA; I will quickly run through each of them. The noble Baroness, Lady Kramer, has already explained the need for her Amendment 46, which would require the FCA to make rules to ensure that the tech or communications company on whose platform or service the fraud arises is responsible for a proportion of the cost of reimbursing the victims. Whether or not the mechanism in her amendment is the right one, the principle here is obvious. At the moment, it is the banks that must compulsorily fully refund victims of fraud. 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. It is clear that the mandatory reimbursement requirement has incentivised banks to do more to protect customers. However, we also know that fraud does not originate from banks’ services. According to UK Finance’s latest report, some 66% of scams arise on online services and a further 17% originate via telecoms. Let us be clear: the highest proportion of that arises on Meta platforms. Despite voluntary charters, this is not improving at all. Your Lordships’...
My Lords, for reasons that will become apparent, I start by referring to my register of interests, including my shareholding in Meta. I am grateful to the noble Baroness, Lady Kramer, the noble Lord, Lord Vaux, and my noble friend noble Lord Holmes, who is absent, for bringing forward this important group of amendments. I am sorry that this debate is so late and that the Grand Committee is so thin under the new five-hour arrangements-of which I am not a fan-because, collectively, these amendments raise an important and timely point. As online retail platforms and digital marketplaces become more popular and AI makes fraud easier, there has been a concurrent increase in the risk that people face from online fraud, as we have heard from the noble Lord, Lord Vaux. We have seen concerning figures suggesting that Facebook Marketplace is now the single most scammed UK consumer platform. Very large sums are stolen through it every day in the UK, and a very high proportion of UK purchase fraud begins there. We have also seen banks such as Santander taking active steps to block suspected Marketplace transfers to protect customers. Those examples raise very important questions: how easy is it for consumers to obtain redress when they are 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 placed to prevent the fraud have a real incentive to do so? It is also...
My Lords, I am grateful to the noble Baroness, Lady Kramer, and to noble Lords for tabling these amendments and to all noble Lords who have contributed to this important debate. The scale of fraud and the devastating impact of that crime on victims remains a concern for this Government. The Government take the issue of fraud very seriously and are dedicated to protecting the public and businesses from this appalling crime.
Amendment 46, tabled by the noble Baroness, Lady Kramer, would require the FCA to make rules so that where a victim of authorised push payment fraud is reimbursed, some or all of the cost can be recovered from technology companies when an online service is used to facilitate fraud. The Government have 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 do not consider this amendment the right vehicle to achieve that.
The Government are already taking forward a broader programme of action. The Online Safety Act, while not a catch-all, as the noble Lord, Lord Vaux, points out, requires tech companies to take proactive steps to stop fraudulent content appearing and to remove it quickly when they become aware of it. This Government are committed to ensuring that Ofcom is sufficiently resourced to undertake swift and decisive action against illegal online harms, including fraud, and we agree that tech companies should rightly bear the relevant costs of Ofcom’s regulatory oversight under that regime.
This summer, Ofcom will publish a register of categorised services subject to more stringent rules and consult on fraudulent advertising codes, to come into effect in 2027. Earlier this year, we also published a new fraud strategy, announcing an online advertising taskforce to improve transparency, new fraud prevention metrics to build platform accountability, and an online crime centre to strengthen intelligence sharing. As tech companies are already liable for the costs of implementing the systems and processes to prevent, detect and remove online fraud, alongside the costs of Ofcom’s fraud prevention work and any penalties for non-compliance, this amendment is not necessary.
Moving on to Amendments 58 and 125, tabled by the noble Lord, Lord Holmes, the Government agree that it is important that sufficient fraud prevention and protection measures are in place. However, we do not believe that these amendments are necessary. In recent years, we have seen welcome advances in firms’ 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 Payment System and CHAPS. Further, Pay.UK, the operator of the Faster Payment System, has been working on enhanced data exchange, which involves the exchange of specified data points between payment service providers before a payment transaction is made, providing more available data in the payment journey.
Moving forward, the Government are clear that fraud prevention must be built into the future payments infrastructure. The Strategy for Future Retail Payments Infrastructure , published in November 2025, 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 consulting on the design of the future infrastructure and how to meet that outcome.
Finally, I come to Amendments 47 and 59, tabled by the noble Lord, Lord Vaux, on authorised push payment fraud reimbursement and the PSR’s fraud performance data publications. Since 2024, the PSR has required that all in-scope payment system providers must reimburse victims of APP scams within five business days, and up to the value of £85,000 where these scams take place over the faster payments system, subject to specified exemptions. The Bank of England has introduced equivalent requirements for CHAPS.
The noble Lord, Lord Vaux, asked about the mandatory reimbursement requirement. The Bill provides for the PSR’s requirement to transfer to the FCA once the consolidation is complete. Firms will therefore continue to be responsible for reimbursing victims of APP fraud once the PSR’s functions are consolidated into the FCA. The FCA will be able to make further rules regarding APP reimbursement. The PSR has also commissioned an independent review of the reimbursement requirement, the results of which will be published shortly.
Regarding the amendment to require the FCA to publish an annual report on payment service providers’ authorised push payment fraud performance, the Government agree 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 payment providers, 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 Neville-Rolfe, asked a number of questions, including on shared liability. In the interests of time, I will write to her.
In summary, the Government are committed to tackling fraud. I hope I have demonstrated that there is significant ongoing work to tackle this threat and protect victims. I therefore ask the noble Baroness to withdraw her amendment.
My Lords, the noble Lord, Lord Vaux, and the noble Baroness, Lady Neville-Rolfe, both gave far better speeches then I could, and covered the whole area substantially. I am grateful to them, but this gives me a few moments to reply. Did the Minister say that the financial responsibility that will fall on tech platforms is the cost of prevention, detection and removal, and does he consider that all they need to do? He did not answer the question on shared liability or full reimbursement, and I find that reasonably preposterous, to tell you the truth. If these firms were effectively putting in place prevention, detection and removal, we would not have very much APP fraud, and therefore they would not be making very much reimbursement. We are not asking them to double up what they pay but to pay effectively. There is a lot more that the Government need to take note of on this. They must also remember that the victims are among the most vulnerable people in our society, as well as others who think of themselves as capable and then find they have fallen for a scam. I suggest that something far more vigorous is required, and it must be effective in making the tech companies respond, because, as the noble Lord, Lord Vaux, said, the history is that tech companies simply absorb the various requirements on them and make little move to act, because of the income that comes when they simply look the other way.
Amendment 46 withdrawn.
Amendment 47 not moved.
Committee adjourned at 8.36 pm.