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Sale of Student Loans Bill

This group of amendments covers repayment and collection arrangements after sales have been made. The manner in which repayments are collected and administered is a key facet of the borrowers’ experience, and noble Lords are right to seek reassurance that those borrowers whose loans are sold will notice no material difference as a result of the loan sale. Clause 1(4)(d) of the Bill is designed to give the Secretary of State the power to specify in the sales contract which organisation may administer the loans for purchasers. Clause 2(2) gives the Secretary of State power to set down in that contract that he will make sure that repayments due to loan purchasers get to him, and provide for the manner of that repayment—for all loans, unsold and sold alike. All repayments are collected in the same way, through employers and HM Revenue and Customs, or through the Student Loans Company for direct or additional repayments. The Government then ensure that the right moneys go to the purchasers of sold loans. Purchasers will not be able to appoint collection agents of their own choosing. Collection of repayments through the tax system will remain as now, and the administration of loans will remain with the Student Loans Company. This collection system is a key feature of the loans, which we expect to be attractive to investors. I turn to Amendment No. 8. It is logical that repayments can be gathered on behalf of the Secretary of State only by an organisation that he has specifically authorised to gather such repayments. It will not be possible for purchasers to decide to use an alternative mechanism from that stipulated under Clause 1(4)(d), nor do we think that such a prospect would be attractive to them. The intention behind Amendment No. 8 is already catered by the existing wording in the Bill. I would therefore urge the noble Baroness to withdraw this amendment. Amendment No. 9 relates to who will be entitled to moneys of different types connected with loans that have been sold. In general, repayments of principal, interest and any other moneys due in relation to a loan would go to the owner of that loan, which is the presumption set out in Clause 5(3). But there may be some payments, such as penalties relating to compliance with the tax system, where it may not be appropriate or possible for moneys collected to be directed to the purchaser. The current drafting of the Bill means that, as part of the negotiated sales contract, there may be arrangements made for certain moneys that differ from this main presumption. In practice, of course, the sales contract will be clear about all such matters, one way or the other, because of the operation of the presumption in default of specific provision. As such, we believe that we do not need to legislate that the contract must contain this specific item, and I urge the noble Baroness to withdraw her amendment. Amendment No. 18 seeks to ensure that the SLC and HMRC will be the only organisations involved in the collection of repayments of sold student loans. As my honourable friend in the other place made clear, the Government very much share the view that the SLC should continue to fulfil those functions it currently performs in respect of both sold and unsold loans. In fact, this Bill allows the Government to specify in the sales contract the identity of the party by whom sold loans will be administered following a sale—our intention being that SLC will perform this function, either directly or continuing as a delegate of the Secretary of State. However, the SLC is a private limited company. It is not a statutory body. There are two primary reasons why it would consequently be problematic to name the SLC in the Bill. First, as the SLC is a private limited company, not a statutory body like the HMRC, like any company it may in future cease to exist. Clearly, this is an unlikely scenario but, to allow for a sustainable programme of sales to develop, the provisions of this Bill will need to continue to be workable in the event this scenario were ever to occur. So the drafting would have to provide for this possibility in any event, and so allow for the possibility of someone else undertaking this role. Secondly, and in a similar vein, the Bill is designed to be flexible so as to cater for any wider changes in the administration of the student loans system in the future. As this Bill seeks to enable a sustainable programme of sales, it needs to allow for changes to the system to be made. I reiterate the Government’s clear intention: the SLC will continue to administer all student loans, including the process of collecting repayments, and this will not be affected by the sales process. Amendment No. 19, like Amendment No. 18, seeks to ensure that the SLC is named in this Bill as the only organisation that will administer sold student loans. This amendment in particular seeks to constrain the identity of the party that is able to make payments to a purchaser of money due to them. However, for the reasons I have already given in respect of Amendment No. 18, it is problematic to name the SLC in the Bill as the Bill needs to retain flexibility to be able to cater for any future changes, however unlikely. I therefore urge the noble Baroness not to press the two amendments. Amendment No. 21 concerns the exemption in the Commissioners for Revenue and Customs Act 2005 that enables student loan repayments collected by HMRC through the tax system to come back to the Secretary of State to be set against the loans themselves, rather than being treated as payment of tax. The amendment aims to make the text of Clause 5(5) more specific. The exemption covers, "““sums required to be paid to a Minister of the Crown by virtue of an enactment relating to financial support for students””." So with the current wording of the Bill, if enacted, the exempt sums would be those, "““required to be paid to a Minister of the Crown or other person by virtue of an enactment relating to financial support for students””." This overall wording makes clear that this is a specific and narrow change, which is necessary to allow money to flow to purchasers who will be entitled to repayments by virtue of the sales contract and the repayment regulations and pursuant to this present Bill. That is the nature of the specification that applies to ““other persons”” in this context. If we ever should wish it to be the case, an agent of the Secretary of State could in any event be the recipient of repayments on the Secretary of State’s behalf, so it is not necessary for that to be set out in the Bill. In the hope that this provides reassurance to the noble Baroness, Lady Sharp, I urge her to withdraw the amendment. Amendment No. 20 is a minor amendment. As the Explanatory Notes on Clause 5 set out, and as I have just mentioned, there is a presumption in the Bill that all moneys paid by borrowers relating to sold loans should be paid to the loan purchaser. The presumption is currently qualified by the cross-reference in Clause 5(4) to Clause 2(2), so that the transfer arrangements—the sales contracts—may provide for exceptions. However, we now consider that this precise cross-reference is not the clearest way of saying that the transfer arrangements in general could provide that some moneys would still be due to the Government after a sale; for example, penalties relating to compliance with the tax system. To provide greater clarity, the amendment therefore expands the scope of the cross-reference to Clause 2 as a whole. This amendment would do no more than fulfil what we originally intended.