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Sale of Student Loans Bill

I thank the hon. Gentleman. One can always sense when constructive engagement has taken place because the Back Benches are empty on both sides of the House, which is what we see today. I should like to proceed by commenting on the first group of Lords amendments, which relate to the effect of the sale on borrowers. Lords amendments Nos. 1 and 4 cover the notification of sales to borrowers and, as I underlined in Committee, we have always intended to let borrowers know when their loan has been sold. Having listened to the arguments, we have strengthened that intention—in Lords amendment No. 1—into an obligation for the Secretary of State to take reasonable steps to let all affected borrowers know within three months that their loan has been sold. Lords amendment No. 4 would mean that, in the unlikely event of an onward sale of the legal title to the loans, the initial loan purchaser would be obliged to take reasonable steps to let the borrower know that their loan had been sold on. Lords amendment No. 5 also relates to onward sales. As I said in earlier stages of these proceedings, the borrower's primary protection in the sales programme lies in the fact that purchasers cannot change the repayment terms, which remain governed by regulations. That is an important protection, but we want the added safeguard that the Secretary of State can enforce any protections contained in the sales contract, including after any onward sale, however unlikely that might be. The Bill has from the outset enabled the Secretary of State to insist on being a party in some form or other to onward transfers. Having listened to the arguments put by hon. Members here and in the other place, we have made it a requirement in amendment No. 5 for the Secretary of State to ensure in the initial sales contract that he is party to any subsequent contract transferring legal title to the loans. Amendment No. 6 clarifies how the Bill addresses onward sales, putting it beyond doubt that the provisions of clause 3 relate only to the transfer of legal title of the loans. Without that clarification, potential purchasers and investors may be deterred from participating in loan sales in the mistaken belief that the Secretary of State will need to be a party to all transfers and the onward transfer of equitable rights that can take place in the context of a securitisation. That has never been our intention. Seeking to regulate this division of equitable interests would be unnecessary and unworkable, given the complexity of the structures. Only the legal owner has a relationship with the borrower and the student finance system as servicer, so the Secretary of State only needs to be able to regulate the legal owner's dealings with the loans. Amendments Nos. 8 and 9 will mean that, when making or amending the loan regulations or regulations under section 186 of the Education Act 2002, the Secretary of State must seek to ensure that borrowers will not as a consequence of the amendments be in a worse position simply because their loan has been sold. This provision will apply to all changes in regulations after any loans have been sold, not just where an undertaking may have been made. That represents a strengthening of the statement already made on the record that borrowers will not be adversely affected by their loan being sold. It will, I believe, give borrowers confidence that the commitment is intended to stand the test of time. Finally, amendment No. 10 is a minor drafting improvement, expanding a cross-reference in clause 5(4) into a reference to the whole of clause 2 rather than just clause 2(2). That will indicate more clearly that the transfer arrangements in general may provide for exceptions to the presumption that all moneys relating to sold loans should be paid to the purchaser. Such an exemption could cover, for example, penalties relating to compliance with the tax system. I am also aware of the Opposition amendment to Lords amendment No. 8, tabled by the hon. Member for South Holland and The Deepings (Mr. Hayes). I know that the Opposition wish to speak to that amendment, so I will respond to what is said about that later. Overall, the amendments in the group represent valuable strengthening and clarification of how we will ensure that the borrowers' interests in the loan sale programme are protected. On that basis, I commend the amendments to the House.