---

Financial Services Bill

My Lords, it will come as no surprise to the House that my noble friend Lord Whitty has made such a powerful and trenchant contribution at this point of our debate. My noble friend’s commitment, vigour and energy on consumer issues is well known to the House and much respected by those who work with him in Consumer Focus and others who take an intense interest in protecting the affairs of consumers and customers. I hope that my noble friend took considerable encouragement from the sentiments expressed by the noble Baroness, Lady Noakes, as endorsed by the noble Lord, Lord Oakeshott. There are undoubtedly issues here deserving of continuing attention, and I am sure that they will receive that attention from the next Government. Many of the issues that he has raised might best be addressed through some form of code or agreement with the banking industry, rather than being prescribed in law. I will certainly follow up with the chief executives of our major banks the points he has made in today's debate. I share my noble friend’s concerns in this area. The Government were equally troubled by the practice of credit card companies of allocating partial payments to the cheapest debt first, thus prolonging the period over which borrowers must pay interest on the more expensive part of their loans. This practice is counterintuitive and not well understood by consumers, many of whom were unaware that that was what would happen when they made a payment. That very issue was reviewed by the Government in our recent consultation on the regulation of credit and store cards. As a result, lenders have acknowledged that the current situation regarding the allocation of payments needs to change. On 15 March, the Government and the credit and store card industry jointly announced five new rights for consumers, including what we have called the right to repay. That right explicitly states that all consumer payments will be put against their higher interest rate debts first. All credit and store card companies have agreed to implement that change by the end of this year—something that we shall be very carefully monitoring. The change will need to be included in cards’ terms and conditions, therefore making them enforceable by law. The requirement will also need to be incorporated into the Lending Standard Board’s lending code, as well as that of the Finance & Leasing Association. Together, those two codes of practice cover the lending behaviour of all credit and store card companies in the UK. In addition, the Government intend to put the broader agreement, which includes a wide range of changes in lending practice, on a statutory footing. I hope that, in the light of my assurances that the Government have already acted on the allocation of payments, and that the consumer credit industry is committed to reversing the practice as quickly as possible on a voluntary basis, my noble friend will feel able to withdraw his amendment. With regard to Amendments 330A and 330B, I appreciate my noble friend’s concerns about ensuring that consumers are made aware of events that might cause them detriment. However, I believe that government Amendment 205 addresses that concern thoroughly and that that view was echoed by the noble Baroness. This new clause widens the circumstances under which the FSA should disclose details of its enforcement actions against authorised firms and individuals so that the FSA is required to disclose information relating to decision notices as it considers appropriate. Currently, the FSA can disclose only information relating to a final notice, which follows any appeal to the tribunal, rather than a decision notice, which is issued after a firm has had the opportunity to make representations to the FSA but before the firm has had an opportunity to appeal. This new clause provides earlier transparency before any appeal has been heard but, importantly, after the FSA has heard the firm’s view and concluded that there is a clear case to answer. Consumers will therefore now be able to benefit from earlier disclosure, and the FSA will retain its existing consumer protection tools, including the ability to vary a firm’s permission if its continuing behaviour poses a threat. Therefore, while I sympathise with my noble friend’s concerns, I believe that they are already met. The noble Lord, Lord James of Blackheath, raised an issue that he described as a "dirty trick" relating to settlement processes. These are issues on which I will familiarise myself. I doubt whether they are likely to be embraced within the Financial Services Bill before the Committee this evening, but I will pursue the matter. The noble Lord, Lord James, will no doubt be aware that the Office of Fair Trading has said that it is looking at issues relating to investment banking and banking with a view to considering whether it wants to launch a more formal review. It is precisely the sort of argument that has been laid before the Committee by the noble Lord, Lord James, that excites a continuing belief that the banking industry needs to be subject to careful scrutiny because its behaviours in the past have so often run counter to treating customers fairly. That is clearly unacceptable to all sides of the Committee. With those closing comments, I beg my noble friend to withdraw his amendment.