Dormant Bank and Building Society Accounts Bill [HL]

I am grateful to the noble Lord, Lord Higgins, for Amendment No. 4, which makes clear that when a bank or building society transfers a dormant account to the reclaim fund under Clause 1, this includes any interest due. The amendment would ensure that when customers reclaim their money, they are repaid the interest due on their accounts. We agree that this is an important and vital principle. Dormant account holders should be repaid in full. The amendment is unnecessary—and I believe that it is put forward in a probing way—as we have taken separate steps to ensure that this will be the case. Clause 8, which defines the term ““balance””, is an important clause in the Bill. It explains that the amount a bank or building society will transfer into the scheme, and the amount a customer is entitled to be repaid, must be adjusted according to the terms of the original deposit to include any interest accrued or charges deducted. The noble Lord, Lord Monson, expressed surprise that Amendment No. 32 is grouped with Amendment No. 4. May I just say to him that that is nothing to do with us! The amendment seeks to clarify that the interest rate that will apply will be the contractual rate. This is unnecessary, as it is clear in relation to Clause 8 that the interest will be calculated in accordance with the contract between the individual and the bank. In particular, subsection (2) sets out that the interest rate that the customer will be repaid is the one that would have applied had the transfer not taken place. It is not therefore possible for any other interest rate to be applied, as subsection (2) prevents this. It will be individual financial institutions that will be responsible for calculating how much a customer is owed, including accrued interest, according to their records, and will make the payment on the reclaim fund’s behalf accordingly. Customers will be repaid their balance, adjusted for interest according to the terms of the original contract. If the bank were to make a mistake and transferred too little or too much to the reclaim fund, the institution would still be obliged to repay to the customer the full amount that they would have been owed under the terms of their contract. The banks and the reclaim fund are expected to adjust for overpayment or underpayment. If there is a dispute about the fairness of any charges deducted post-transfer, customers can now complain to the Financial Ombudsman Service, if necessary. I hope that I have made the position crystal clear on the record as to what the Bill intends. If noble Lords want to raise any other matters on this issue, I am happy to answer them.