Financial Services Bill

I wish to speak to new clause 15, and I make no apology for bringing it forward today. It covers important policy issues, and there is significant public concern about the Supreme Court's recent decision. This new clause was fully ventilated in Committee and ably moved by the hon. Member for South-East Cornwall (Mr. Breed), so I shall not go over the issue, which is well known, other than to reaffirm that thousands of consumers have been affected by the decision on unauthorised overdraft charges, and to emphasise the mix of public surprise, shock and delayed anger at the Court's decision, which was to reverse the previous decision of the Court of Appeal and lower courts. That is why there is considerable public concern. I want to focus on the judgment that two members of the Supreme Court made, allied to the main finding in relation to overdraft charges. One of the judges was quoted as saying:""Parliament may wish to confer a higher degree of consumer protection by re-visiting its previous decisions"" when drawing up legislation. New clause 15 is an attempt to achieve exactly that. It would respond to genuine concerns among the public and ensure fairness as we move forward after the great disappointment of the Supreme Court decision on existing charges. Many consumers and consumer organisations think that the best and simplest way to do this is to revisit the Unfair Terms in Consumer Contract Regulations 1999. The new clause reflects that, because it would ensure that these charges were clear and transparent, which is an important consideration given the history of the development of this issue. It is also proportionate, which is a critical consideration in all this. Some people will ask why the Department responsible—the Department for Business, Innovation and Skills—cannot simply issue amended regulations. However, as we heard in Committee, that is complicated by the consultation on a new European Union consumer rights directive, which has been going on for a considerable period, as is usual in such cases. The Minister said that slow progress was being made. However, given that, as was agreed across the Committee, there is little prospect of this mechanism coming into force very soon, that does not answer any of the public, or indeed parliamentary, concerns about the matter. The new clause is a sensible and pragmatic response to what happened at the Supreme Court. In Committee, the Minister said that he is unsympathetic, at this stage, to following a legislative route and prefers a voluntary approach on the basis that that would be quicker and, perhaps even more important, more flexible in how it addressed not only the particular issue dealt with by the Supreme Court but other changes that may occur in the marketplace. Although I could have some sympathy with that argument, the history of this issue makes it difficult to believe that there is an easy or a quick solution. The Minister says, rightly, that if voluntary measures fail to deliver, then Government action will follow. However, I question exactly what will happen in such circumstances. Throughout our discussions of this matter, as it has gone through the courts and before it reached legal proceedings, it has been absolutely clear that the two sides have completely failed to agree, and that greater polarisation has occurred as the debate has gone on. On the one side, consumer organisations and the public believe that these charges are totally unfair; on the other side, the banks suggest that this is normal practice to which they remain committed regardless of the public reaction. All that I can see arising from the voluntary mechanism is that we will get into a time-consuming discussion and end up, at best, with a fudge, and I suspect that neither side will be particularly happy with the outcome. The new clause offers a genuine prospect of delivering a quick and effective solution at a time when we have a window of opportunity. It would respond to the public mood and the expectation that change will follow the decision of the Supreme Court. In Committee, there was a lot of discussion about whether the wording of the new clause was appropriate. The Minister suggested, as he often does, and often correctly, that perhaps those who originated it had not thought through all its implications, and questioned whether there might be some unintended consequences. I was more surprised that he went on to complain that it was so widely drawn that it almost amounted to price regulation; I suspect that that might have been an overreaction. I accept, however, that he put forward a variety of reasons to justify his conclusion that the new clause should not be pursued. He talked in general terms about not intervening in competitive markets and about how competition benefits consumers. We had a long and fruitful discussion, led by the hon. Member for Chichester (Mr. Tyrie), about the idea that we should make financial markets more competitive. I sign up to that. However, much of our discussion of this issue relates to whether market failure is occurring and whether, in those circumstances, regulation is necessary. I want to return to the issue of unauthorised overdrafts. As we heard in Committee, one of the surprising things in a so-called competitive market is that the charges that the banks impose for unauthorised overdrafts are remarkably similar, so it is pointless for someone to go from one bank to another because they will be treated in pretty much the same way. Someone on a modest income will be charged a very large amount of money for their overdraft compared with what they have in the bank. It is difficult to see how the existing situation benefits consumers. I am therefore unmoved by the argument that competition will deal with the issue. The Minister suggested that the new clause would have a sweeping impact across the whole financial services sector. However, I remind the House that its terms would restrict the OFT to addressing only the ancillary terms of any contract—it would not have the right to question the so-called value-for-money equation or the price mechanism within those contracts. We must also recognise that the OFT would have to act only when the terms were unfair, and show clearly that in its view they were unfair, before action was taken. I accept that, as the Minister says, the new clause would widen the coverage considerably by taking in large numbers of financial services contracts. However, I submit—I understand that the Minister would want to consult others—that, with the restrictions that I have described, it would provide real protection for consumers in their financial services contracts. I listened very carefully to the discussion in Committee, and I was not entirely convinced that the new clause before us then would not have provided answers to the decision of the Supreme Court, the concern and anger of consumers and the public and the need for prompt and directed Government action. New clause 15 would do all those things, and I commend it to the Minister and the House.