My Lords, in moving the amendment in the names of my noble friend Lord Stevenson and myself—I do not think that I have to declare this as an interest, as it was rather a long time ago—I should say that I cannot help but bring to this debate my experience on the Financial Services Consumer Panel, where I am afraid we witnessed countless examples of financial providers acting completely without the fiduciary duty towards their customers, despite what the law said at the time. What subsequently became evident during the crash—which, I remind the Government, was not caused by the Labour Government and was not started in the United Kingdom, but was caused by the banks—was that they had also failed to exercise any duty of care towards consumers across the sector that the industry was supposed to serve.
I shall cite only a couple of examples; my noble friend Lady Drake may have others to offer. The ones that I was involved with at the time were interest-only mortgages, self-cert mortgages, high loan-to-value mortgages and high loan-to-income mortgages. I am not talking here of the mass mis-selling of PPI or endowment mortgages; this was about selling products to people without putting their interests first—indeed, probably in the full knowledge that, should circumstances change, those people would have no way of repaying their loans. More than that, as the number of those reckless loans added up to a torrent, once unleashed, that hurt not just the individual borrower but a far wider group of consumers whose house prices fell, future loans dried up or repayment terms became unsustainable.
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Amendment 46B would ensure that financial services have a duty of care to their consumers collectively, as well as on a one-to-one basis for their clients. I know that the law has said that that duty of care across the financial services exists, but the Government have resisted writing it down in legislation and have relied only on case law. That duty of care would help prevent the financial services risking future crises through greed because it would extend the Bill’s duty of acting with “reasonable care and skill”—using the Government’s wording—to the financial industry. The first part of the amendment would establish a fiduciary duty that would demand a higher standard of care for direct consumers, and the second part would extend that general duty to all consumers across the sector.
In the Commons, the Government claimed that banks are already subject to duties to their consumers and that they are also subject to fiduciary duties and regulatory obligations. However, that is clearly not known to the industry, and it is certainly not experienced by consumers who are still liable to unethical sales practices. We saw in the interest rate swaps for small businesses, more recently than the crash, that these things continue to happen.
The Committee will know that confidence in this sector remains dangerously low. It seems, therefore, that we have to do something to try to give back confidence to consumers that this sector really will act in their interests. This Bill gives us the opportunity to do that. It will improve standards in financial services and have those rights set out in what, after all, will be called the Consumer Rights Act, which is where consumers can look to find out what they might expect from a provider. I beg to move.