My Lords, before I turn to the amendment in detail, I shall take a step back and look at the amendment in the context of Clause 49 and the wider context of financial services regulation in the UK. The purpose of the Bill is to strengthen the rights of consumers, and it is designed to make changes to consumer law of general application and scope. It is not intended as a substitute for sector-specific legislation or the rules that sector-specific regulators may make. Clause 49 helps consumers by requiring, in effect, that every contract between a business and consumer for the supply of services includes an obligation that the business performs a service with “reasonable care and skill”. The clause would therefore apply to the provision of services of all kinds; it would apply to the provision of financial services by all parts of the financial services industry, not just the provision of core services by ring-fenced banks.
As we all know, the financial services industry—not just banks—is already subject to the comprehensive regulatory regime set out in the Financial Services and Markets Act 2000, a great deal of secondary legislation and the massive PRA and FCA rule books. I am sure that no Member of the House will disagree with the proposition that we need a better deal from our banks, whether as individual consumers, small businesses or, for that matter, society as a whole. The question we now have to consider is whether this amendment would help us to get that better deal. The Government do not consider that it would.
8.30 pm
The first part of the amendment seeks to impose a fiduciary duty to provide core services with reasonable care and skill. I am not sure that a duty to perform services with care and skill could be described as a fiduciary duty. As I have said, that would be imposed as part of the contractual obligations under Clause 49. It will be buttressed, where appropriate, by general law or as obligations under FiSMA or FCA or PRA rules.
The second part of the amendment seeks to impose a wider duty of care to consumers across the financial services sector. Again, I am not entirely sure what is intended, but the Government cannot see what this could add to the comprehensive regulatory regime to which ring-fenced bodies are subject.
The noble Baroness, Lady Hayter, asked about consumers being able to look for a duty of care in a Consumer Rights Bill, but not in financial services legislation. But wherever it is placed, a general duty of care proposed in the amendment would not add anything to the comprehensive sector-specific requirements for financial services firms in FiSMA 2000 or in the secondary legislation and the massive rule books of the FCA and the PRA, as I have already said.
Turning to some of the points that were made in Committee, the noble Baroness, Lady Hayter, made the point that we have witnessed countless examples of financial providers acting completely without a fiduciary duty towards their customers, despite what the law said at the time. The noble Baroness, Lady Drake, made a similar point in Grand Committee. She commented on the problems of conflicts of interest and asymmetries of knowledge and understanding; and she criticised
the regulator’s reliance on rules, rather than placing responsibility on the financial services provider to act in the consumer’s interest.
No one will disagree that we have seen far too much wrongdoing in the financial services industry, but we have also seen massive penalties imposed on banks and other firms for that wrongdoing. We have seen the payment of massive amounts to customers as compensation for that wrongdoing, for example in connection with the mis-selling of the payment protection insurance—PPI—all under the existing law and all for breaches of what the law said at the time.
The noble Baroness, Lady Drake, raised queries about conflicts of interest between firms and customers. Conflicts of interest are dealt with in the Principles for Businesses—specifically Principle 8, which states:
“A firm must manage conflicts of interest … both between itself and its customers and between a customer and another client”.
My question to the noble Lords who tabled this amendment is, “How would the extra duties proposed in it have helped?”. Would they really have prevented any wrongdoing? Would they really have made it easier for regulators to take enforcement action? Would they really have helped consumers get redress? As I said before, no one denies that consumers need and deserve a better deal from our banks, but this amendment will simply not deliver it. I hope, therefore, that the noble Baroness will agree to withdraw it.