My Lords, I support Amendment 70 tabled by the noble Lord, Lord Holmes. As he indicated, what we really need is a wider power, but it is outside the scope of this Bill. I want to challenge that, at least for the moment. I refer to Clause 2(3), which makes it clear that:
“The single financial guidance body may do anything that is incidental or conducive to the exercise of its functions”.
This is an attempt to build on the powers that that subsection suggests.
The fact is that the prevention of debt is even more important than helping people once they fall into debt. In terms of preventing debts arising, the duty of care is particularly important to people with serious health conditions and disabilities, for whom financial problems can quickly become overwhelming, as the noble Lord, Lord Holmes, has indicated. I want to concentrate on the particular plight of sick and disabled people. For example, 400,000 people in the UK with cancer struggle to pay their household bills because of their diagnosis. Banks and building societies have a vital role to play in helping such people; it makes a huge difference if a bank or building society offers flexibility in mortgage and other payments or interest freezes on credit cards and other loans. Although the Bill highlights the importance of early help, there is a growing consensus that greater leadership is needed from the Government to make it clear that providing this support to vulnerable customers must be a priority for financial institutions.
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An amendment to the Bill that would have the effect of requiring the Financial Conduct Authority to set out a reasonable duty of care for financial services
firms is needed, albeit we have to work out how it can be fitted within this Bill. The exact detail of how any duty of care would translate into financial conduct rules would be decided by the FCA, based on consultation with the industry, consumers and other stakeholders. But it will need to be clear that a duty of care would require banks and other institutions to act with the best interests of their customers in mind. The great benefit of the duty of care is that, by avoiding people falling into unrepayable debts, the financial institutions as well as customers would benefit.
The amendment proposed by the noble Lord, Lord Holmes, relates only to claims management services—and I understand the good reasons why he tabled it in that way. However, I very much hope that we can go further and would be very grateful if the Government would give serious consideration to the issue that I am raising. They have argued that the amendment is unnecessary because the FCA has previously committed to publishing a discussion paper on the duty of care. This would be part of its review of the handbook that sets out the financial conduct rules and guidance that authorised firms must comply with. However, the FCA has stated that this review will not take place at all until after we depart from the EU. Given the strong consensus on the need for a duty of care and the significant number of people with long-term conditions facing financial difficulties now, we believe this decision should not wait. Also, we understand that a discussion paper would only start a dialogue, exploring the need for a duty of care rather than formally consulting on its introduction. Assuming, at the end of a lengthy consultation process, that it was decided that a duty of care was needed, legislation would then be required which would then be translated into financial conduct rules. In other words, there would be a whole sequence of events that could take years to complete. So I would strongly urge the Government not to go down that very long-term route.
Of course, such a significant regulatory change needs due consideration—there is no doubt about it. However, experts from the Financial Services Consumer Panel and the Lords Select Committee on Financial Exclusion have already examined the issue and endorsed the call for a duty of care. Also, if the Government agree to an amendment to achieve a duty of care as set out, the FCA would, of course, consult on the detail of how such a duty would be translated into regulation, providing a full opportunity to ensure that the duty would work for consumers and the industry. I hope the Government will be sympathetic to this important amendment and to the points raised here.