On 13 March 2023, the House of Lords Grand Committee continued its line by line examination of the FSM Bill, which took place during the eighth day of committee stage. The amendments that were discussed covered clauses on mortgage prisoners, APP fraud and financial crime prevention.
On mortgage prisoners, Lord Sharkey’s amendment on a cap over the SVR for mortgage prisoners, was supported by many, but was noted to be the same amendment that had failed during the passage through Parliament of what became the FS Act 2021. The opposing view expressed by Baroness Noakes was that FCA is already taking, and is required to take, action, and that the amendment would in fact unfairly advantage some high risk borrowers. Lord Harlech, offering more measured opposition from the Government perspective, said he did not feel more could be done than has already been done. Lord Sharkey said his amendment was primarily a probing amendment which was aimed at ensuring that the initiative taken by Martin Lewis, the LSE and the APPG is taken seriously, and quickly – before Report stage. On that basis, he withdrew the amendment.
The next amendment proposed to give FCA power to overrule a FOS decision if the implications of the decision would affect FCA’s ability to regulate effectively, and also to allow FOS to make persons other than the complainant pay towards the costs of a case. The amendments were proposed by UK Finance. The amendment was withdrawn on the promise of a timescale for it to be discussed in further detail.
On APP fraud, the first amendment discussed was to remove the limitation that mandatory reimbursement is limited to scams made via Faster Payments. Lord Vaux spoke to the amendment, noting that the current voluntary system is stressful not least because not all banks act in the same manner – he called out TSB for reimbursing all fraud victims while saying other banks who are not signed up to CRM at all do not, and have no incentive to, prevent fraud or reimburse. A further element of the amendment proposed that while a 50:50 split between sending and receiving banks is an acceptable starting point, there should be flexibility to allow refinement where one bank was more at fault – but that nothing should make things more difficult for victims. The final part of the amendment would require the PSR to consider how the reimbursement policy might alter the behaviour of potential victims, because people should not feel they need not take care to avoid fraud. Lord Sharkey opposed this last requirement, saying it is important that banks cannot use the “you should have known it was fraud” excuse to deny restitution. He said the amendment proposed by Lady Kramer is vital to stop banks making these decisions themselves. Baroness Bowles spoke in support of the amendments. Baroness Penn sought to give reassurance that the Government would take all necessary initiatives but that it does not feel the amendments would improve consumer outcomes beyond that the Bill already says. Lord Vaux withdrew his primary amendment but said he might return on report to some others. Following that debate, clauses 68-71 and Schedule 14 of the Bill were agreed.
The next topic was the provision of sharia-compliant student finance, with Lord Sharkey explaining that none currently exists. He noted that the potential solution – a takaful – had been supported by the Government in 2013, but still nothing has changed. Ultimately he withdrew the amendment, but again, on the understanding of an urgent meeting to discuss the solution, otherwise the issue will come up again at Report stage.
The next amendment sought to prevent persons who are UK tax residents from being treated as PEPs – on the basis that there are many examples of individuals who have had their accounts frozen with no explanation, but which it is believed is because they are treated as “foreign PEPs”. The amendment sought to ensure that UK tax residents are not treated as “foreign”. Alternatively, the existing laws should be able to be made to work, if applied correctly. Baroness Bowles spoke of the significant issues that the EU had faced in getting the right balance. Baroness Penn, responding, said she understood the significant issues. She noted the importance of proper due diligence, but also that the Government recognises that domestic PEPs often present a lower risk than overseas ones – and that this is explicit in FCA guidance. The Government carried out research to establish whether to abolish the mandatory requirement for EDD on domestic PEPs if the risk was found to be low, but concluded that the current regime is appropriate. There followed a heated debate about the position of members of the Lords. Eventually the amendment was withdrawn on the understanding that the issue will return on Report unless the Government comes up with an acceptable proposal for change.
Further amendments will be discussed at a ninth day of committee stage, which is scheduled for 21 March 2023.