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Paul Farrelly: I am glad that the Minister said that I was only a ''little harsh'' rather than ''very harsh'' about the OFT. My OFT bashing was not meant to be a criticism of the Bill, which is a wonderful step in progressing regulation. I was pointing out that I hope that some regulatory competition, with a bit of backbone, will help the OFT to become a harder touch.
Mr. Sutcliffe: I acknowledge my hon. Friend's point. I assure the Committee that I meet regularly with the director-general of the OFT, Sir John Vickers. Sir John will leave his post later in the year, and there will be a replacement. We will have to look at how people see the OFT's role in the context of the Bill. I acknowledge the concerns raised and will pass those on to the OFT. The hon. Member for Bridgwater asked several questions. I am not sure that I have answered them, so I shall give him the opportunity to reply.
3.15 pm
Mr. Liddell-Grainger: I have two supplementary questions. One concerns the delay in the FOS deciding what the outcome will be. One problem with such cases has always been that they can drag on interminably. The second issue is that the Minister said that either party can go to the ombudsman. As I said on the Select Committee on Public Administration, which deals with the ombudsman, the ombudsman is swamped most of the time. The problem is that either party
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could decide that it is much easier simply to make their views known and pass the matter to the ombudsman, which would cause an enormous delay.
The hon. Member for Northampton, North very eloquently expressed how emotional the process is. The Minister knows that the longer the delay, the more the credit piles up, and the situation becomes much worse. There is the potential for a delay of three or four months, perhaps longer, if there is no agreement when it reaches the ombudsman.
Finally, I refer to the matter of a complaint being dealt with by the ombudsman on the condition that it cannot be dealt with under the compulsory jurisdiction. The Minister mentioned voluntary and compulsory jurisdiction. When does one become the other? If the complaint cannot be dealt with under the voluntary jurisdiction because one party does not agree, is the matter then resolved under compulsory jurisdiction? Could the Minister clarify that?
Mr. Sutcliffe: We are adding a third jurisdiction—the consumer credit jurisdiction. I take the point about the time delay. One of the industry's concerns was that many complaints would be piled on to the ombudsman, in the way that the hon. Gentleman mentioned. A levy is to be applied to the industry to deal with the costs of the issues surrounding ADR. Firms must deal with complaints with their own structures within eight weeks. They must prove that complaints have gone through all their in-house processes.
If the complaint has not been resolved after eight weeks, the firm must inform the consumer about the FOS, which can then become involved. A first attempt can be made to settle the complaint informally, not necessarily by the ombudsman himself. If that does not work, the ombudsman service will open a case and investigate. After consideration, an adjudication will be issued. If either party is unsatisfied, the ombudsman will make a formal determination. A benefit to the consumer is that if they accept the final decision, it becomes binding on the business and can be upheld by the courts.
With regard to the point about the additional workload associated with the consumer credit jurisdiction, the FOS is well resourced in terms of staff expertise in consumer credit issues. It already handles a large proportion of consumer credit business under its existing jurisdictions, because banks and building societies provide about 75 per cent. of consumer credit businesses in the compulsory jurisdiction. The additional workload is not expected to be large. Estimates based on research conducted by MORI indicate that the FOS might expect to receive a maximum of about 13,000 additional consumer credit complaints a year. Any such increase is unlikely to overburden the FOS. Furthermore, much of the current FOS workload is made up of mortgage endowment complaints, and it is anticipated that the number of those complaints will begin to fall. In addition, the gradual phasing in of consumer credit
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activities to the FOS's jurisdiction will allow it to take on activities consistent with its capacity to handle the volume of complaints, given its workload.
There has been an increase of 57 per cent. in the number of cases received. The FOS has maintained its targets for dealing with complaints: 45 per cent. within three months, 80 per cent. within six months and 90 per cent. within nine months.
Mr. Liddell-Grainger: The Minister has almost answered his own question about the level of complaints to the ombudsman. Every Member knows how difficult it is to get the ombudsman to deal with complaints. I have two suggestions for the Minister: first, will he examine the possibility of a credit ''holiday'' so that interest does not continue to rack up?
Ms Keeble: An interest holiday?
Mr. Liddell-Grainger: Yes, I thank the hon. Lady for her help. Given the delay on the ombudsman's part, can the credit holiday option be examined?
Secondly, will the Minister examine the possibility of a definition of ''seriousness'', so that cases can be categorised. The ombudsman has been trying to pigeonhole cases into levels of seriousness. The hon. Member for Northampton, North spoke eloquently about the desperation factor. Some people will be able to pursue their cases, but many others will not, and they will have no choice. I am aware of the complexities, but if there are some 13,000 running cases, the situation will simply continue to deteriorate, and many cases will not be resolved until it is too late.
Mr. Sutcliffe: I understand where the hon. Gentleman is coming from and what he is trying to achieve. The FOS can operate within its capacity with regard to targets. It will be able to cope with various businesses. During our discussions on other clauses, we dealt with accumulation of interest. I shall come back to the hon. Gentleman on that issue.
Ms Keeble: I understand that it is important to have a freeze on interest while a case is being progressed. The Minister has reassured us that the FOS can deal with the number of cases. Can he also reassure us that the FOS is geared up to deal with various types of cases? Does it have the necessary skills to deal with people who have small debts that they find it impossible to manage? Complaints about administration and technical issues may be well-founded, but the FOS may not be familiar with certain types of complaints. I have referred certain cases that I can well imagine would be difficult to deal with.
Mr. Sutcliffe: I refer my hon. Friend to my previous remarks about the consultation process and how we arrived at the FOS with regard to stakeholders working with the industry and consumer groups that understand the complexity of the disagreements and the ensuing problems. I strongly suggested that the FOS was the appropriate route because of its experience and its ability to operate in other jurisdictions.
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The FOS can deal with a variety of cases. Good practice and the development of in-house company procedures will improve because of that route. Eventually, that may affect the number of cases.
Information on interest has not yet been forwarded to me. We must be careful not to micro-manage the FOS; we must trust its expertise and independence. I can only say to the hon. Member for Bridgwater that I think that we have covered the issue of accumulated interest and what can be done about it. [Interruption.] On the other hand, in news just in, I am now told that we have not examined situations when debt interest stops. The Bill has no provision to stop interest being charged in such situations. I shall investigate that issue.
Mr. Liddell-Grainger: Perhaps I could help the Minister. All members will agree that it would be unacceptable for that scenario to continue. When the situation becomes compulsory rather than voluntary, perhaps the Government should think about letting the guillotine down. The hon. Member for Northampton, North is right; this situation cannot be allowed to continue. We know that the FOS can run out of time and cases could continue for three or four months. The Minister decided voluntarily to take things to that stage. If it becomes compulsory, it is because it needs to be taken further. Perhaps the Minister could consider that as a cut-off time.
Mr. Sutcliffe: I am happy to do that. However, the ombudsman can deal with a complaint in various ways, and he may be able to deal with that matter through the consideration of cumulative interest.
Mr. Liddell-Grainger: It gives him the chance.
Mr. Sutcliffe: In that spirit, we shall examine those issues in the context of financial ombudsman service solutions. I hope that that explains everything.
This has been an important debate, as the system that we are introducing is new. I hope that, in the light of the caveats that I have provided, hon. Members will accept the clause.
Question put and agreed to.
Clause 59 ordered to stand part of the Bill.
Schedule 2 agreed to.
Clause 60
Funding of ombudsman scheme
Mr. Robertson: I beg to move amendment No. 44, in clause 60, page 49, line 41, at end add—
'(16) No licensee shall have to pay to the Ombudsman or its scheme operator any money until such time as the case is decided against him.'.
Perhaps I could provide a little background on how I see the situation, not just on the funding of the ombudsman scheme that clause 60 deals with, but with the general principle. I can illustrate my point with an example. Some time ago, one of my constituents who was an independent financial adviser was reported by a client to the authorities. He was charged £500 for the
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pleasure of having his case heard. The complaint against him was dismissed, and it might be reasonably assumed that he could claim back his £500. I am afraid that that was not the case. That seems very wrong for two reasons. First, why should he pay anything when the case was dismissed? That seems to fly in the face of justice; we do not normally fine people who have not committed an offence. Secondly, it gives rise to the possibility that vexatious litigants keep reporting someone whom they do not like until that person is bankrupt.
My amendment states:
''No licensee shall have to pay to the Ombudsman or its scheme operator any money until such time as the case is decided against him.''
I do not see what objection there could be to such an amendment. I know that there is a precedent to the opposite effect; and I know that it may affect other legislation. However, I do not see how it can be fair that people should have to pay what are, in effect, fines when they have done nothing wrong. I look forward to hearing what the Minister has to say.
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