Select Committee on Treasury Written Evidence


Memorandum submitted by Michael Chapman

EXECUTIVE SUMMARY

  1.  It is important to remember that money in dormant accounts actually belongs to the account holder. All necessary attempts have to be made to reunite the account holder with the unclaimed deposit, even if the cut off date is 15 years, people still should have the right to access there own money.

  2.  The scope of scheme should be extended but in a staged way.

  3.  Several stakeholders should be involved in the collecting of unclaimed assets including industry, the regulator, trade and consumer bodies and Government. An independent Board would report to the UK Parliament.

  4.  There is merit in separating collection from disbursement. A sister body to distribute funds. For example to a Social Investment Bank, to establish an endowment fund to support generic financial advice, administer a programme of matched community based savings schemes.

  5.   There should be scope in the funding to provide a free and independent service—A National Asset Recovery Service—responsibility of the new organisation collecting unclaimed assets.

  6.  The use of unclaimed assets should be limited to key aims around financial inclusion and financial capability, promoting savings and asset building and supporting generic financial advice. The scope should be inclusive—across the UK and for all groups.

  7.  The Treasury Select Committee to call for a more detail study of international best practice and to analyse possible Unclaimed Asset Scams that will arise through internet and telephone contact with consumers, what actions should be taken to protect vulnerable clients and consumers?

THE DEFINITION, IDENTIFICATION AND COLLECTION OF UNCLAIMED ASSETS

Q.  The proposed definition of an unclaimed asset within the United Kingdom banking sector, and whether the scope of assets identified for inclusion within the scheme is appropriate

  8.  The definition of what constitutes an unclaimed asset and the scope of assets included seems reasonable just as long as the structure being established is Effective, Efficient and Fair.

  9.  It is important to remember that money in dormant accounts actually belongs to the account holder. All necessary attempts have to be made to reunite the account holder with the unclaimed deposit, even if the cut off date is 15 years, people still should have the right to access there own money.

Q.  The scope for extension of the scheme, or for another scheme, relating to unclaimed assets held by other financial institutions, such as insurance companies and National Savings & Investments

  10.  Any scheme has to ensure maximum consumer protection and entitlement and involve industry and Government in the practicalities of collection. However, the scope should be extended but in a staged way.

  11.  First regulation enacted to claim dormant bank and building society accounts. Second to incorporate National Savings and Investments, Post Office accounts, unit and investment trusts, personal and occupational pensions and windfalls from demutualisation and privatisations. Finally consideration should be given to the national Lottery, uncontested wills and property.

Q.  Any potential estimates of the scale of unclaimed assets, using different criteria to define an unclaimed asset

  12.  No specific information on the scale of unclaimed assets in the UK.

  13.  I agree with other commentators that the sums involved may not be as large as some predictions especially if the focus is on dormant bank and building society accounts. This in it's self would suggest that the use of the funds should be targeted for maximum impact.

Q.  Who should monitor the running of the collection scheme, and ensure that financial institutions identify, and provide for use, unclaimed assets

  14.  Several key actors should be involved including the industry, the regulator, trade and consumer bodies and Government. There should be an independent Board that reports to the UK Parliament.

Q.  Whether the collection of unclaimed asset funds should be organisationally separate from its disbursement

  15.  There is merit in separating collection from disbursement. A sister body to have the role of distributing funds—to a Social Investment Bank—to establish an endowment fund to support generic financial advice, administer a programme of matched community based savings schemes.

Q.  Whether enough is being done to ensure that unclaimed assets will be reunited with their owners, especially after the assets have begun to be disbursed

  16.  The commission on Unclaimed Assets makes no mention of the means by which consumers will be reunited with their funds in the event that a claim is made on the assets. This could happen in a number of circumstances and more could be done to ensure that people are reunited with their funds.

  17.  I believe that a Free and Independent service—A National Asset Recovery Service—should be the responsibility of the new organisation collecting unclaimed assets.

Q.  How unclaimed assets that have been disbursed can be reclaimed should their owner be found, and who should bear the final burden of repaying such monies owed

  18.  The practicalities of reclaiming funds should be the responsibility of the collecting organisation. A certain proportion of funds should be kept before distribution to ensure that monies owed to rightful claimants is returned.

  19.  There could be a dual role in supporting a national programme of Generic Financial Advice that also advertises the rights of people to reclaim assets. In turn people reunited with their assets should be given the opportunity to then donate these to the Fund?

THE DISTRIBUTION AND USE OF UNCLAIMED ASSETS

Q.  Whether the use of the unclaimed assets should be limited to certain aims, bodies or localities

  20.  The use of unclaimed assets should be limited to key aims around financial inclusion and financial capability—promoting savings and asset building and supporting generic financial advice. The scope should be inclusive—across the UK and for all groups.

Q.  What can be learnt from the distribution of funds from the National Lottery when setting up the body responsible for disbursing unclaimed assets?

  21.  The Lottery in Scotland has moved to towards acting more as an investment partner, working with voluntary and community based organisations with a shift in focus on generating positive outcomes for people through their investment programme is a positive step forward.

Q.  Whether and how such a body should be accountable to Parliament and Government

  22.  No specific comments apart from to support the view that any institution or organisations established should be.

Q.  How appropriate is the proposal of the Commission for Unclaimed Assets for a "Social Investment Bank", and whether there are more appropriate alternative models

  23.  The Commission for Unclaimed Assets proposes cash from dormant accounts could be used to capitalise a "Social Investment Bank" which could then use its financial muscle to help smaller charities gain access to financing. There are estimated to be 500,000 charities and voluntary organisations in the UK, the majority of which have little or no access to capital and are largely dependent on grants and donations.

  24.  The Commission looked at alternative models particularly in the USA such as the Local Support Initiatives Corporation and the Enterprise Foundation, which use their access to the financial markets to help local charities fund construction projects in deprived areas.

  25.  There is no doubt that accessing funding for charities, voluntary and community sector's is required I am not convinced that with the resources potentially available that this should be allocated to one institution. The idea of a Social Investment Bank is part of the solution but the panacea.

Q.  Whether it was right for the Commission for Unclaimed Assets to discount the idea of using unclaimed assets to fund an endowment

  26.  This issue should be looked at again. Not knowing the precise reasons why this decision was made, it is difficult to comment upon. However, this issue should be looked at again, there are examples from the USA and elsewhere that provide useful guidance on how endowment funds are constituted and operated.

  27.  The delivery mechanism should fit for the purpose intended. It is my personal view that funds from unclaimed assets should be used to promote better understanding of the financial system (these funds being generated from that system), focused on individuals (whose dormant accounts funds are taken) to help combat financial exclusion and support generic financial advice and be used to make investments that promote savings and asset building.

Q.  Who should monitor the effectiveness of the use of unclaimed assets?

  28.  Accountability for the effectiveness of the use of unclaimed assets for the public good should ultimately rest with the UK Parliament.

Q.  How the use of unclaimed assets might promote financial inclusion

  29.  Financial exclusion is a complex and multidimensional phenomenon, it transcends many boundaries impacting on different groups, communities and individual at varies life stages. Financial exclusion is both a cause and consequence of poverty.

  30.  Financial inclusion means more than just accessing bank accounts, it is a life long learning process, providing people with the means, opportunity and confidence to engage with and be part of the financial services sector. We can no longer afford as a society to operate a two tier structure of financial inclusion—those are part of the system, who benefit from the strength and competitiveness of the financial services industry and those who are outside, marginalise, stigmatised and who lack the basic skills, financial awareness and capability to make informed financial choices, even on low incomes.

  31.  Two areas where funds from unclaimed assets could make a significant difference include:

    1.  Promoting a savings and asset building culture—matched saving schemes linked with asset goals, moving out of debt, starting a business, higher or further education and asset building education.

    2.  Generic financial advice—preventative, community based, tailored to meet the needs of vulnerable clients, provided through trusted intermediaries.

THE POSSIBLE RELEVANCE OF SCHEMES IN OTHER COUNTRIES FOR PUTTING UNCLAIMED ASSETS TO PRODUCTIVE USE COUNTRIES INCLUDING THE USA, IRELAND, AUSTRALIA, NEW ZEALAND AND SPAIN HAVE LEGAL FRAMEWORKS IN PLACE FOR PUTTING UNCLAIMED ASSETS TO PRODUCTIVE USE

Q.  The Committee would particularly welcome written evidence that uses international comparisons to identify potential best practice

  32.  No in depth expertise in this area but from discussions with key stakeholders from the banking and consumer sectors, there would be merit in the Committee calling for a more detail study and analysis of international best practice, regulatory frameworks, distributions channels, partnership working arrangements, governance issues, accountability, asset recovery, financial planning, operational and delivery costs, monitoring and evaluation frameworks, industry and consumer involvement.

  33.  The Committee should look into the possible Unclaimed Asset Scams that will arise, as has been the case in the US, through internet and telephone contact with consumers, what actions should be taken to protect vulnerable clients and consumers?

February 2007





 
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