|
Clause 11: "Dormant"
58. This clause explains when an account will be regarded as dormant for the purposes of clauses 1 and 2. In practice, as participation in the scheme is voluntary, institutions will have the flexibility to take into account other indications as to whether an account is genuinely dormant, in addition to meeting the requirements of this clause. For example, correspondence from the customer or activity in relation to other accounts held with the same institution may be regarded as evidence that the customer is still active and that their account which would otherwise meet the definition of "dormant" should not be transferred to the scheme. It is intended that the Banking Code will be revised to require banks and building societies to explain to customers their approach to deciding which accounts will be treated as dormant.
59. Subsection (2)(a) excludes from the scheme "no mail" accounts (i.e. those accounts where the account holder has instructed their bank or building society not to contact them).
60. Subsection (2)(b) provides that in relation to "fixed-term" accounts, the 15 year dormancy period does not begin to run until the end of the fixed-term period.
61. Subsection (3) sets out further matters to be taken in to account when determining whether an account is dormant.
62. Subsection (4) clarifies that if an account is closed by someone other than the account-holder, for example if it is closed by a bank or building society for administrative reasons, this is not to be taken into consideration when determining whether the account is dormant for the purposes of subsection (1).
63. Subsection (5) ensures that child trust fund accounts are treated as fixed term accounts under subsection (2)(b) and excluded from the dormant accounts scheme whilst the child is under 18. The Child Trust Funds Regulations 2004 (SI 2004/1450), made under section 3(4)(d) of the Child Trust Funds Act 2004, permit withdrawals before the age of 18 where the child is terminally ill or has died.
Clause 12: Triennial report to Parliament
64. This clause requires the Treasury to publish a report every three years on the operation of the scheme and to lay a copy of the report before Parliament.
65. Subsections (2)-(4) set out specific matters which must be included in the report, including the desirability and practicality of establishing similar schemes for other types of assets and improvements which could be made to the scheme. The Treasury is required to consult persons with relevant knowledge before preparing its report.
Clause 13: Customer's rights preserved on insolvency etc of bank or building society
66. This clause ensures that a dormant account holder is entitled to repayment of his or her balance (plus interest due and less charges that would have been payable) in full, even if the liability that the customer's bank or building society would have had if their balance had not been transferred is reduced or cancelled (for example if the bank is wound up and dissolved after the balance has been transferred). However, this does not apply in the case of accounts governed by Scots law where the bank or building society's liability would have been cancelled as a result of the application of the Prescription and Limitation (Scotland) Act 1973. This Act provides for liability to be extinguished if no relevant claim has been made by an account holder, or no relevant acknowledgement of the debt has been made by a bank or building society, after certain specified periods.
Clause 14: Disclosure of information
67. This clause enables banks and building societies to transfer to the reclaim fund any confidential information they hold that is required to ensure that a dormant account holder who makes a claim under clause 1 or 2 is repaid. In practice, institutions are not expected routinely to transfer customer records to the reclaim fund because they will handle claims for repayment as agents of the reclaim fund and
continue to maintain their customers' records. However, in exceptional circumstances the transfer of confidential information may be necessary, for example where a dispute arises which involves the reclaim fund directly.
Clause 15: Banks making transfers under section 2: information in directors' reports
68. This clause requires banks which participate in the alternative scheme for smaller institutions and transfer money under clause 2 to report on the amounts of money transferred to charities under that scheme and the identity of the charities. Similar reporting obligations will be imposed on building societies which participate in this scheme by way of amendments to the Building Societies (Accounts and Related Provisions) Regulations 1998 (SI 1998/504) which are made under section 75 of the Building Societies Act 1986.
Clause 16 and Schedule 2: Amendments to the Financial Services and Markets Act 2000
69. Clause 16 introduces Schedule 2, which makes amendments to the Financial Services and Markets Act 2000 ("FSMA").
70. Paragraph 1 amends the list of activities in Schedule 2 to FSMA to include the activities of a reclaim fund. Schedule 2 to FSMA supplements section 22 of FSMA by describing, non-exhaustively, the sorts of activities which may be specified under section 22 as "regulated activities". The Treasury intend to specify the activity of paying customer claims under clauses 1 and 2 as a "regulated activity" under section 22 of FSMA, by way of an amendment to the Regulated Activities Order 2001 (SI 2001/544), and will consult on this following Royal Assent. This is to enable a reclaim fund to be authorised by the FSA.
71. Paragraphs 2 to 5 amend Part 7 of FSMA, which provides for the control of transfers of business. The amendments will enable a reclaim fund to transfer its liabilities (as well as its assets) to another FSA authorised reclaim fund with the approval of the court. Without this provision, liabilities could usually only be transferred with the consent of all the original account holders or by way of an Act of Parliament. Similar provisions already exist in relation to banking and insurance business transfers.
72. Paragraphs 6 and 7 amend Part 24 of FSMA, which enables the FSA to intervene in the event of the insolvency of an FSA authorised person.
73. Paragraph 6 provides that where an authorised reclaim fund defaults on its obligation to repay a customer, following a claim made under clauses 1 or 2, this will be treated as an indication that it is unable to pay its debts for the purposes of paragraph 11 of Schedule B1 to the Insolvency Act 1986. This is the ground on which a court may make an administration order.
74. Paragraph 7 inserts a new section into Part 24 of FSMA, which requires that a person other than the FSA who presents a petition to wind up or appoint a provisional liquidator in respect of an authorised reclaim fund must serve a copy of the petition on the FSA. This will ensure that the FSA is made aware of the situation and is given the maximum possible time to intervene to protect dormant account holders' interests.
Part 2: Distribution of money under the general scheme
Clause 17: Distribution of dormant account money by Big Lottery Fund
75. This clause gives the Big Lottery Fund ("the Fund") power to distribute for social or environmental purposes dormant account money passed to it by a reclaim fund. The Fund is a body corporate established by section 36A of the National Lottery etc Act 1993. The Fund is the largest of the distributors of lottery resources and manages and distributes about £600 million of lottery funds each year.
76. Subsection (3) allows the Fund to distribute assets to recipient bodies in the form of grants or loans, or through other arrangements.
77. Subsection (5) enables the Fund to distribute dormant account money to create endowments, including permanent endowments.
Clause 18: Apportionment of dormant account money
78. This clause allows the Secretary of State to set out by order the apportionment, in percentage terms, of dormant account money passed to the Fund by a reclaim fund to cover expenditure in England, Wales, Scotland and Northern Ireland. This is expected to be done on a per capita basis. It also sets out the formula for calculating the amount of dormant account money which will be available for apportionment in each financial year. This requires the deduction from the overall dormant account money received by the Fund from the reclaim fund of (a) the Fund's expenses and (b) the Secretary of State's expenses in overseeing the Fund. The amount after these deductions is the amount available for apportionment.
Clauses 19- 22: Distribution of money for meeting English, Welsh, Scottish and Northern Ireland expenditure
79. Clause 17 sets out the overall purposes for which dormant accounts money may be distributed (i.e. for a social or environmental purpose). Clause 19 sets out two particular purposes, and one particular kind of recipient, for which the proportion of dormant account assets allocated for expenditure in England will be used.
80. The particular purposes, and kinds of recipient, for dormant account expenditure apportioned to the devolved administrations of Wales, Scotland and Northern Ireland have not yet been determined and will not be set out on the face of the Bill. Instead, clauses 20, 21 and 22 give Welsh Ministers, Scottish Ministers and the Northern Ireland Department of Finance and Personnel respectively the power to restrict the particular purposes for which, and the kind of person to whom, dormant account money apportioned to their country will be distributed.
81. It is envisaged that the particular purposes and recipients set out in clause 19 for England and set out in orders for the other three countries will be specified further in directions given to the Fund by the Secretary of State or by the devolved administrations under clause 23.
Clause 23: Directions to Big Lottery Fund
82. This clause requires the Fund to comply with any directions given to it by the Secretary of State and by the devolved administrations in relation to their devolved expenditure. The powers set out in this clause are broadly similar to the powers to give directions under the National Lottery etc Act 1993, save that subsection (4)(c) and (d) adds that directions may relate to the process used to decide what payments to make and to the terms and conditions upon which the Fund makes loans or grants or enters into other arrangements. The Fund must be consulted and a draft statutory instrument containing the direction must be approved by both Houses of Parliament before any direction is given under this clause.
83. Only the Secretary of State has power to issue directions under subsection (5) relating to operational matters such as financial management, staffing and accounts.
Clause 24: Power to prohibit distribution in certain cases
84. This clause enables the Secretary of State, by order, to prohibit the Big Lottery Fund from distributing dormant account money to any person in certain circumstances. This power is designed to allow the Secretary of State to intervene in cases where there may be a perceived conflict of interest in the relationship between the Big Lottery Fund and a particular body.
85. Subsection (2) requires the Secretary of State to consult the devolved administrations before issuing an order that it considers could impact on expenditure or affect persons within Scotland, Wales and Northern Ireland.
86. Subsection (4) gives the Secretary of State the power to require the Fund to provide any information which the Secretary of State needs to assist in the exercise of the power of prohibition.
Clause 25: Power to add or remove distributors
87. This clause allows the Secretary of State to add or remove distribution bodies. This power may be exercised as a sanction for failure to comply with a direction given under clause 23 or contravention of a prohibition order made under clause 24.
Alternatively, it may be exercised to add a distributor with particular expertise or to remove a distributor whose particular expertise is no longer required. This power is exercisable after consultation with the devolved administrations.
Clause 26: Power of Big Lottery Fund to enter into arrangements
88. The Fund has only a limited power, under the National Lottery etc Act 1993, to hold and invest money in an interest-bearing account. Money is managed by the National Lottery Distribution Fund. This clause gives the Fund the power to make arrangements for another body to hold or invest dormant account money allocated to it, on its behalf. Subsection (5)(a) of clause 23 gives the Secretary of State the power to give directions restricting the nature of the arrangements into which the Fund can enter.
89. Subsection (2) enables a reclaim fund, following arrangements with the Fund, to make payments on the Fund's behalf directly to the Consolidated Fund to defray expenses incurred by the Secretary of State in carrying out functions under this Bill. Similarly, it allows a reclaim fund and the Fund to arrange for the reclaim fund to make payments on the Fund's behalf to the devolved administrations, to defray expenses incurred by those administrations.
Clause 27: Expenses
90. This clause allows the Fund to defray any expenses incurred in carrying out its obligations set out in the Bill. Such expenses will be deducted from dormant account money before it is apportioned for distribution.
91. This clause also allows the Secretary of State to reclaim expenses incurred in carrying out the functions set out in this Bill. The combined effect of clause 18(3) and subsection (3) of this clause is that these expenses are to be defrayed from dormant account money before apportionment for distribution, with the exception of expenses incurred in relation to the giving of directions for English expenditure. Subsection (3)(a) gives the Secretary of State the power to deduct these expenses from the sums apportioned for English spending. Subsections (6) to (10) give the devolved administrations the power to defray expenses incurred under the Bill from the sums apportioned for distribution in their country.
Clause 28: Interpretation of Part 2
92. This clause defines a number of terms used in Part 2 of the Bill.
Schedule 3: Further provision about the functions of the Big Lottery Fund
93. Schedule 3 sets out further functions of the Fund as the distributor of dormant account money. They include a requirement where so instructed to issue strategic plans relating to distribution of dormant account money in England, Scotland, Wales and Northern Ireland (Part 1) and a provision allowing it to delegate its dormant account functions to another body or person (Part 2). Part 2 also allows the devolved expenditure committees set up under the National Lottery etc Act 1993 to play a role in devolved expenditure under this Bill.
94. Part 3 applies similar reporting obligations in respect of the distribution of dormant account money as those set out in the National Lottery etc Act 1993. These require the Fund to keep proper accounting records in respect of the distribution of dormant account money, separate from those of the distribution of lottery resources, and to prepare a statement of accounts relating to the distribution of such assets at the end of each financial year. The Fund will also be required to report to the Scottish Parliament and the Welsh and Northern Ireland Assemblies.
95. Part 4 includes the provision of a number of further powers in respect of the Big Lottery Fund's role as the distributor of dormant account assets. These powers are similar to powers which the Fund has as a distributor under the National Lottery etc Act 1993.
96. Paragraph 12 enables the Fund to identify and approach any body, with a particular expertise, to invite it to make an application for dormant account money.
97. Paragraph 13 allows the Fund, when making a decision about distributing dormant account assets, both to consult any person and to take account of the opinions expressed to the Fund or information submitted to it as a result of that consultation. The paragraph is intended to remove any doubt about whether the Fund has the power to consult or take into account such opinions and information in exercising its powers to distribute dormant account assets.
98. Paragraph 14 is intended to remove any doubt about the powers of the Big Lottery Fund to publicise the distribution of dormant account money. As well as allowing the Fund to publicise their own award of a grant and its purposes, this section enables it to participate in publishing more general information about its work in relation to the distribution of dormant account money. The intention is that by doing so the Fund will be able to inform the public better about what the money it is distributing is achieving overall, and to raise awareness of, and support for, the results of the distribution of dormant account assets across the UK.
99. Paragraph 15 is intended to clarify that the Fund may give advice about the distribution of dormant account money and the use of dormant account money that has been distributed. For example, the Fund might provide advice to bodies applying to be a recipient of dormant account money.
FINANCIAL EFFECTS OF THE BILL
100. The expenses of the Big Lottery Fund, the Secretary of State and the devolved administrations incurred in consequence of this Bill will be met out of money held by the Big Lottery Fund by virtue of clause 27 of the Bill. Therefore there will be no direct effect on public expenditure as a result of this Bill.
EFFECTS OF THE BILL ON PUBLIC SERVICE MANPOWER
101. It is not possible to say at this stage what the exact impact of the Bill on public service manpower might be, but it is not expected to have a significant effect on public service manpower. The Big Lottery Fund, a non-departmental public body, will employ staff to distribute dormant account money available for disbursement. The number of staff needed will be determined by the amount of funding available and the programmes designed to distribute it.
SUMMARY OF IMPACT ASSESSMENT
102. The Dormant Bank and Building Society Accounts Bill facilitates the transfer of monies in dormant bank accounts for distribution in the community, whilst safeguarding consumers' rights to reclaim their money. Participation in the scheme established by the Bill is not compulsory, and so the Bill does not impose any direct costs on industry or other groups. A full analysis is available to the public from http:// www.hm-treasury.gov.uk./Consultations_and_Legislation/ria/consult_ria_index.cfm, and to Members from the Vote Office.
EUROPEAN CONVENTION ON HUMAN RIGHTS
103. Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement about the compatibility of the provisions of the Bill with the Convention rights.
104. The Exchequer Secretary to the Treasury, Angela Eagle MP, has made the following statement: "In my view the provisions of the Dormant Bank and Building Society Accounts Bill are compatible with the Convention rights".
105. The Bill raises issues under Article 8 (respect for private life) and Article 1 of the First Protocol (right to peaceful enjoyment of possessions). The Bill is compatible with these rights for the reasons summarised below.
Article 1 of the First Protocol
106. Clauses 1 and 2 of the Bill provide for the extinguishment of a bank or building society's liability to repay a dormant account holder where the balance on the account is transferred to a reclaim fund. This affects the customer's contractual rights which constitute property protected by Article 1 of the First Protocol ("Article 1"). In order to be compatible with Article 1, this interference with a person's property rights must be in the public interest and subject to the conditions provided for by law. The interference in this case does meet those requirements and so is compatible with Article 1. This is primarily because the customer has a right to repayment, from the reclaim fund.
107. Also, the Bill meets the public interest requirement because the effect of the legislation is to make funds which have been left untouched in bank and building society accounts for over 15 years available for the benefit of the community. The Bill provides for the money to be distributed by the Big Lottery Fund for social and environmental purposes (subject to the need to maintain sufficient reserves to meet anticipated claims for repayment by customers). In the case of the alternative scheme for building societies and smaller banks, surplus money will be distributed to charities.
108. The safeguards for dormant account customers will be set out in legislation. Clauses 1(2)(b) and 2(2)(b) of the Bill provide customers with a right to repayment by the reclaim fund. Clause 9 ensures that they will be entitled to payment of any interest which would have accrued under the terms of their original account. Clauses 1 and 2 require that the reclaim fund be authorised by the Financial Services Authority for the purposes of the Financial Services and Markets Act 2000, which will mean that it is subject to capital requirements designed to protect against insolvency. Customers will also have access to the Financial Ombudsman Service for the resolution of disputes and be eligible to claim against the Financial Services Compensation Scheme, subject to meeting the usual qualifying conditions. Individual banks and building societies are expected to enter into agency arrangements with a reclaim fund and continue to manage the customer relationship, and it is intended that the scheme will be reflected in revisions to the Banking Code. Clause 4 of the Bill will preserve the rights of building society members.
Article 8
109. Clause 14 enables information about a customer's account to be transferred by a bank or building society to the reclaim fund, where this would otherwise be in breach of a legal restriction, for example a bank's duty of confidentiality to its customer. This amounts to an interference with Article 8 rights. In order not to breach the ECHR, the interference must be in accordance with law and justified as necessary for pursuing a legitimate aim.
110. Under the Bill the transfer of information is only permitted where the information is needed in order for it to fulfil its function of meeting a claim for payment. The provision is necessary to enable a reclaim fund to verify claims for payment by customers whose balances have been transferred and to protect against fraudulent claims. It therefore fulfils the conditions required by Article 8. In practice, the transfer of information should be minimised by the arrangements established under the Banking Code for banks and building societies to continue to be responsible for maintaining customer records and handling claims for repayment on behalf of a reclaim fund. However, in exceptional cases the transfer of information may be necessary, for example in the case of a dispute in which the reclaim fund is directly involved.
COMMENCEMENT
111. Parts 1 and 2 of the Bill will come into force following an order or orders made by the Treasury. The order (or orders) may provide for different provisions of the Bill to come into force at different times.
112. Part 3 will come into force on Royal Assent.
| 
