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Sale Of Student Loans Bill


These notes refer to the Lords Amendments to the Sale of Student Loans Bill, as brought from the House of Lords on 10th June 2008 [Bill 121]




1.     These explanatory notes relate to the Lords Amendments to the Sale of Student Loans Bill, as brought from the House of Lords on 10th June 2008. They have been prepared by the Department for Innovation, Universities and Skills in order to assist the reader of the Bill and the Lords Amendments and to help inform debate on the Lords Amendments. They do not form part of the Bill and have not been endorsed by Parliament.

2.     These notes, like the Lords Amendments themselves, refer to HL Bill 24, the Bill as first printed for the Lords.

3.     These notes need to be read in conjunction with the Lords Amendments and the text of the Bill. They are not, and are not meant to be, a comprehensive description of the effect of the Lords Amendments.

4.     All the Lords Amendments were in the name of the Minister.

Bill 121—EN     54/3


Lords Amendments 1 and 4

5.     Lords Amendment 1 would oblige the Secretary of State to make reasonable efforts to contact all borrowers whose loans had been sold within three months of the transaction to inform them of the fact of the sale of their loan. Lords Amendment 4 would place on purchasers of loans an equivalent obligation to take reasonable steps to notify borrowers within three months of any onward sales transaction.

Lords Amendments 2, 3 and 15

6.     Lords Amendment 2 would enable the Secretary of State to include in the sales contract with a purchaser undertakings about the exercise of the power to make loan regulations (which include terms and conditions of student loans). Such amendments to the loan regulations would have effect in relation to sold and unsold loans. The intention of the amendment is to reduce the uncertainty about changes which the Secretary of State could make to the terms and conditions of the loans. It allows the Secretary of State to promise to act in ways which are predictable for purchasers, by:

(a) promising not to exercise the powers in particular ways;

(b) promising to exercise the powers only in particular ways and using particular procedures; and

(c) promising to utilise particular information in or methods of calculating interest rates.

7.     Any undertakings given would be enforceable both as contractual promises and as binding public law commitments.

8.     Lords Amendment 3 would ensure that the scope of undertakings given by the Secretary of State could extend to regulations under section 186 of the Education Act 2002, as well as to the loan regulations under section 22 of the Teaching and Higher Education Act 1998. Under section 186 of the 2002 Act, the Secretary of State may make regulations enabling the Secretary of State to make repayments on behalf of borrowers, or to reduce or extinguish the amounts owing by them. The amendment would allow the Secretary of State to make binding promises about how this power would or would not be exercised.

9.     As the power to make regulations under section 186 of the 2002 Act has not been extended to Welsh Ministers, Lords Amendment 15 excludes the possibility of Welsh Ministers giving undertakings in Welsh transfer arrangements about how such a power would be used. The Secretary of State would be able to give any such undertaking in relation to Welsh transfer arrangements.

Lords Amendment 5

10.     Lords Amendment 5 would oblige the Secretary of State to ensure that initial sale contracts contain provision for the Secretary of State to be party to any onward sale contract. Clause 3(6) enables the Secretary of State to include such a provision, but there is no obligation so to do. Being party to the onward sale contract would enable the Secretary of State to enforce the terms of the contract against subsequent purchasers. The amendment does not require the Secretary of State to use any particular legal method of becoming a party, but leaves that to the Secretary of State's election.

Lords Amendment 6

11.     If, as expected, the loans eventually sold are securitised, legal structures will be created to hold the legal and equitable interests in the loans in the names of different parties. Lords Amendment 6 would make clear that the provisions of clause 3 relating to onward sale of the loans do not apply to the creation or transfers of equitable rights that occur in a securitisation. Rather, it clarifies that clause 3 relates only to the onward transfer of legal title to the loans. The amendment ensures that the transfers of equitable interests that occur as a normal part of a securitisation are separate from the onward transfer of legal title, and which do not require the same protections.

Lords Amendments 7 and 16

12.     Lords Amendment 7 would introduce a new clause imposing a legal duty on the Secretary of State to report to Parliament on each sale transaction, including on value for money, within three months of the transaction. The report has to reflect any guidance given by HM Treasury on assessing value for money. Lords Amendment 16 removes any obligation on Welsh Ministers to report to Parliament after a sale of Welsh loans which would otherwise apply by virtue of clause 8 of the Bill.

Lords Amendments 8 and 9

13.     Lords Amendments 8 and 9 would require the Secretary of State to give consideration to borrowers whose loans have been sold in making or amending loan regulations, and in making or amending regulations under section 186 of the Education Act 2002, so as to avoid detriment to any such borrower resulting solely from the fact that the loan is sold. The amendments require the Secretary of State to compare borrowers with their notional selves and to ask whether their position is worse as a result of any proposed amendment to regulations, as compared to someone with the same characteristics whose loan has not been sold. The same requirements would be imposed on Welsh Ministers by virtue of clause 8.

Lords Amendment 10

14.     In clause 5(3) of the Bill, there is a presumption that all monies collected relating to sold loans should be paid to the loan purchaser. Lords Amendment 10 would subject this presumption to anything provided for in transfer arrangements as a result of clause 2 as a whole, rather than just clause 2(2), as originally provided.

Lords Amendments 11 to 14

15.     These amendments would make drafting changes to the clause on sharing of information with purchasers and potential purchasers. Lords Amendments 11 and 12 would make explicit that HMRC information may be disclosed in relation to loans that have not yet been sold, as well as those that have been sold. Restrictions already contained in the Bill restrict the disclosure of personalised data to actual purchasers and their agents. Amendment 13 would define the permitted onward disclosure of anonymised HMRC data by reference to the purpose of disclosure - in connection with loans that have been or may be transferred - rather than by reference to the identity of parties who may receive such data. Amendment 14 would make explicit that the narrow group to which onward disclosure of personalised HMRC data is permissible does include loan purchasers' auditors.

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Prepared: 11 June 2008