Dr.
Pugh: I speak to new clause 16, which stands in my name
and that of my hon. Friend the Member for South-East Cornwall, but I
shall also say something about new clause 15, which seems to be an
attempt to impose sensible regulation on the timing and manner of
mortgage repossession where tenants are concerned. It sets out some
very legitimate social concerns that should be considered formally by
the courts. I have just one concern about such an amendment, although
to some extent the hon. Lady has responded to it already. We do not
want to create a toolkit for delay, evasion or the
perpetuation of unsustainable situations by putting off the inevitable.
In such circumstances, a complex series of relationships will have been
entered into, and they should not be unpicked precipitously or without
care and thought.
To some
extent, the same applies to new clause 16. Proposed new section 35B(1)
and (8)in many ways the shortest and most comprehensible
subsections of what is quite a long new clauseaddress the nub
of the matter. The new clause has been developed over time. I am not
saying that it is business in progress, but obviously it could stand to
be revised in the light of any critique from the Minister. However, it
addresses an important consideration: we all agree that repossessions
by banksthis Bill deals only with repossessions by
banksshould take place in a considered way and by application
to courts. It is perfectly possible for that not to happen and for the
banks simply to foreclose under common law, for people not to know
their rights or to be advised on them inadequately, and for there to be
no considered and careful court process. That can be unfortunate and
lead to a bad outcome, particularly when we remember, or have it
brought to our attention, that many mortgage repossessions are prompted
by strained personal circumstances, such as divorce. That kind of thing
does not happen often. Where such big and traumatic events do occur,
when situations were entered into with care and consideration, the exit
should equally be marked with care and
consideration. 12
noon If
there is the option of an exchange of letters and the banks using
powers to foreclose on the deal, which is not illegitimate and is
allowed at the moment, things may not turn out perfectly or as we would
wish, and will not reflect the balance of interests between the parties
adequately. I think that the measure has the support of Shelter; I
stand to be corrected on that, but I am fairly confident that it does.
It closes a loophole in British law, which most of us are not aware of
in the first place. It would be better if it was not
there.
Mr.
Gauke: I am grateful to the hon. Members who proposed the
new clauses; they have highlighted an issue of growing concern. We know
that the Council of Mortgage Lenders has predicted 45,000 repossessions
this year and there are concerns that the number might rise next year.
There are worries that the balance between the rights of mortgagees and
mortgagors is inappropriate, particularly regarding the important issue
of repossessions occurring without a court order, which was raised by
the hon. Member for
Southport. No
doubt, the Minister will give us his assessment of whether the new
clauses would achieve their objectives. Whether the Banking Bill is the
appropriate vehicle for addressing these matters is, again, an issue
for debate. The issues touched upon by the new clauses are important,
and given the state of the economy and the likely level of
repossessions over the months ahead, it is right that we have the
opportunity to debate these matters at this stage. All serious
politicians will give a great deal of thought to them in the months
ahead.
Ian
Pearson: The Government welcome the opportunity to discuss
the important issue of the protection of home owners in arrears and
facing repossession proceedings.
We have acted on it in a number of areas in recent weeks and months. I
stress that we want all borrowers to be treated fairly and,
particularly during difficult times, we want to ensure that appropriate
actions are taken.
The two new
clauses both concern repossession hearings. New clause 15 concerns the
treatment of tenants in mortgaged properties subject to repossession.
It aims to protect tenants and licensees who do not have a right to
remain when a lender takes possession. Those occupiers should be
allowed adequate time to make alternative arrangements. The key
provision of the new clause is that the court should have discretion to
allow the occupier of such a property up to three months in total to
make alternative arrangements, before the date set by the court for the
possession order to take effect. The provision is supported by others
for notices to be served before and during possession
proceedings.
I understand
that, in practice, the proposal may be little different from the
present law, although it could help to clarify it. At present, an
occupier should receive at least 14 days notice of the
possession hearing and may apply to the court to be joined in the
possession action. The courts already have the power to allow such
occupiers a reasonable amount of time to move out if their
circumstances justify it. That is achieved without the additional
expense and trouble that would be caused by the proliferation of
notices that appear to be suggested in the amendment.
We need to
ensure that the interests of ordinary families caught up in other
peoples repossessions are properly protected. The Civil
Procedure Rule Committee, which is the statutory body responsible for
the development of rules of court, will be considering what notice of a
mortgagees possession proceedings should be given to occupiers.
The committee is the appropriate forum in which to decide whether
further procedural protections are necessary.
The new
clause provides that the occupier can be required to pay the lender for
the use of the property during the relevant period. That is only
reasonable, and it is broadly similar to the way tenants would be
treated under the current law. I recognise that there are issues raised
by the new clause tabled by my hon. Friend the Member for Northampton,
North and, as I indicated, we are actively considering them.
I turn to new
clause 16. As I said at the outset, the Government wish to see all
borrowers treated fairly, and a key element is that lenders treat
repossession as a last resort. At present, lenders seeking to evict
borrowers from residential property will normally go to court to get a
possession order. In those cases the court has power to delay or
prevent the making or operation of the possession order, where it
appears that the borrower can pay off the arrears within a reasonable
time, while not falling further behind with future payments. That
limitation recognises that a mortgage is a debt and ultimately, if we
are to ensure that there are lenders willing to provide funds to home
owners and home buyers, the debt has to be repaid.
The new
clause would remove the remedy of foreclosure from residential
properties. I understand that the remedy is little used but we need to
consider properly what the implications of closing it off would be,
before deciding that it can be abolished. The new clause would also
restrict the ability of lenders to recover the costs of
possession proceedings and proceedings to recover money, by making such
recovery subject to the precondition of obtaining a court
order.
I am sure
that we have all received letters from constituents about excessive
costs charged by mortgagees and added to the mortgage debt, so I
understand the concern driving the new clause. However, if it is the
intention that lenders may not recover their costs without a court
order, we need to be careful that the provision does not increase those
costs by requiring court action in every case. There is a danger of
generating unnecessary litigation for the parties and the courts, which
could feed through into higher borrowing costs to the detriment of
borrowers generally.
We need to
look at all the issues together. The new clauses address only the
actions of banks, but clearly building societies and other lenders need
to be considered. In relation to new clause 16, we also need to
consider carefully how any restriction on the power of sale will
interact with existing mortgages, where the power of sale forms part of
the contractual rights of the lender. The Justice Secretary is actively
considering whether further action should be taken in relation to
repossession cases. We are committed to working with lenders,
regulators and the judiciary to ensure that timely action is taken in
response to problems.
The
Government have already taken specific action. We have made clear our
concern for families in financial difficulty and facing repossession.
We are actively working with lenders, regulators and the judiciary to
ensure that borrowers are treated fairly. In 2004 the Government
extended the scope of Financial Services Authority regulation to cover
mortgages. FSA regulation ensures that borrowers are afforded important
protections and have appropriate means of redress. On 22 October the
Master of the Rolls approved a new protocol for possession proceedings.
It is intended to ensure that lenders and borrowers use every effort to
ensure that there is a genuine attempt to find other
solutions.
The protocol
will come into force from tomorrow, and we will continue to provide
advice and assistance through the courts and other agencies to
individuals with mortgage payment problems. We will consider the policy
issues underlying the amendments, and with that assurance I hope that
my hon. Friend will withdraw the new
clause.
The
Chairman: Dr. Pugh, do you want to
respond?
Dr.
Pugh: I thank the Minister for his thorough and thoughtful
response, which recognised the issue and dealt with it, but indicated
some of the work that may need to be done in an amendment to address it
satisfactorily. I shall read carefully what he said and consider the
details, but I shall not press the new clause, which was a probing
provision and has done exactly what it should
do.
Ms
Keeble: I very much welcome the commitment to consider the
issues, and the concern about people who face repossession of their
homes and tenants who are living in privately rented properties subject
to repossession. However, the explanation that has been provided is
wide of the reality facing many people. If a social tenant receives
notice only 14 days before the hearing
that their landlord is being taken to court, and the next step is to be
told that the bailiffs are coming round to evict them, it does not give
them much opportunity to try to join in the proceedings or to tell the
court what is happening. The court making the decision may not have a
mechanism for the tenant even to be made aware of what is happening
with the eviction, and might unwittingly make a vulnerable large family
with a number of children homeless when there is not much other housing
around. I
hope that the review will be careful, and that I and others with an
interest can have input in some of the discussions so that we can
decide what best practice should be. However, I completely recognise
that this is probably not the time or place to press the new clause to
a vote, so I beg to ask leave to withdraw the
motion. Motion
and clause, by leave,
withdrawn.
New
Clause
20Duty
of rescued bank to have regard to statements of Government
policy (1) This section
applies in respect of any bank or other financial institution which is
a rescued bank within the meaning of subsection
(2). (2) A bank or other
financial institution is a rescued bank
if (a) an order under
section 3 (transfer of securities issued by an authorised UK
deposit-taker) or section 6 (transfer of property, rights and
liabilities of an authorised UK deposit-taker) of the Banking (Special
Provisions) Act 2008 has been made in relation to it,
or (b) it has taken part in the
bank recapitalisation fund announced by the Chancellor of the Exchequer
on 8 October 2008,
or (c) it is subject to any of
the stabilisation options provided for in sections 10 to 12 of this
Act. (3) A rescued bank must
have regard to any statement of Government policy which may be
designated by the Treasury for the purposes of this
section. (4) A statement may be
designated for the purposes of this section whether it was made before
or after the passing of this Act..[Dr.
Pugh.] Brought
up, and read the First
time.
Dr.
Pugh: I beg to move, that the clause be read a Second
time.
In some ways,
the new clause goes to the heart of the Bill, which is about remedies
for rescuing banks. We all agree that collapsing banks are not a good
thing, but it is possible that their collapse may not create a threat
to the economy. There must be a reason for interfering in a
banks misfortunes, and powers are being taken in the Bill to
deal with those misfortunes, but for specific
purposes. One
purpose might be that the bank is just too large to be allowed to fail,
and its destiny may be the main or exclusive reason for worrying about
it. More significantly, people talk about the interest not just of the
bank, but of the economy beyond the bank and the various clients to
whom it lends. Clearly, it is possible that when a bank is rescued it
may recapitalise and save itself, and then punish its clients by
calling in credit or issuing new loansthe reality is
confronting us at the moment.
Anecdotal and real evidence suggests that the hardening of the
banks stance has been simultaneous with the Governments
charity to them. What we do to recapitalise banks may not achieve the
objectives that Governments have in mind, and the banks may act
contrary to what the Government
intend. One
solution employed by the Chancellor is simply to gather bankers
together and give them a good telling off. Obviously, that public
pillorying will have some effect, but it may not have a radical effect
or the strength that people desire. It does not by itself create an
obligation. It is simply a telling off.
12.15
pm New
clause 20 would put into the Bill an explanation of what we have in
mind when we capitalise a bank, which is that to some extent the
recapitalisation process should coincide with wider economic stability.
If the banks receive help they must have regard to advice from the
Treasury and thus do precisely what they are expected to do and what
they are clearly not doing in many circumstances at
present. To
give a personal critique of my own amendment, one might question
whether it is tough enough because it does not create arrangements to
monitor whether banks are doing what the Treasury thinks they should
not be doing, nor does it create a series of penal sanctions if they
fail to have regard to Treasury advice. When framing the new clause,
which is entirely in place within the Bill, we were torn between two
alternatives.
First, it is
not a good idea for the Treasury to micro-manage the lending policy of
all banks. We accept that. The Treasury, qualified though it is, is not
party to all the commercial transactions that banks are involved in and
ought not itself to run the banks day to day. Equally, there is clear
and evident fear that something goes wrong if banks are left to their
own devices. There are thus two unacceptable alternatives:
micro-managing banks is bad but so is leaving them to their own
devices. The
new clause tries to address both concerns as delicately as possible.
One could point to the absence of sanctions and simply state in the
Bill that banks can still ignore the advice just as they can ignore the
Chancellor, although it is harder for them to do that. If the provision
was in the legislation, it would be very much part of
recapitalisationit would be incorporated in the
recapitalisation process. It would still be legally possible for banks
to flout the law and to ignore the spirit of the law, but it would be
harder to do if the Bill made perfectly explicit the basis on which
they had received funds from the state in the first
place. I
shall not press the new clause to a vote. I will listen to the
Ministers response and see if he can give a reason why we
should not proceed with it. The proposal is an attempt to solve a
genuine problem. A scheme will be enshrined in law; it has a definite
political objectiveto recapitalise banks in order to stabilise
the economybut nothing in the Bill obliges banks to consider
the wider interests of the economy or to heed the advice of the
Treasury, which allowed them to have the funds in the first
place.
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