Dormant Bank and Building Society Accounts Bill [Lords]
Mr. Browne: Will the Minister give an example of circumstances where that may be necessary, as I am confused as to what they might be?
Ian Pearson: My understanding is that they would be exceptional circumstances. At the moment, in normal circumstances, banks or building societies should hold sufficient information to identify the account holder and to ensure that the money that was held in their accounts and transferred to the reclaim fund is genuinely reclaimable. Under those circumstances, there should be no need for information to be transferred. Of course, there is potential for dispute in such situationsfor example, a bank or building society might no longer exist, and the records might be imperfect. Clause 14 is intended to deal with such exceptional circumstances. The principle that we should not routinely transfer data that give private information about an individual to the reclaim fund is correct. Normal account details should remain with a bank or building society.
Mr. Browne: I understand the Ministers point about not transferring data beyond what is necessary. In practical terms, however, presumably I could go along to a bank where I had an account with £100 in it that I had not touched for 10 years, withdraw the money and walk out with £100 in cash. If I had a bank account that I had not touched for 20 years, could I similarly go in and walk out with my £100? Would there be a delay or complications because that money, having passed the 15-year threshold, had gone into the reclaim fund? Could the bank say, Sorry, well have to process it, and it will take a certain amount of time? Would I, as the customer, notice the difference between an account that had not passed the 15-year threshold and one that had?
Ian Pearson: Subject to verification checks, which one would expect a bank or building society to want if someone had not been in touch with them for 15 or 20 years, a person should be able to get the money immediately. If the money has been transferred, it will be up to the bank or building society to get it back from the reclaim fund. A customer can walk into a bank or building society and get the money that is rightfully theirs. The bank or building society should have already written to the individual to alert them to the possibility that the money might be dormant. If they had not received any information back from the customer, after 15 years the money could be transferred into the reclaim fund. The principle that someone can get their money back by going to their bank or building society and having some simple verification checks is right, and it is one of the reasons why banks and building societies
Let me respond briefly to the point made by the hon. Member for Fareham. When money is transferred to the reclaim fund, there should be sufficient informationbut not personal detailsto enable the reclaim fund, when producing its business plan, to make some assessment of the likelihood of dormant funds being repatriated. We discussed on Second Reading the need for a balanced decision to be taken by the reclaim fund on that basis. There will be information that enables the reclaim fund to take those decisions, but customers details will not be routinely passed to the reclaim fund. We do not believe that to be necessary.
Mr. Hoban: I am grateful to the Minister for that clarification. What type of information does he envisage being passed across by the banks or building societies to the reclaim fund? Will it have a breakdown of the individual account balances that have been transferred across, on a numbers basis? Will they know for how long an account has been dormant, again on a numbers basis? What sort of information will they get to enable them to make such a judgment, which we all agree is a fundamental part of making sure that the scheme works?
Ian Pearson: My understanding is that fairly high-level information will be provided. Individual accounts will not be subject to in-flight refuelling. My advisers suggest that that will be a matter for agency agreement and not for the Bill. As regards the general principles involved, we need sufficient high-level informationto be clarified in agency agreementto be provided to enable the reclaim fund to understand how many customers accounts have been transferred to it, the age profile of those accounts and the quantums involved. The reclaim fund need not necessarily know exactly which individuals are having accounts transferred into it. The Bill allows for the provision of information that is likely to be necessary to repay customers. Other than that, it will be a matter for agency agreement. I appreciate that the hon. Member for Fareham is making a probing point. The reclaim fund needs sufficient information to be able to have a properly functioning business plan and to conduct the work that we want it to do, which is to transfer money to good causes.
Amendment, by leave, withdrawn.
( ) The reference in subsection (1) to an account that a person holds is to be read as including an account held by a deceased individual immediately before his or her death.
In such a case, a reference in subsection (2) to the customer is to be read as a reference to the person to whom the right to payment of the balance has passed..
Ian Pearson: The amendments are technical and arise from debates in the other place. Our consistent position has been that all accounts should be eligible for transfer into the scheme, provided that they meet the test of dormancy set out in the Bill. That includes accounts opened a long time ago. As the Bill is currently drafted, if a customer dies it is not possible for their balance to be transferred to the reclaim fund and the banks liability extinguished, because the account is not one that the customer holds with the bank. That presents difficulties, as banks will not know whether older, inactive accounts are owned by living or deceased persons. We certainly intend to address that point, which was raised in the other place. It is unlikely that banks or building societies would know whether account holders were living or deceased. We appreciate what the banks and building societies have told usthat they wish to have certainty on that point so that they are not constrained in their ability to participate in the scheme. We are happy to propose the amendments, which are a technical clarification confirming that the accounts owned by deceased persons are eligible for transfer into the scheme.
Mr. Hoban: I am grateful to the Minister for that clarification of the purpose of the amendments. He will be aware of concerns outside the Committee about how accounts belonging to deceased persons can be reunited with the people to whom they have been bequeathed in a will. Does the measure make it easier or more difficult for that process to take place?
Amendment agreed to.
Clause 1, as amended, ordered to stand part of the Bill.
Transfer of balances to charities, with proportion to reclaim fund
Ian Pearson: I beg to move amendment No. 9, in clause 2, page 2, line 1, leave out building society or a smaller bank and insert smaller bank or building society.
Ian Pearson: The amendments intend to bring the Bill back to the state in which it was originally introduced. It is right to have a significant debate on the objectives of the small and local schemes. I would like to remind the Committee about the objective of the Bill, which is to facilitate fair and efficient distribution of funds in dormant accounts for the benefit of society.
We recognise that small banks and building societies often play a key role in supporting and engaging with our local communities. It has always been clear that small, locally based institutions should be able to focus dormant account assets on needs in their local communities. That was announced as far back as the pre-Budget report of 2005. In consultation with the bank and building society sector, we have identified £7 billion as a
The vast majority of building societies will be eligible for the alternative scheme. The BSA advises that 50 out of their 59 membersnearly 85 per cent.will be eligible. On Second Reading, it was helpfully pointed out that building societies which will not be eligible hold a large proportion of the dormant account funds in that sector. To be precise, the BSA has estimated that £100 million of the £130 million in dormant accounts in the sector lie in the larger institutions. I am aware of the views that have been regularly expressed by Nationwide building society. Much has been said of the great need in the areas to which spending priorities in the scheme have been directed, particularly the need for youth facilities and for improving financial capability and inclusion. One of the key messages on Second Reading was the strong support across the House for investment in youth facilities and in matters of financial capability and inclusion.
One of the reasons behind the scheme is that, if the larger building societies do not take part in the main scheme, the funds for the spending priorities will be heavily impacted on. We are aware that banks and building societies support a variety of good causes in different communities and, of course, we fully support such laudable objectives. However, are banks and buildings societies really in the best position to consider consistently the needs of wider communities throughout the United Kingdom? We have identified the good causes following an extensive consultation exercise in England, and other Administrations have similarly consulted. We think that it is right to proceed with the scheme. If we were to allow all dormant account money to be administered through multiple individual foundations, it would inevitably lead to significant overlaps and potentially large gaps in provision. It is in the interests of a fair and efficient distribution of funds to have a centralised national distribution scheme.
Mr. Browne: Is the Minister satisfied that the £7 billion threshold is still appropriately pitched, given the events of the past few weeks and months?
Ian Pearson: Yes, I am. I have asked that question of officials. Obviously, there have been changes during the past few weeks and months, but I am confident that an asset limit of £7 billion strikes the right balance and enables us to have a scheme of a sufficient size that it can be efficient in its distribution of funds.
We very much welcome the recent BSA statement in support of the Bill as it was introduced to Parliament, which is what the amendments are designed to achieve. The Governments proposals for an alternative scheme for smaller financial institutions have also been welcomed by the BSA. We also welcome its statement expressing its members commitment to making the scheme a success and their intention to participate in it, as we do the British Banking Associations statement confirming commitments to participate from banking groups representing 90 per cent. of the UK retail banking market.
The proposed scheme is designed to be simple and efficient, to minimise costs to institutions and the scheme overall, and to maximise funds for distribution. The asset limit provides a balance between giving small, locally based banks and building societies the flexibility to benefit directly their local communities against maximising the assets for the main scheme, which will be operated through the Big Lottery Fund to give money to good causes. We believe that the amendments will produce the alternative scheme for small, locally based institutions, which is what small banks and building societies want.
Mr. Hoban: The matter under discussion was the subject of significant debate in the other place, and I happen to think that the balance of debate there was right. Building societies are in a particular position in our society and they differ from banks. We are talking about the money not only of customers, but of members of a building society. The society is a mutual and the money is its members money. I am conscious that members of building societies have made decisions about how building societies should operate. For example, at its last annual general meeting, members of Nationwide agreed to a commitment that 1 per cent. of its profits should be allocated to charitable purposes.
There is a strong belief in those organisations, which is one reason why there is so much support for mutuals throughout the House. The mutual nature of such organisations gives them different status; they see their mutuality as a distinctive selling point compared with other institutions. To carve out one group from the whole population says that there is almost a two-tier category of building society: those that are of sufficient size and thus will be dealt with on a different basis when it comes to dormant accounts and those that will be allowed to continue to use their members funds when there are dormant accounts to benefit the communities in which they are based. That creates an unhelpful distinction.
The hon. Member for Taunton asked whether the asset limit of £7 billion is right. From the Ministers justification of the Bill, a better measure is the one that he used on the concentration of branchesto what extent does a building society serve a well-defined local community?
Ian Pearson: I am not sure how this is helping the hon. Gentlemans argument. My argument is that it is right to have a small and local scheme, and that small building societies, which generally serve local or regional and sub-regional communities, are in a different place
The hon. Gentleman mentioned the Nationwide building society. I have enormous respect for the Nationwide and its policy on giving money to good causes, but it has 14 million customers and is about to acquire the Derbyshire building society, which will make it even larger. It does not help his argument to say that we should treat all building societies the same. The Nationwide is of sufficient size that it deserves to be regarded as an institution on a par with some of our banks, and it is right in that case that it participate in the wider reclaim scheme, which will give money to good causes through the Big Lottery Fund.
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