Dormant Bank and Building Society Accounts Bill [Lords]

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Mr. Hoban: Before the Minister concludes, may I go back to a point that he made before we had this digression on who should produce the list? I thought he said—I would like clarity on this—that it is not the reclaim fund’s job to scan the horizon and that the FSA should have a role in that. Obviously, it does that in the context of ensuring that all financial services organisations are registered with it. Does the FSA have a role in encouraging banks and building societies to look at the issue of dormant accounts, and should it in any way supervise and regulate the work that they do on reuniting accounts with their rightful owners?
Ian Pearson: It is not my job during consideration of the Bill to comment on the role of the FSA in that respect, but we have a strong commitment from banks and building societies that they will voluntarily participate in the scheme. That is completely the right approach to take and we have no reason to think that any major bank or building society will not want to participate. The situation to which the hon. Gentleman refers is not likely to arise, but I will reflect on his amendment and come back to him.
Amendment agreed to.
Amendments made: No. 22, in schedule 1, page 17, line 24, at end insert—
‘( ) its annual accounts and reports for that year (within the meaning given by section 471 of the Companies Act 2006 (c. 46));’.
No. 23, in schedule 1, page 17, line 26, after ‘fund’, insert ‘in that year’.
No. 24, in schedule 1, page 17, line 28, after ‘fund’, insert ‘in that year’.
No. 25, in schedule 1, page 17, line 31, after ‘transferred’, insert ‘in that year’.—[Ian Pearson.]
Schedule 1, as amended, agreed to.

Clause 6

Parliamentary accountability of reclaim fund
Question proposed, That the clause stand part of the Bill.
Ian Pearson: As I made clear earlier, we want the reclaim fund to operate in a transparent way. Our amendments show that we have listened to the debate and that we seek to reinforce transparency. We did that with Government amendments Nos. 21 to 25, which require the fund to publish the information referred to in clause 6 as soon as possible after the end of each financial year. That information will be available for all to see, including hon. Members. I hope that that satisfies any concerns that there will not be full transparency and scrutiny of the reclaim fund. However, requiring the reclaim fund to lay its annual accounts and reports before Parliament would be inappropriate and out of keeping with the Bill.
I shall briefly restate why clause 6 is unnecessary and why I oppose it standing part of the Bill. Representations have been made that the reclaim fund should be regarded as a public sector body as a result of the Treasury’s direction-making power, which has been discussed, and that that justifies additional parliamentary scrutiny. We have already debated those points, but I want to re-emphasise the fact that the reclaim fund is not a public sector body; it is a private company operating under company law.
As I have said, we do not envisage using the direction-making power to interfere in the day-to-day running of the reclaim fund and the management of its money. The FSA is responsible for regulating the reclaim fund for prudential purposes.
For the reasons I have outlined, the improvements in transparency made by Government amendments Nos. 21 to 25 and the explanations we have given about why we envisage using the direction-making power only in exceptional circumstances mean that a requirement for the reclaim fund to put its annual report and accounts before Parliament would be excessive and unnecessary. That is why I recommend hon. Members not to support clause 6.
Mr. Hoban: Given the consensus that we reached on the previous amendments, I do not have a problem with the removal of the clause, but removing subsection (2)(a) would be a retrograde step. That subsection requires the Treasury to
“lay before each House of Parliament...any directions issued to a reclaim fund under section 5(4) of this Act”.
The Government won the point about whether the positive method for directions should be followed, but now not only will there be no parliamentary scrutiny, but there will be no obligation on the Treasury to publish such directions, which makes the situation even worse.
If we remove the clause in its entirety, no one will know what directions the Treasury has published. The directions might be used in pressing emergencies—to use the Minister’s words—but it would be helpful if we knew when they had been issued to the reclaim fund. I am sure that this is an over-hasty deletion by the Government, not a deliberate step to keep directions shrouded in secrecy.
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Ian Pearson: I welcome the hon. Gentleman’s support for removing clause 6. If there is a problem with subsection (2)(a), I will undertake to return to the matter on Report. It is not the Government’s intention to be secretive in any way in the wholly unexpected circumstance that we might exercise a power of direction; on the contrary, we would want to ensure that we act transparently. We have debated whether that should be through an affirmative or negative procedure, perhaps because of the requirement for urgency. I will come back to that later should it be necessary or if there is any lack of clarity or transparency.
Question put and negatived.
Clauses 7 to 10 ordered to stand part of the Bill.

Clause 11

Mr. Browne: I beg to move amendment No. 3, in clause 11, page 6, line 37, at end insert ‘and,
(c) the bank or building society in question has exhausted all reasonable efforts to inform the account holder of the funds that bank or building society holds on their behalf.’.
The Chairman: With this it will be convenient to discuss Government amendment No. 16.
Mr. Browne: The amendment would create a statutory obligation for banks to attempt to reunite dormant accounts with their owners. It amends the definition in subsection (1) by adding another paragraph to require the financial institution to have
“exhausted all reasonable efforts to inform the account holder of the funds that bank or building society holds on their behalf.”
That would ensure that financial institutions exercise appropriate responsibility towards account holders before transferring their money to a reclaim fund. The current system for allowing people to check whether they have dormant accounts centres around the website, That presupposes that the account holder knows which institutions their account is with and believes that they have a dormant account in the first place. It is also reliant on voluntary information from the institutions, which can be patchy, and on the account holder being able or willing to use a computer, which we should not assume will automatically be the case. I am not trying to undermine the Bill as a whole but to ensure that the interests of depositors are safeguarded to an even greater degree than it currently envisages by putting that greater obligation on the banks.
Mr. Hoban: I wonder whether the hon. Gentleman could expand on the wording of his amendment where he says that
“the bank or building society in question has exhausted all reasonable efforts to inform the account holder.”
What does he believe that “all reasonable efforts” might encompass? For example, one bank has employed a tracing agency to track down the owners of accounts holding more than £1,000. Is that reasonable, or would it be expected to go further to include lower-value accounts?
Mr. Browne: The hon. Gentleman raises a reasonable point. There is a useful debate to be had over how much effort the financial institution should make. Many people take the view that the effort should match the size of the deposit in the account. The process may become not self-defeating but less obviously purposeful if it costs more to try to trace the account holder than the total value of the deposit. If the account held a higher amount of money, I would envisage the efforts going somewhat beyond writing to an account holder at an address at which he resided 15 years or more ago and having a website that he or she could access if they so wished.
There will be several ways in which the banks go about trying to contact longstanding customers who have not been in recent contact. The essential point is that at the moment the banks have insufficient incentive to try to reconnect the dormant bank account holder with his or her dormant bank account and that the Bill does not give them any great incentive to do so. After all, what does the bank stand to gain from tracking down a person who has not been in contact for 15 years or more? Very little. I fear that the bank will do the bare minimum in order to be seen to be doing the right thing and that that will not be good enough in the interests of the individual account holder. I would be pleased if the Minister could assure me that greater and more strenuous efforts will be made.
Mr. Field: I want to say a few words about the amendment, with which I have a certain amount of sympathy. I also want to put on record the specific concerns of a constituent of mine—Mr. Manzetti of Belvedere house in Grosvenor road, Westminster—which were answered in part by an exchange of correspondence with the erstwhile Economic Secretary to the Treasury that took place in the summer. Having worked in the insurance industry for more than 35 years, Mr. Manzetti is worried that not enough is being done to seek out the owners of assets, along the lines of the proposal by the hon. Member for Taunton. In a modern world in which there are websites and far more detail that can potentially be demanded and accessed by the public, banks and building societies are becoming more proactive in their efforts to hunt down the owners of assets. Mr. Manzetti’s experience of this world leads him to believe that there has been a reluctance on the part of insurers and others to follow up unclaimed benefits or dormant accounts. There is still concern as to whether that process has been adequately open.
As the hon. Member for Taunton said, there is now a desire for companies to be required to list on freely accessible websites the names of all holders of unclaimed assets and for part of the cost of that exercise to be borne by advertising of the company’s products on those sites. At the moment, as the Minister will be aware, there is a pretty extensive charging regime of some £18 per search. That is a fairly significant disincentive unless the cost is to be paid by an individual who is aware of some unclaimed assets for him or his family.
In her letter, which is dated 10 August, the erstwhile Economic Secretary mentioned
“tracing systems being made more user-friendly.”
Can the Minister give some indication as to the nature of those tracing systems and how they can be more user-friendly in a world where people will increasingly access websites through the internet? What process will be put in place to ensure that we do not have a system suitable only for 2008 that becomes defunct in the light of new technology in the years and decades ahead? Is there a commitment from the Government, alongside the banks and building societies, to ensure that this information is kept up to date, as far as possible?
I thank you for your indulgence, Mr. Benton, in allowing me to stray slightly off the line, as I felt that the issues raised by my constituent could best be discussed under clause 11. I hope that the Minister is able to comment on them. I am happy, if need be, to forward the correspondence that was responded to by the then Economic Secretary, who is now Under-Secretary of State for Work and Pensions, the hon. Member for Burnley (Kitty Ussher).
Mr. Hoban: This is an opportunity for us to spend a little time thinking about the precursor to the work that the reclaim fund and the Big Lottery Fund will do with dormant accounts. Consumers will want to know that banks have taken all the appropriate steps to ensure that they identify the rightful owners of accounts. The provision is important, because it will give customers confidence that this is not just an exercise to take money out of their accounts and put it in the reclaim fund to be used for the causes mentioned in later clauses. It is important to consider the approach that the banks and building societies use to identify dormant accounts and reunite them with their owners.
Having heard the remarks of the hon. Member for Taunton, I am not sure whether I support his amendment. The word “reasonable” is difficult to explain and be clear about. Consumers will expect banks take all the appropriate steps that they need to take to identify account owners. The debate that we have had about unclaimed assets and dormant accounts over the past six years, since the first document on such assets was first published, has forced, or encouraged, institutions to consider how they identify those accounts and what steps they should put in place to reunite the accounts with their owners. National Savings and Investments, the Building Societies Association and the British Bankers Association have worked together to set up My understanding is that there have been many more visits to that site, and searches initiated on it, than there were on the previous websites available to bank and building society customers. It appears to have stimulated a great deal of interest in the minds of customers about whether they might have accounts and about initiating the process of searching for them.
12.30 pm
Some banks have employed tracing agencies, particularly for larger accounts and customers, and they appear to have been successful. It is interesting that the banks have made quite a lot of progress in whittling down the amount of their unclaimed and dormant accounts. On Second Reading, other hon. Members and I said that HBOS had made significant progress. We want that to continue. No matter how much we want to go to the good causes, we want the banks to have as their first priority trying to reunite those assets and getting their customers to claim them. In the time between now, or Royal Assent, and the setting up of the reclaim fund, we all want the banks to work carefully and diligently to ensure that that takes place. We will touch on the triennial reports in the next series of debates, but we certainly want a mechanism to be in place that shines a light on the activities of institutions in reuniting customers with their accounts.
I am concerned about Government amendment No. 16, deleting subsection (3), which was added in the House of Lords. That subsection would put the onus on the banks to use the knowledge of their accounts, account holders and any other relevant matters in determining dormancy. It would try to encourage banks to take a holistic approach to their customers, to determine whether there was any evidence that they were aware of, or should be aware of, to suggest that the account was not dormant.
Amendments tabled in the Lords stemmed from a series of discussions that tried to define dormancy more carefully. Those amendments were unsuccessful, because there was, rightly, a concern that people did not want statutory impositions placed on the scheme, to try to preserve as far as possible its voluntary nature. Lord Davies of Oldham said in the other place:
“The bank can follow its normal procedures for reaching a judgment on whether an account is dormant”—[Official Report, House of Lords, 10 January 2008; Vol. 697, c. GC344.]
There is some uncertainty, and my amendments Nos. 47 and 46, which we will come to next, highlight some of the dormancy issues. I am not clear in my own mind whether the banking code, which is the fall-back position in this situation, is enough of a prod to ensure that the banks deal with their customers on a fair basis when looking at dormancy. Under the code, each bank will have to publish its own policy on dormancy, but that is voluntary in nature, like so much of the scheme. I am not sure whether that will provide adequate protection for customers, who might see their accounts being declared dormant. Subsection (3), from our perspective, tries to provide some of that protection for consumers. We are disappointed that the Minister seeks to delete the amendment made by the House of Lords.
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