Ian
Pearson: I shall speak to Government amendment No. 16 to
clause 11, which refers to the definition of dormancy. It allows us to
have a number of debates about that definition and to make some
important points about the priority that we all attach to reuniting
customers with their savings.
The Government
have made it clear—this is a widely shared view in the
House— that reuniting customers with their money should be a
priority for the scheme and that, whenever possible, efforts should be
made to ensure that customers are reunited with money that is rightly
theirs. That is one reason why we welcomed the launch of
mylostaccount.org.uk by the BBA, the BSA and NS&I early this year,
and the industry’s commitment to reach out to hard-to-reach and
disadvantaged customers. The website has the potential to provide an
efficient and effective means for customers to trace their lost
accounts and for concerns about personal data to be
respected.
As we have
heard, since its launch on 30 January, the site has had nearly 190,000
search forms submitted for money left unclaimed in a dormant bank,
building society or NS&I account. The Government are always
interested in ideas for improving such arrangements, but it is
obviously a matter for banks, building societies and NS&I to ensure
that they have effective arrangements in
place. To
reinforce a point that I made on Second Reading, searches are possible
through multiple institutions. Website guidance suggests that, if
someone is searching just one institution, it might be best to approach
it direct, but multiple searches are allowed. As the hon. Member for
Fareham said, there has been an increase in the number of people who
have been reunited with their
money.
Mr.
Field: Given what the Minister says, is he comfortable
with the explosion in numbers since the website was set up at the
beginning of the year? Does he believe that it is adequate and open
enough or that it is simply a playing of the numbers game? Does he
understand some of the concerns mentioned by Opposition Members about
the fact that there seems to be a lack of incentive on the part of too
many of those who will benefit from the system to put in place an
entirely open one? At what point will he be satisfied—perhaps it
has been reached—in his own mind that enough is being done to
ensure that dormant accounts are being reunited with their
owners?
Ian
Pearson: As I said, I am always interested in ideas for
improving the arrangements for reuniting, but I acknowledge the step
change in activity this year. We want that progress to continue, and I
shall certainly be interested in talking to banks and building
societies about their reuniting activities. It should be a priority for
them to ensure that they reunite customers with their money, and we all
share an interest in ensuring that they are doing all that they
reasonably
can. The
hon. Member for Cities of London and Westminster raised a specific
constituency issue, and I shall trace the correspondence to ensure that
the Government are taking any action that we should be taking. To
reinforce the point, banks and building societies are committed to
reuniting and have made significant efforts to do
so. On
the point made by the hon. Member for Fareham, transferring accounts
that are not truly dormant is not in the interests of banks and
building societies, because they would have to bear the up-front costs
of any subsequent reuniting.
The hon.
Member for Cities of London and Westminster made a point about
insurance companies paying for tracing services. As he knows, the Bill
is about the
dormant accounts of banks and building societies only—other
assets and institutions pose questions for another
day. Mr.
Hoban: The Minister said that it would not be in a
bank’s interest to transfer accounts that are not dormant
because they will bear the up-front cost of the transfer. However, when
an account is transferred to the reclaim fund, the cash and liability
are in effect transferred as well, so there is no cost to the
bank.
Ian
Pearson: Certainly administrative and time costs are
associated with transferring funds to a reclaim fund and then back
again. The hon. Gentleman is right that the assets and liability are
transferred, which is one of the purposes of the Bill. I wish that I
could reassure him on Government amendment No. 16 and why we want to
delete subsection (3). I emphasise that we intend genuinely dormant
bank and building society accounts lost by the account holder to be
transferred into the scheme, but not accounts that are simply rarely
used or where the account holder is still aware of their account. That
will minimise the unnecessary costs associated with returning accounts
to customers after a
transfer. We
believe that our definition of dormancy is simple, clear and
straightforward: an account open throughout a period of 15 years with
no customer-initiated transactions. However, the scheme allows banks
and building societies the flexibility to refer to customer-initiated
activities that might indicate that an account is not dormant even
where there have been no transactions on the account. If the
institution is aware of activity, such as the requesting of periodic
statements, we fully expect institutions not to transfer accounts.
Furthermore, those with particularly strong or individualised systems
can take that into account in their individual policies. That
flexibility is one the scheme’s great strengths. I am happy to
confirm that institutions will be expected to use their knowledge of
such matters. That was indicated in our consultation and is set out
clearly in the explanatory notes. It is unnecessary to require in
legislation that institutions use their knowledge; that would add
nothing to the scheme and have a detrimental impact on the clarity of
the definition. That is why our approach has been supported by
industry.
Mr.
Hoban: I want to return to the Minister’s point
about customer-initiated activity. He used the example of a customer
asking for a statement of their account. The point at which the
statement was requested might indicate whether the customer still knew
of the account. If the statement had been requested at the end of year
1 and we were now in year 16, with no customer activity in that
intervening period, one would expect that account to be deemed dormant.
However, does that activity have to be related specifically to that
account? What if a customer has, say, an insurance policy through a
bank that is wholly unrelated to the account? I assume that such
activity would not impact on the definition of dormancy made by the
bank.
Ian
Pearson: It is up to the bank to judge whether an account
is dormant. That is a key point. Banks and building societies will
publish their policies on their interpretation of a dormant account. We
believe that it is important to have a clear definition in legislation
of
dormancy, while allowing banks and building societies the discretion to
use their own judgment. In the Bill, it is immediately apparent when
the minimum definition of dormancy has been achieved: if there has been
a transaction within the past 15 years, the account cannot be
considered dormant; if there has not, it can be. The BSA has said that
the ability to take account of other forms of customer contact is
particularly important to it, and it supports the Bill as introduced.
The BBA has also welcomed the ability to take into account other
indications whether an account is genuinely dormant.
I do not
think that there is any difference between our intentions. We are
saying clearly that subsection (3) and the amendment tabled by the hon.
Member for Taunton would muddy the waters and make the position less
clear. Our professional advice from those in the industry states that
they would much prefer to have a clear definition and the flexibility
to use their own judgments and publish their own policies, rather than
having requirements introduced under the
Bill.
12.45
pm
Mr.
Jones: As my hon. Friend is probably aware, I am concerned
about the flexibility for banks and building societies to make their
own definitions of dormancy, thereby limiting the amount of money that
they may have to give up to the reclaim fund. One of my concerns
involves something that he just mentioned. I am interested to hear
whether there will be any compulsion on banks and building societies to
give their definition of a dormant bank account. If not, there may be a
problem of definition.
Ian
Pearson: There is a requirement on banks and building
societies, as part of the banking code, to publish their dormant
accounts policies. That is covered. Again, the key point is that it is
emphatically the case that banks will want to use their judgment to
make reasonable decisions on whether accounts are dormant. We want to
create a clear definition of dormancy and then allow banks and building
societies to exercise their judgment. Tests such as those in subsection
(3), which was inserted in the other place, are not regarded by the BSA
or the BBA as helpful. They would fetter the discretion of the
institutions to make reasonable judgments on whether accounts were
dormant and get in the way of general
practice. I
support amendment No. 16 and oppose amendment No. 3. I emphasise that
it is not in anybody’s interest to transfer accounts unless
people have lost touch and the accounts are considered dormant. If they
are not dormant, there is at least an administrative cost involved. I
also emphasise that this is customers’ money. If a customer goes
through the door of a bank or building society and says that he or she
wants their money, they will be able to get it, subject to the
necessary checks. If the money has been transferred as dormant, it will
be reclaimed by the bank from the reclaim fund, and as far as the
customer is concerned, they will just be withdrawing their money from
their bank account, as they have a right
to.
Mr.
Browne: I am not massively reassured by the
Minister’s statement that the associations representing banks
and building societies are not keen for more onerous requirements to be
put on them; I had expected
that. Nevertheless, I take his point, which is that it is difficult
specifically to define a more onerous requirement. When I moved the
amendment, that point was reasonably put to me in an intervention by
the hon. Member for Fareham.
As the
Minister said, all parties seem to share the overall objective of
trying to make the requirement as strong as possible, but given that it
is difficult to frame it legislatively, I beg to ask leave to withdraw
the amendment.
Amendment,
by leave, withdrawn.
Mr.
Hoban: I beg to move amendment No. 47, in
clause 11, page 6, line 38, leave
out
‘at any time
during that
period’.
The
Chairman: With this it will be convenient to discuss
amendment No. 46, in
clause 11, page 7, line 3, at
end insert— ‘(2A) Where
under the terms of the account withdrawals were prevented or there was
a penalty or other disincentive for making withdrawals, the period of
dormancy as set out in subsection (1)(a) above will start when
withdrawals can be made or when the penalty or other disincentive
expires’.
Mr.
Hoban: This is a probing amendment on the wording of
subsection (2). I understand that if money is sitting in an account
from which withdrawals are not allowed, or if there is a penalty or a
disincentive to making withdrawals, the account cannot be deemed to be
dormant. The money will sit for ever on the bank’s balance sheet
as an asset or a liability. Because the money is unlikely ever to be
declared, the bank will decide not to try to reunite it with its owner.
However, I realise that many accounts, for short periods, involve a
penalty for early withdrawal, including loss of interest. Even if those
penalties were effective for only a short time, those accounts would
never be deemed to be
dormant. I
looked on the internet to find some examples. I found the Alliance
& Leicester eSaver issue 2 account, in which interest is foregone
in any month in which a withdrawal is made. That account would
therefore fall foul of subsection (2)(b)(ii), which states
that “there
was a penalty or other disincentive for making
withdrawals”. On
that basis, such an account could never be said to be
dormant.
Another was a
fixed-rate bond account—not at Alliance &
Leicester—that paid a high interest rate but with no access for
at least a year. That would fall foul of subsection
(2)(b)(i), which states that “withdrawals are prevented”.
I am not sure whether that is the intention of the provision, but it is
certainly the impression that it left in my mind. That is why I tabled
amendments Nos. 47 and 46, which suggest that the period of
dormancy should be calculated from the time when the penalty expires.
For the Alliance & Leicester eSaver account, the period of dormancy
would start after a year, so rather than it being declared after 15
years, it would be 16 years after the account was
opened. I
would be grateful for some clarity on the thought processes behind
subsection (2).
Ian
Pearson: I shall deal first with amendment No.
47, which I appreciate is probing. The amendment would delete the
words
“at any time
during that period”
from subsection (2). We
understand that the intention is to clarify the fact that if an account
holder has requested no contact, or if the account is a of type that
prevents or includes a disincentive for making withdrawals, the period
for calculating dormancy can begin only once the restrictions are
lifted. We believe that the clause already achieves that, and that
omitting those words is unnecessary and makes the point less certain.
The amendment would remove the emphasis that if at any time an account
becomes subject to those restrictions, it cannot be considered
dormant.
Amendment No.
46 is designed to clarify the fact that a period of dormancy cannot
include any time during which any penalties or disincentives for
withdrawals apply. The hon. Member for Fareham gave several examples.
Although we agree with the intention, clause 11(2) already achieves
that effect. In the case of an account with fixed-term or no-mail
restrictions, the clause ensures that the 15-year period of inactivity
required to meet the dormancy definition cannot begin until those
restrictions have ended. These proposals are not necessary, as they
would not achieve anything that the Bill does not already ensure. I
therefore invite the hon. Gentleman to withdraw the
amendment.
Mr.
Hoban: I am grateful to the Minister for that
clarification. He has set out why my amendments are unnecessary, and I
think that the clause is meant to achieve what my amendments are
designed to do. The only thing that slightly sticks in my own mind is
the phrase “if at any time”, because there may be a
one-year period when withdrawals are prevented, but the fact that there
is a one-year period means that the account cannot be declared
dormant. An
account may have been open for 15 years, but if at any time there was a
period when withdrawals were prevented, that account could not be made
dormant. I think that that is how the phrase “if at any
time” works in the context of the
clause. I
think that the Minister and I are on the same wavelength with what we
want to achieve, but I am not sure that the drafting of the clause
quite gets there yet. I will be happy to withdraw amendment No. 47 and
not press amendment No. 46, but I hope that he will look again at the
wording of the clause to ensure that it does not inadvertently rule out
a swathe of accounts from being dormant. I beg to ask leave to withdraw
the
amendment. Amendment,
by leave,
withdrawn.
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