Draft Electronic Commerce Directive (Financial Services and Markets) (Amendment) Order 2015
Draft Financial Services and Markets Act 2000 (Miscellaneous Provisions) Order 2015
The
Committee consisted of the following
Members:
†
Barwell,
Gavin (Lord Commissioner of Her Majesty's
Treasury)
†
Binley,
Mr Brian (Northampton South)
(Con)
†
Birtwistle,
Gordon (Burnley)
(LD)
Bradshaw,
Mr Ben (Exeter)
(Lab)
†
Burns,
Conor (Bournemouth West)
(Con)
†
Burrowes,
Mr David (Enfield, Southgate)
(Con)
†
Dakin,
Nic (Scunthorpe)
(Lab)
James,
Mrs Siân C. (Swansea East)
(Lab)
†
Jamieson,
Cathy (Kilmarnock and Loudoun)
(Lab/Co-op)
†
Johnson,
Gareth (Dartford)
(Con)
†
Leadsom,
Andrea (Economic Secretary to the
Treasury)
†
McInnes,
Liz (Heywood and Middleton)
(Lab)
†
Raab,
Mr Dominic (Esher and Walton)
(Con)
†
Shannon,
Jim (Strangford)
(DUP)
Sheerman,
Mr Barry (Huddersfield)
(Lab/Co-op)
†
Skinner,
Mr Dennis (Bolsover)
(Lab)
†
Uppal,
Paul (Wolverhampton South West)
(Con)
Kate Emms, Committee
Clerk
† attended the
Committee
Fifth
Delegated Legislation Committee
Tuesday 17 March
2015
[Mr
Adrian Sanders
in the
Chair]
Draft
Electronic Commerce Directive (Financial Services and Markets)
(Amendment) Order
2015
The
Chair:
It may be helpful if I briefly outline the
procedure. In a moment, I will ask if the Committee is content to
debate the two instruments together. If there is no objection, the
Committee will have a single debate of no longer than an hour and a
half covering both instruments. If there is an objection, the
instruments will be debated in turn for no longer than an hour and a
half each. If it is the Committee’s wish, I will call the
Minister to move the first motion and speak to both instruments. At the
end of the debate, I will put the question on the first motion and then
ask the Minister to move the second motion
formally.
8.55
am
The
Economic Secretary to the Treasury (Andrea Leadsom):
I beg
to
move,
That
the Committee has considered the draft Electronic Commerce Directive
(Financial Services and Markets) (Amendment) Order
2015.
The
Chair:
With this it will be convenient to consider the
draft Financial Services and Markets Act 2000 (Miscellaneous
Provisions) Order 2015.
Andrea
Leadsom:
With permission, Mr Sanders, I will refer to the
orders as the e-commerce order and the miscellaneous order. I am
pleased to introduce these draft statutory instruments to the
Committee.
The UK
consumer credit market of around £160 billion helps
households and families to smooth the peaks and troughs in their income
and outgoings. As such, the Government believe that a well-functioning
consumer credit market is crucial to individuals, the economy and to
wider society. To support that objective, the Government have
profoundly reformed consumer credit regulation, transferring
responsibility from the Office of Fair Trading to the Financial Conduct
Authority on 1 April
2014.
The
FCA is far better resourced and has far stronger powers to ensure that
consumers are protected from sharp practice in the sector. It has also
been equipped with flexible rule-making powers to allow it to keep pace
with developments and innovations in the market. The FCA regime is
already having a substantial positive impact and is helping to deliver
the Government’s vision for an effective and sustainable
consumer credit market that is able to meet consumers’ needs.
That raising of standards across the consumer credit market will
continue as the FCA assesses firms’ fitness to trade in its
authorisation assessments. That process has already begun for
industries regarded as the riskiest, including debt management and
payday lending. The instruments help to support the effectiveness of
the FCA’s regulatory regime.
The e-commerce
order gives the FCA powers to take action against credit firms,
including payday lenders, that seek to abuse their rights under the
e-commerce directive to evade FCA rules. As Members will be aware, the
Government have taken tough action dramatically to improve protections
for consumers in the payday lending market. As well as transferring
regulatory responsibility to the FCA’s robust new regime, the
Government have legislated to require the FCA to introduce a cap on the
cost of payday loans. Last year, the FCA introduced a package of new
rules for payday lenders, including limits on roll-overs and tougher
requirements for affordability
assessments.
The
FCA has formidable enforcement powers to take action where wrongdoing
is found. The FCA’s authorisation process for payday lenders is
now under way, and firms that do not meet its exacting threshold
conditions will not be allowed to continue in the market. FCA
regulation is already having a dramatic impact on the payday market,
with the volume of payday loans falling by 35% in the first six months
of the FCA’s regime. Those data are from before the cost cap
took effect in
January.
The
Government are committed to preventing gaming of the FCA’s
regulatory regime. The order would protect UK consumers by giving the
FCA powers to take action against credit firms that seek to abuse their
rights under the e-commerce directive by establishing themselves in
another European economic area member state but lending primarily into
the
UK.
Going
forward, the powers will enable the FCA to require credit firms to
comply with FCA rules—which for payday lenders include the price
cap—or to seek full authorisation to continue their activities.
This order therefore represents an important reinforcement of the FCA
regulatory regime, helping to protect UK consumers from unfair costs
and harmful practices across consumer credit
markets.
The
miscellaneous order to which I now turn addresses a number of technical
issues and supports the Government’s objective of consumer
credit regulation that strikes the right balance between proportionate
burdens on business and robust protections for consumers. The order
makes several provisions to minimise unnecessary regulatory burdens on
firms, including adjusting the working definition of a “domestic
premises supplier”. This definition is important because it
requires firms selling goods in a customer’s home to comply with
the higher regulatory standards in the FCA’s “full
permission” regime, thereby helping to protect consumers from
the pressure selling of goods or services on credit. The order ensures
that the definition of “domestic premises suppliers” is
drawn correctly and that firms providing goods or services in a home
where no attempt is made to sell other goods or services are not
regarded as domestic premises suppliers. So, for example, a stair-lift
supplier or carpet fitter who simply visits the customer’s home
to measure up before a contract is signed or a kitchen supplier who
delivers and installs an item after it has been ordered can benefit
from the lower cost and reduced regulatory burdens of the FCA’s
“limited permission”
regime.
The
order also makes a number of other technical adjustments to ensure
proportionate regulatory burdens. For example, it ensures that
solicitors, who are already subject to their own professional
regulatory regime, will not require FCA regulation when undertaking
credit
activities incidental to the firm’s professional services, such
as allowing a consumer to pay off an invoice over a longer period of
time.
So
I hope that I have reassured hon. Members that the orders further
support the Government’s aims of strong consumer protections in
the consumer credit market, in particular in the payday lending market,
and will also minimise unnecessary regulatory burdens on
businesses.
9.2
am
Cathy
Jamieson (Kilmarnock and Loudoun) (Lab/Co-op):
Thank you.
It is a pleasure to be here to consider these important orders. I will
refer to them in turn in the same way as the Minister has
done.
As the
Minister outlined, the electronic commerce order gives the Financial
Conduct Authority the power to take action against consumer credit
firms, including payday lenders, which do most of their business in the
UK but establish themselves in another state in the European economic
area with the intention of waiving FCA regulations through the
e-commerce directive. This order is important because the intention, as
the Minister said, is to prevent consumer credit firms from evading the
FCA’s new rules for payday lenders, including the 0.8% daily cap
on interest fees and the total cost cap of 100% of the value of the
initial loan, including the fees and charges. It is worth pointing out
that, while the Minister talked about the Government’s tough
action on payday lenders, I think even she would acknowledge that that
action followed a considerable amount of pressure not only from various
charities and other organisations representing people who have got into
difficulty with these loans but from Opposition parties and some
related high-profile campaigns.
We welcome
the measure; it is important to give additional protection to
consumers. As the Minister said, the regulations for payday lenders
changed in November 2014 and the FCA’s new regulations include
the caps already mentioned and the fixed default fees cap. At that
time, I welcomed the FCA’s action, but I wanted to ensure that
the changes would be regularly monitored to ensure their effectiveness.
The Minister has made some reference to that. We wanted to see a review
by the end of 2015, much earlier than recommended by the FCA. Will the
Minister comment on that? We also said that we wanted to see more done
to promote safer and more ethical forms of lending, including, for
example, through credit unions. We wished to see an extension of the
levy on payday lenders’ profits and to use that funding to
undertake some of that work for alternative credit providers. That has
been taken forward in the work that we have done on banking
reform.
So
while we have no issue with the measures that have been taken, I want
to place on record again our view that local authorities ought to have
powers to limit the spread of payday lending shops, which are all too
often too numerous on our high streets. That is something that we will
of course continue to pursue.
In relation
to the miscellaneous order, as the Minister has outlined, the FCA took
over the regulation of consumer credit from the Office of Fair Trading
on 1 April 2014, and consumer credit firms must now comply
with the rules set out in the consumer credit source book, which
applies to all firms that carry out
consumer credit-related activities and connected activities. The order
makes further amendments to the threshold conditions applied in
relation to relevant credit activity under the
legislation.
The
Minister has also made it clear that, when authority for consumer
credit was transferred from the OFT to the FCA, the regulation was
being moved between two very different organisations. There
was not a big change in the underlying legislation, but there was
a big change in terms of responsibility. That would lead, I
think understandably, to some difficulties with various consultations
about permissions to operate the general authorisation system and the
new fee structure. The FCA, as I said, operates in quite a different
way—it is perhaps more interventionist and proactive than the
OFT, which had a role that was much more akin to a licensing authority.
We are dealing with quite different cultures.
As the
Minister said, the order makes a number of changes to the thresholds,
the applicability and exemptions in respect of the rules and
regulations, for example, by extending the scope of the limited
permissions regime to domestic premises suppliers; making changes in
relation to exemptions for solicitors or other qualified legal
practitioners; amending the definitions of payment; and, very
importantly, carrying forward the existing anti-abuse provisions of the
Consumer Credit Act in relation to the business lending exemptions or
high net worth exemptions, to avoid them setting an artificially high
credit limit in running account agreements.
Does the
Minister know of any particular instances that have been uncovered in
relation to the issues that the order is intended to address—has
it been designed to address very specific cases or to try to anticipate
some of the problems that people have identified as those that are
likely to emerge? Indeed, is the Minister satisfied with the way in
which the FAC has performed as the regulator since it took over the
responsibilities from the OFT, and does she have in mind any further
changes to that
regime?
9.8
am
Jim
Shannon (Strangford) (DUP):
It is a pleasure to serve
under your chairmanship, Mr Sanders. I want to ask the Minister a
couple of questions in relation to the legislation that we are
concerned with today and the Financial Services and Markets Act in
particular. I understand from the information we have that direct
contact has been made with the devolved
Administrations —the Northern Ireland Assembly in
particular, and I know that discussions have taken place with the
Scottish Parliament and Welsh
Assembly.
I
know that the Department of Enterprise, Trade and Investment expressed
some concern—if that is the right word. There is a broad welcome
for this—I make that quite clear. We welcome the changes, but I
understand that the Department and its Minister, Arlene Foster, brought
the attention of the Minister to legal practitioners and the issue of
exemptions. I understand that amendments have been made to address
those issues in the process, but will the Minister confirm that the
concerns about legal practitioners and the regulatory issues
and arrangements for lawyers and solicitors are recorded for
Hansard?
9.10
am
Andrea
Leadsom:
I am grateful to the hon. Members for Kilmarnock
and Loudoun (Cathy Jamieson) and for Strangford for their remarks.
Certainly, the hon. Lady is quite right that there was a huge concerted
effort from the voluntary sector and many people right across the
country who support those in financial need, as well as from hon.
Members across the House, to promote the idea of a payday loans cap. I
am delighted that this Government have taken firm action on this, and I
congratulate all those who campaigned for so long. It is a very
important
measure.
The
hon. Member for Kilmarnock and Loudoun asked whether the cap should be
reviewed sooner. She will appreciate that it is right for the FCA to
take on responsibility for the regulation of this sector, and for it to
decide exactly what the cap is and how it should be monitored. The FCA
has decided to review the cap in 2017, which the Government are happy
with. We think that that gives some certainty, but at the same time it
is a reasonably quick review to make sure that the cap is working and
test its
consequences.
The
hon. Lady also asked whether the orders were in anticipation of
problems or a reaction to them. I can tell her that we have not seen
any specific problems to date. I put some examples of what could happen
in my opening remarks to explain the sort of issue that the measures
could resolve. With the FCA rules and the e-commerce directive, a
credit company could be deliberately set up in an EEA country in order
to lend to the UK and get round the FCA rules on the cap or other
regulations. The orders could put a stop to that. I am sure that we can
all envisage that happening, although it has not necessarily happened
as yet. Likewise on the miscellaneous order, the intention is to ensure
that we do not unnecessarily burden companies with the requirements of
a full FCA regulatory environment if all they are doing is, for
example, measuring up for a carpet or a stair lift. The aim is really
just to be proportionate. These are sensible measures, but they are not
really a reaction to an enormous problem, so they are
anticipatory.
The
hon. Lady also asked whether further FCA regulations were expected. The
FCA keeps that under review, and it has flexible powers to enable it to
react to changes that credit companies might make to get
round
the regulations. The FCA has the powers to react to that and we
anticipate that it would do so, and certainly that it would keep that
very much under
review.
The
hon. Lady also asked about a payday loan levy to support credit unions.
The Government felt very much that tighter regulation was the best
response to the payday lending market but, as the hon. Lady will know,
the Government have done a great deal to support the credit union
movement, including raising the maximum monthly interest rate that
credit unions can charge to ensure that they do not make a loss on
short-term credit loans. Of course, we also have the credit union
expansion plan. The Department for Work and Pensions has invested
£38 million in enabling credit unions to build a better platform
from which to expand quite rapidly. We have set ourselves some
challenging targets to increase the membership of credit unions, which
I am very keen on, as I know the hon. Lady
is.
The
hon. Member for Strangford asked whether amendments were made following
contact with the devolved nations. I can tell him that we have taken
account of all concerns in the drafting of the exemptions for members
of the legal profession in the miscellaneous provisions order. I cannot
tell him specifically that we have changed this word or that word as a
result of representations from Northern Ireland, but we have certainly
taken into account all submissions from other regulatory bodies,
including those in Northern
Ireland.
I
am grateful to my hon. colleagues for their contributions, and I
express my thanks again to stakeholders who have engaged with us on
these instruments and the development of the wider regulatory regime.
These statutory instruments support the framework of a regulatory
regime which will deliver the Government’s vision for a
sustainable and competitive credit market. I ask the Committee to join
me in supporting these statutory instruments today. Thank
you.
Draft
Financial Services and Markets Act 2000 (Miscellaneous Provisions)
Order
2015
That
the Committee has considered the Draft Financial Services and Markets
Act 2000 (Miscellaneous Provisions) Order 2015.—(Andrea
Leadsom.)
9.15
am
The Committee consisted of the following Members:
† Barwell, Gavin (Lord Commissioner of Her Majesty's Treasury)
† Binley, Mr Brian (Northampton South) (Con)
† Birtwistle, Gordon (Burnley) (LD)
Bradshaw, Mr Ben (Exeter) (Lab)
† Burns, Conor (Bournemouth West) (Con)
† Burrowes, Mr David (Enfield, Southgate) (Con)
† Dakin, Nic (Scunthorpe) (Lab)
James, Mrs Siân C. (Swansea East) (Lab)
† Jamieson, Cathy (Kilmarnock and Loudoun) (Lab/Co-op)
† Johnson, Gareth (Dartford) (Con)
† Leadsom, Andrea (Economic Secretary to the Treasury)
† McInnes, Liz (Heywood and Middleton) (Lab)
† Raab, Mr Dominic (Esher and Walton) (Con)
† Shannon, Jim (Strangford) (DUP)
Sheerman, Mr Barry (Huddersfield) (Lab/Co-op)
† Skinner, Mr Dennis (Bolsover) (Lab)
† Uppal, Paul (Wolverhampton South West) (Con)
Kate Emms, Committee Clerk
† attended the Committee
Fifth Delegated Legislation Committee
Tuesday 17 March 2015
[Mr Adrian Sanders in the Chair]
Draft Electronic Commerce Directive (Financial Services and Markets) (Amendment) Order 2015
The Chair: It may be helpful if I briefly outline the procedure. In a moment, I will ask if the Committee is content to debate the two instruments together. If there is no objection, the Committee will have a single debate of no longer than an hour and a half covering both instruments. If there is an objection, the instruments will be debated in turn for no longer than an hour and a half each. If it is the Committee’s wish, I will call the Minister to move the first motion and speak to both instruments. At the end of the debate, I will put the question on the first motion and then ask the Minister to move the second motion formally.
8.55 am
The Economic Secretary to the Treasury (Andrea Leadsom): I beg to move,
That the Committee has considered the draft Electronic Commerce Directive (Financial Services and Markets) (Amendment) Order 2015.
The Chair: With this it will be convenient to consider the draft Financial Services and Markets Act 2000 (Miscellaneous Provisions) Order 2015.
Andrea Leadsom: With permission, Mr Sanders, I will refer to the orders as the e-commerce order and the miscellaneous order. I am pleased to introduce these draft statutory instruments to the Committee.
The UK consumer credit market of around £160 billion helps households and families to smooth the peaks and troughs in their income and outgoings. As such, the Government believe that a well-functioning consumer credit market is crucial to individuals, the economy and to wider society. To support that objective, the Government have profoundly reformed consumer credit regulation, transferring responsibility from the Office of Fair Trading to the Financial Conduct Authority on 1 April 2014.
The FCA is far better resourced and has far stronger powers to ensure that consumers are protected from sharp practice in the sector. It has also been equipped with flexible rule-making powers to allow it to keep pace with developments and innovations in the market. The FCA regime is already having a substantial positive impact and is helping to deliver the Government’s vision for an effective and sustainable consumer credit market that is able to meet consumers’ needs. That raising of standards across the consumer credit market will continue as the FCA assesses firms’ fitness to trade in its authorisation assessments. That process has already begun for industries regarded as the riskiest, including debt management and payday lending. The instruments help to support the effectiveness of the FCA’s regulatory regime.
The e-commerce order gives the FCA powers to take action against credit firms, including payday lenders, that seek to abuse their rights under the e-commerce directive to evade FCA rules. As Members will be aware, the Government have taken tough action dramatically to improve protections for consumers in the payday lending market. As well as transferring regulatory responsibility to the FCA’s robust new regime, the Government have legislated to require the FCA to introduce a cap on the cost of payday loans. Last year, the FCA introduced a package of new rules for payday lenders, including limits on roll-overs and tougher requirements for affordability assessments.
The FCA has formidable enforcement powers to take action where wrongdoing is found. The FCA’s authorisation process for payday lenders is now under way, and firms that do not meet its exacting threshold conditions will not be allowed to continue in the market. FCA regulation is already having a dramatic impact on the payday market, with the volume of payday loans falling by 35% in the first six months of the FCA’s regime. Those data are from before the cost cap took effect in January.
The Government are committed to preventing gaming of the FCA’s regulatory regime. The order would protect UK consumers by giving the FCA powers to take action against credit firms that seek to abuse their rights under the e-commerce directive by establishing themselves in another European economic area member state but lending primarily into the UK.
Going forward, the powers will enable the FCA to require credit firms to comply with FCA rules—which for payday lenders include the price cap—or to seek full authorisation to continue their activities. This order therefore represents an important reinforcement of the FCA regulatory regime, helping to protect UK consumers from unfair costs and harmful practices across consumer credit markets.
The miscellaneous order to which I now turn addresses a number of technical issues and supports the Government’s objective of consumer credit regulation that strikes the right balance between proportionate burdens on business and robust protections for consumers. The order makes several provisions to minimise unnecessary regulatory burdens on firms, including adjusting the working definition of a “domestic premises supplier”. This definition is important because it requires firms selling goods in a customer’s home to comply with the higher regulatory standards in the FCA’s “full permission” regime, thereby helping to protect consumers from the pressure selling of goods or services on credit. The order ensures that the definition of “domestic premises suppliers” is drawn correctly and that firms providing goods or services in a home where no attempt is made to sell other goods or services are not regarded as domestic premises suppliers. So, for example, a stair-lift supplier or carpet fitter who simply visits the customer’s home to measure up before a contract is signed or a kitchen supplier who delivers and installs an item after it has been ordered can benefit from the lower cost and reduced regulatory burdens of the FCA’s “limited permission” regime.
The order also makes a number of other technical adjustments to ensure proportionate regulatory burdens. For example, it ensures that solicitors, who are already subject to their own professional regulatory regime, will not require FCA regulation when undertaking credit
activities incidental to the firm’s professional services, such as allowing a consumer to pay off an invoice over a longer period of time.So I hope that I have reassured hon. Members that the orders further support the Government’s aims of strong consumer protections in the consumer credit market, in particular in the payday lending market, and will also minimise unnecessary regulatory burdens on businesses.
9.2 am
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): Thank you. It is a pleasure to be here to consider these important orders. I will refer to them in turn in the same way as the Minister has done.
As the Minister outlined, the electronic commerce order gives the Financial Conduct Authority the power to take action against consumer credit firms, including payday lenders, which do most of their business in the UK but establish themselves in another state in the European economic area with the intention of waiving FCA regulations through the e-commerce directive. This order is important because the intention, as the Minister said, is to prevent consumer credit firms from evading the FCA’s new rules for payday lenders, including the 0.8% daily cap on interest fees and the total cost cap of 100% of the value of the initial loan, including the fees and charges. It is worth pointing out that, while the Minister talked about the Government’s tough action on payday lenders, I think even she would acknowledge that that action followed a considerable amount of pressure not only from various charities and other organisations representing people who have got into difficulty with these loans but from Opposition parties and some related high-profile campaigns.
We welcome the measure; it is important to give additional protection to consumers. As the Minister said, the regulations for payday lenders changed in November 2014 and the FCA’s new regulations include the caps already mentioned and the fixed default fees cap. At that time, I welcomed the FCA’s action, but I wanted to ensure that the changes would be regularly monitored to ensure their effectiveness. The Minister has made some reference to that. We wanted to see a review by the end of 2015, much earlier than recommended by the FCA. Will the Minister comment on that? We also said that we wanted to see more done to promote safer and more ethical forms of lending, including, for example, through credit unions. We wished to see an extension of the levy on payday lenders’ profits and to use that funding to undertake some of that work for alternative credit providers. That has been taken forward in the work that we have done on banking reform.
So while we have no issue with the measures that have been taken, I want to place on record again our view that local authorities ought to have powers to limit the spread of payday lending shops, which are all too often too numerous on our high streets. That is something that we will of course continue to pursue.
In relation to the miscellaneous order, as the Minister has outlined, the FCA took over the regulation of consumer credit from the Office of Fair Trading on 1 April 2014, and consumer credit firms must now comply with the rules set out in the consumer credit source book, which applies to all firms that carry out
consumer credit-related activities and connected activities. The order makes further amendments to the threshold conditions applied in relation to relevant credit activity under the legislation.The Minister has also made it clear that, when authority for consumer credit was transferred from the OFT to the FCA, the regulation was being moved between two very different organisations. There was not a big change in the underlying legislation, but there was a big change in terms of responsibility. That would lead, I think understandably, to some difficulties with various consultations about permissions to operate the general authorisation system and the new fee structure. The FCA, as I said, operates in quite a different way—it is perhaps more interventionist and proactive than the OFT, which had a role that was much more akin to a licensing authority. We are dealing with quite different cultures.
As the Minister said, the order makes a number of changes to the thresholds, the applicability and exemptions in respect of the rules and regulations, for example, by extending the scope of the limited permissions regime to domestic premises suppliers; making changes in relation to exemptions for solicitors or other qualified legal practitioners; amending the definitions of payment; and, very importantly, carrying forward the existing anti-abuse provisions of the Consumer Credit Act in relation to the business lending exemptions or high net worth exemptions, to avoid them setting an artificially high credit limit in running account agreements.
Does the Minister know of any particular instances that have been uncovered in relation to the issues that the order is intended to address—has it been designed to address very specific cases or to try to anticipate some of the problems that people have identified as those that are likely to emerge? Indeed, is the Minister satisfied with the way in which the FAC has performed as the regulator since it took over the responsibilities from the OFT, and does she have in mind any further changes to that regime?
9.8 am
Jim Shannon (Strangford) (DUP): It is a pleasure to serve under your chairmanship, Mr Sanders. I want to ask the Minister a couple of questions in relation to the legislation that we are concerned with today and the Financial Services and Markets Act in particular. I understand from the information we have that direct contact has been made with the devolved Administrations —the Northern Ireland Assembly in particular, and I know that discussions have taken place with the Scottish Parliament and Welsh Assembly.
I know that the Department of Enterprise, Trade and Investment expressed some concern—if that is the right word. There is a broad welcome for this—I make that quite clear. We welcome the changes, but I understand that the Department and its Minister, Arlene Foster, brought the attention of the Minister to legal practitioners and the issue of exemptions. I understand that amendments have been made to address those issues in the process, but will the Minister confirm that the concerns about legal practitioners and the regulatory issues and arrangements for lawyers and solicitors are recorded for Hansard?
9.10 am
Andrea Leadsom: I am grateful to the hon. Members for Kilmarnock and Loudoun (Cathy Jamieson) and for Strangford for their remarks. Certainly, the hon. Lady is quite right that there was a huge concerted effort from the voluntary sector and many people right across the country who support those in financial need, as well as from hon. Members across the House, to promote the idea of a payday loans cap. I am delighted that this Government have taken firm action on this, and I congratulate all those who campaigned for so long. It is a very important measure.
The hon. Member for Kilmarnock and Loudoun asked whether the cap should be reviewed sooner. She will appreciate that it is right for the FCA to take on responsibility for the regulation of this sector, and for it to decide exactly what the cap is and how it should be monitored. The FCA has decided to review the cap in 2017, which the Government are happy with. We think that that gives some certainty, but at the same time it is a reasonably quick review to make sure that the cap is working and test its consequences.
The hon. Lady also asked whether the orders were in anticipation of problems or a reaction to them. I can tell her that we have not seen any specific problems to date. I put some examples of what could happen in my opening remarks to explain the sort of issue that the measures could resolve. With the FCA rules and the e-commerce directive, a credit company could be deliberately set up in an EEA country in order to lend to the UK and get round the FCA rules on the cap or other regulations. The orders could put a stop to that. I am sure that we can all envisage that happening, although it has not necessarily happened as yet. Likewise on the miscellaneous order, the intention is to ensure that we do not unnecessarily burden companies with the requirements of a full FCA regulatory environment if all they are doing is, for example, measuring up for a carpet or a stair lift. The aim is really just to be proportionate. These are sensible measures, but they are not really a reaction to an enormous problem, so they are anticipatory.
The hon. Lady also asked whether further FCA regulations were expected. The FCA keeps that under review, and it has flexible powers to enable it to react to changes that credit companies might make to get round
the regulations. The FCA has the powers to react to that and we anticipate that it would do so, and certainly that it would keep that very much under review.The hon. Lady also asked about a payday loan levy to support credit unions. The Government felt very much that tighter regulation was the best response to the payday lending market but, as the hon. Lady will know, the Government have done a great deal to support the credit union movement, including raising the maximum monthly interest rate that credit unions can charge to ensure that they do not make a loss on short-term credit loans. Of course, we also have the credit union expansion plan. The Department for Work and Pensions has invested £38 million in enabling credit unions to build a better platform from which to expand quite rapidly. We have set ourselves some challenging targets to increase the membership of credit unions, which I am very keen on, as I know the hon. Lady is.
The hon. Member for Strangford asked whether amendments were made following contact with the devolved nations. I can tell him that we have taken account of all concerns in the drafting of the exemptions for members of the legal profession in the miscellaneous provisions order. I cannot tell him specifically that we have changed this word or that word as a result of representations from Northern Ireland, but we have certainly taken into account all submissions from other regulatory bodies, including those in Northern Ireland.
I am grateful to my hon. colleagues for their contributions, and I express my thanks again to stakeholders who have engaged with us on these instruments and the development of the wider regulatory regime. These statutory instruments support the framework of a regulatory regime which will deliver the Government’s vision for a sustainable and competitive credit market. I ask the Committee to join me in supporting these statutory instruments today. Thank you.
Draft Financial Services and Markets Act 2000 (Miscellaneous Provisions) Order 2015
That the Committee has considered the Draft Financial Services and Markets Act 2000 (Miscellaneous Provisions) Order 2015.—(Andrea Leadsom.)