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Lord Tope: My Lords, the case for this amendment has been well made. Anxiety was expressed at earlier stages in the consideration of the Bill about the probable, certainly possible, effect on creditworthiness of students in their future life. This amendment addresses the point very well, particularly the proposal that it:

That is the nub of it. On that basis I am happy to support this amendment.

Baroness Farrington of Ribbleton: My Lords, there is one further point that I would like to put to the Minister for his consideration and that is the fact that at the end of the course the student may be caught between the devil and the deep blue sea. If the student is unable to ascertain why a loan has been refused, or if the reason has nothing to do with his or her personal creditworthiness but rather the course, as has been said, were the student to fail to declare that fact, unless he is legally exempt from having to do so, on some future

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occasion the student could be accused of fraud. For example, I think of someone joining the police force who takes a degree in a subject such as philosophy which the private sector loan arrangement authority decides is not relevant to a career. The student then applies to join the police. Such a student should be exempt from having to declare that a loan has been refused because there is no doubt that a lack of creditworthiness may influence the opportunity to get a job, let alone the ability to raise credit, for example, for a mortgage.

Lord Henley: My Lords, as the House will recall, I resisted a similar amendment at Committee stage, putting forward what I believed to be very good reasons. I am still not persuaded of the need for such an amendment.

It would have serious and, I believe, impractical implications beyond the student loans scheme. The proposal seeks to regulate not only the private lenders of student loans but private lenders of every kind. They would obviously be affected by the first part of the amendment; namely,

    "A refusal to an eligible student of a private sector student loan shall not be regarded as a refusal of credit".
In other words, it would have to be taken into account. The amendment seeks to allow a student who has been turned down for a loan from a private lender to withhold that information whenever he applies for a loan in future. I understand the concern put forward by various noble Lords about students who may be turned down, for whatever reason, for loans from private lenders that they may find it hard to get badly needed credit in future to buy a house, a car or whatever. However, financial institutions, whether lending money to students or house buyers, must be allowed commercial freedom in their decisions. We could not possibly require a bank or a building society, when considering an application for a mortgage, to make a special exemption for an applicant because he was refused a student loan by another institution.

Further, I do not believe that we should assume that future prospective lenders will be greatly interested in knowing that an applicant was refused a student loan in the past--perhaps many years in the past--and perhaps for a reason which, as noble Lords have said, is not a good one. They all have their own methods of assessing applications and their own different, commercial preferences. It is misleading to attribute too much weight to past information. I do not believe that the banks or building societies themselves are that short-sighted.

Further, I remind the House that the refusal of a student loan from a private sector institution is not the last word. There is always the absolute right, which I have mentioned on a number of occasions and which I repeat today, for that individual student to go to the Student Loans Company. Therefore, there will always be the availability of a loan for the student if he or she complies in all other ways. Therefore,

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I hope that the noble Lord will feel that his amendment is not necessary and will withdraw it on this occasion.

Lord Morris of Castle Morris: My Lords, we know full well that the private sector loan is not the position of last resort and that a student can always go to the SLC to get his or her loan. But that is surely not the point. Here we are talking not about that question but about what happens if a student is refused a loan. Does that count as credit and, if so, is that going to appear on every computer in the land and work against that student for the rest of his or her life? The proposed new clause would cost nothing. It would encourage students to apply and it would give them a bit more hope if they were applying to a bank, knowing that if they were turned down that would be an end of it and it would not be a permanent stain on their character, as it were.

We put this amendment forward in no destructive sense whatever; we genuinely believe that it will improve the Bill. But it appears that the Minister is still not persuaded. I find his arguments on this amendment even weaker than those on most of the matters that he has opposed so far. Nevertheless, much though I would welcome the opportunity to divide the House on this amendment, I am unlikely to command a vast amount of support. Therefore, at this time, and without any prejudice towards bringing the matter back at a later stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6 p.m.

Lord Morris of Castle Morris moved Amendment No. 6:

After Clause 1, insert the following new clause--

Independent assessor

(". The Secretary of State shall establish an independent assessor to investigate and adjudicate upon disputes between an eligible student and any person by whom private sector student loans are made.").

The noble Lord said: My Lords, the purpose of this amendment is to extend the power of an independent assessor to the private loans company which is now proposed. In Schedule 2(3)(5), the Education (Student Loans) Act 1990 provided for an independent person, the assessor, to investigate and report on disputes between borrowers or intending borrowers and the body making the loans. Only complaints which are not resolved by the Students Loans Company or which are not replied to within three months can be referred to the assessor.

The Bill as it stands will not, as far as I can see, extend that provision to the new private loans scheme. There will be no independent mechanism for resolving disputes in the new scheme. That may well deter students from applying and it gives the lender what we consider to be an unnecessary power. The amendment would therefore work to the benefit of the Government because it would not deter students from at least attempting to get a loan from a bank or whatever body they are dealing with.

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It is important that there should be an independent mechanism for dealing with disputes that cannot be resolved through the usual complaints procedures, because students may very well be in their final year at school when they have to go through the process of starting negotiations about a loan. It means that young persons of the age of 17 or thereabouts will be involved in negotiating what for them will probably be the first step of their financial lives and to say to them, "caveat emptor" seems to us to be rather more harsh than is necessary.

The Bill would be improved by the appointment of an independent assessor to give aid and comfort in such situations. The role of the assessor will be particularly important in the new private scheme in disputes between intending borrowers and lenders. Students who, for one reason or another, are refused loans by private sector lenders will benefit from an independent mechanism for complaint if they feel that they have been unfairly treated. At Report stage in another place, Mr. Stephen Byers argued that although there is a banking ombudsman, his terms of reference prevent him being involved in commenting on a bank's commercial judgment about lending. We have taken on board what the Minister said at previous stages about what the ombudsman can and cannot do, but I think that it is still true to say that he cannot comment on a bank's commercial judgment when lending. We feel that someone should have that power. Surely the lack of such a power disables the ombudsman and seriously weakens his powers.

It is true that the number of complaints not resolved by the Students Loans Company and referred to the assessor has been relatively small. In 1993 a customer survey commissioned by the Student Loans Company found that less than 5 per cent. were aware of the company's complaints procedure. In response to those findings the company took steps to publicise its complaints procedure in its customer service policy and annual report.

However, there has come into my possession--I found it on my desk; I do not know how it got there but I do not think that the Minister kindly placed it on my desk--the 13th report of the Committee of Public Accounts, entitled The Operations of the Student Loans Company Ltd. Browsing quietly through it, I find these words in subsection (vii) of paragraph 4 on the main conclusions and recommendations:

    "We are surprised that up to the end of the 1994/95 academic year, only eight complaints had been referred to the independent Assessor, despite the widespread difficulties experienced by students. We note that a customer survey has suggested that there is only a limited awareness by borrowers of the Company's complaints procedure. We recommend that efforts should continue to publicise the complaints procedure more widely".
Surely students opting for the new private scheme--if it ever comes into being and if there ever are any--should receive the same protection as already exists for students and graduates who have loans from the public sector scheme. I beg to move.

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