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Lord Faulkner of Worcester: I rise to speak in support of the amendments. Indeed, the noble Lord, Lord Sharman, has pre-empted me by quoting from the letter sent by Barbara Saunders, which I received only today along with the annual report of Financial Services Consumer Panel. The survey to which the noble Lord referred and from which he quoted is very telling. I was struck by the panel's strong plea about the Bill's caveat emptor provisions. Early on in its report the panel fairly makes the point that the inclusion of the consumer panel as a statutory requirement was inserted at the instigation of the Joint Committee, chaired by the noble Lord, Lord Burns.

The amendment of the consumer protection objective also tilts the balance a little further in the consumer's direction as it acknowledges the consumer's need for advice and accurate information. The panel states:

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    responsibility, an ambiguity that leaves the door open to mischievous legal challenges to the FSA's consumer protection activities".

That is right. The degree of ignorance that there is about financial products and the degree of mistrust that exists, which I suspect will not have been lessened by the publication of Mr Cruickshank's report today, and the fact that only 6 per cent of the people surveyed--this is the part of the survey which the noble Lord, Lord Sharman, did not quote but it is also important--could name the FSA as the official watchdog, show that the balance is still not quite right.

I hope very much that the Government will take on board the comments made by my noble friends Lord Borrie and Lady Turner in considering whether the Bill can be strengthened in favour of the consumer in this very modest way.

Lord Donaldson of Lymington: Perhaps I may suggest that the two amendments should be looked at in a slightly different light. As far as concerns the amendment of the noble Lord, Lord Borrie, it is a pure question of construction. Construction of an Act of Parliament must always have regard to its context. I find it difficult to believe that a court approaching subsection (2)(d) of Clause 5 would construe it as meaning other than "reasonable" responsibility. That is no reason for not putting in the word. However, we have now taken 22 minutes on this amendment so I suppose there must be a degree of doubt. Perhaps the Minister will tell me and the Committee whether what the Government really intend is that paragraph (d) should be read as meaning that the general principle is that consumers should take responsibility for their decisions even in circumstances in which it is quite unreasonable to expect them to do so.

I cannot believe that the Government intend that in the light of paragraph (c), which draws attention to,

    "the needs that consumers may have for advice and accurate information".

That is why I lay stress on the context. As far as concerns the amendment of the noble Baroness, Lady Turner, I would respectfully suggest that, while it may be highly admirable and desirable in principle, the actual wording needs to be looked at rather more carefully. I am troubled by the words "as far as possible". It certainly would be possible to undertake an enormous number of activities in order to ensure that a proposed product was suitable for the consumer, but it would be wholly unreasonable to expect it to be done. I suggest that such words as "as far as is reasonably practicable" or "in all the circumstances" should be inserted and that the amendment as currently drafted should not be accepted.

Lord Blackwell: Despite the thoroughly reasonable arguments that have been put forward for the amendments, I would be worried about either reaching the statute book. I say that because the cost of compliance and the cost of providing information and advice on many of these products have been so great as to make it uneconomic to sell them to the consumers

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who need them. There is no regulation that does not impose costs and, ultimately, costs on consumers. The danger of the amendments is that they would build in another degree of caution and another degree of prejudice which would require more compliance costs around the sale of products, which again would make them uneconomic in major parts of the market.

We should bear in mind the development of some of the new channels and the Internet selling of these products which will, in an ideal world, enable them to be sold much more effectively with adequate information. In many cases there will be tools which people can use to reach better decisions than may have been possible in the past without the provider having to be involved in any face-to-face discussion or fact finding with the consumer. Building anything into the Bill that provides a barrier to such cost-effective channels developing in the future is likely to work against the interests of consumers. Paragraph (c) of subsection (2), which refers to,

    "the needs that consumers may have for advice and accurate information",

must be taken into account. To my mind, that says it all. The caveat emptor provision which follows is then a healthy rejoinder which ensures that we do not go too far overboard in the balance to which many Members of the Committee have referred.

Lord Alexander of Weedon: Before my noble friend sits down, I want to understand what he is saying with regard to the amendment of the noble Baroness, Lady Turner. I understand his point that sales may be effected on the Internet. However, does he cavil with the fact that even on the Internet the seller should have a responsibility for ensuring that, as far as is reasonably practicable, the product should be suitable for the consumer?

Lord Blackwell: I am grateful for that question. The wording as it stands suggests to me that the seller has some obligation to understand the particular circumstances of the consumer and to ensure that the product is tailored to that consumer whereas the circumstances I envisage are where the seller may ultimately know nothing about the consumer. He may provide tools that the consumer can use but there is nothing in what he does that ensures that the product is suitable for that consumer. That is up to the consumer to determine, based on the information provided. I may have misunderstood the implications of the wording, but that is my fear about the wording as it stands.

Lord Monson: Perhaps I may suggest that the parallel which some Members of the Committee have tried to draw between investing £100 in a microwave and £100 in a unit trust is an inaccurate one. The only legal duty on the seller of a microwave is to ensure that the microwave itself functions properly at the time of sale, that it is properly insulated, and so on. The seller does not have to ask the purchaser whether he or she has a 13 amp socket fitted in his or her kitchen or

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whether his or her baking dishes fit into the microwave. But that is what in essence the seller of the unit trust would have to do if the second of the amendments were to be accepted.

Lord Walker of Worcester: I wish to express concern about the amendment proposed by the noble Lord, Lord Borrie. I hesitate to do so because we are neighbours in the same village in Worcestershire and divisiveness in one small village might cause concern. There is a difficulty when a word like "reasonable" is introduced. No noble Lord who has spoken in favour of it has defined what "reasonable" means. Those who would be pleased by the insertion of the amendment are the lawyers. The amendment would give enormous scope for legal disagreement about what was reasonable and not reasonable. Perhaps I may also say that from the Government's point of view it gives enormous scope for further amendments. If the Minister decides that he cannot reject the word "reasonable" because that would be unreasonable, we could insert the word "reasonable" into virtually every clause of the Bill and into every other piece of government legislation. The noble Lord would have the same problem.

Lord McIntosh of Haringey: Without anticipating the end of the debate on this amendment, I must inform the noble Lord, Lord Walker of Worcester, that later I shall move a number of amendments which seek to insert "reasonable" into the Bill.

5 p.m.

Lord Stewartby: I have some sympathy with the general purport of the amendments. While I note the observations of the noble and learned Lord, Lord Donaldson, about the wording of Amendment No. 60, I believe that the idea behind it has merit and hope that the Government will respond to it. Like my noble friend Lord Walker of Worcester, I am a little concerned about introducing "reasonable" into subsection (2)(d). I am not sure to what "reasonable" is related. Is it related to the care that the consumer takes or the behaviour of other parties in relation to the other sub-paragraphs in the subsection? I hope that the noble and learned Lord is correct in saying that it is not necessary. I believe that some confusion may be caused if the four plain statements that we now see must be looked at according to the actions of the various parties involved. I believe that there is merit in having a fairly plain statement of the matters to which the authority must have regard, provided the Government can assure the Committee that a degree of reasonableness is a thread that runs through all of them.

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