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We have already had evidence of the work being done by the banks and building societies with regard to the scheme. I hope therefore that the noble Baroness, who tabled this as a probing amendment, will feel that she has a satisfactory enough answer to be able to withdraw it.
2.30 pm
Baroness Noakes: I did say that it was a probing amendment. I thank the noble Lord, Lord Newby, for his support. He hit the nail on the head in asking why, if the banks and building societies say that they are going to do this, we cannot have it in legislation. The Government did not want to place demands on the institutions, but that is approaching the issue from the wrong end. This is about protecting the interests of the individual account holders. As the banks and building societies say that writing to those holding accounts is something they would do routinely, it seems to me perfectly reasonable to say that that should form part of the definition.
The British Bankers’ Association and the Building Societies Association have said that they will do this, but, as the Minister said, it is entirely voluntary, as is compliance with the code. As far as I am aware, there are no penalties for non-compliance with the Banking Code, because it exists in the realm of voluntary activity.
The Minister said that writing would only aid fraudsters. That is a rather sweeping assertion because it makes certain assumptions about why people may not have responded to letters. I am not convinced that it is a sufficient answer, although clearly there is a risk to banks and building societies being required to do what they say they are going to do to ensure that account holders are informed about their account and the effect of the Act. People do not want to get into reclaim situations: they want to know that their accounts continue to exist. I do not regard the Minister’s response as satisfactory. However, as this and a number of other amendments are probing, I will withdraw them today and will consider whether, in the light of other answers I receive, the Bill overall is satisfactory in this regard. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Monson moved Amendment No. 37:
Clause 10, page 6, line 30, after “account” insert “, other than to post the holder regular yearly or half-yearly statements, if requested by the holder”
The noble Lord said: The purpose of the amendment is to provide an extra layer of protection for those individuals who chose to salt away a few hundred pounds in a bank or building society for a distant rainy day—a rainy day which may never come. It would appear that many, if not most, of the amendments to Clause 10 have the same purpose.
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As the Bill stands, an account can only remain non-dormant provided that the account holder notifies the bank or building society that he does not wish to be contacted by it for any reason in future. That seems to be a quite unreasonable restriction. Surely any normal or sensible individual would wish to check periodically that the account is still in existence and to know what bank charges, if any, have been levied and interest earned. The amendment is designed to allow for that.
However, it seems to me that government Amendment No. 42 might well achieve exactly the same purpose rather more neatly and comprehensively. If that is indeed the case, I shall happily withdraw the amendment. I beg to move.
Baroness Noakes: The noble Lord, Lord Monson, has raised an important point. A person may well instruct a bank not to communicate with him, or to send him only statements. Those of us on the receiving end of all kinds of unwanted communications from our banks and other financial institutions with which we have had dealings, trying to sell us all kinds of financial services which we do not want, would sympathise with that position.
The only question I have for the noble Lord, Lord Monson, is: why is the drafting confined to statements being on a six-monthly or yearly basis? Statements come out with all kinds of frequency, and to state that these should be sent six-monthly or yearly is perhaps a little too restrictive. Apart from that, we support the amendment.
Lord Davies of Oldham: Clause 10 sets out the minimum conditions that an account must meet to be regarded as dormant. No-mail accounts and fixed-term accounts which have not reached their maturity date are excluded from the definition. That is because the aim is to cover accounts that are genuinely dormant. It is difficult to know whether in those two instances customers have forgotten about their accounts or not.
Amendment No. 37 would exclude accounts where, on request, the only post the account holders received from their bank or building society were yearly or half-yearly statements. It would seem, therefore, that he is content for the bank or building society to contact account holders. If that is the case, unlike no-mail accounts, which are excluded, institutions would be able to use their usual processes to contact the account holder to establish dormancy. Therefore, the amendment is unnecessary.
The current definition excludes fixed-term accounts, not to be used on a regular basis, and no-mail accounts where it can be difficult for an institution to establish dormancy. But those two exclusions are self-evidently sensible. I do not think that we need to be excessively concerned about circumstances in which the customer has established an arrangement with the bank which, as far as the bank is concerned, is a continuing and live relationship, and within this framework it is straightforward for the institution to stay in contact with the account holder.
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Of course we could tighten things up by increasing the exclusions. However, with this Bill we are seeking to apply the lightest possible touch to a scheme which, I emphasise, is voluntary, and, at the same time, ensure that customers’ interests are safeguarded, which is the noble Lord’s concern. I therefore do not believe that his amendment is necessary, although I recognise the motives behind it.
Lord Monson: I am grateful to the noble Baroness, Lady Noakes, for her provisional support. For the reason I specified, half-yearly or yearly statements are sent, in my experience, because banks like to reduce their costs and do not like sending out monthly statements. I know of one semi-dormant charity account that I deal with where that takes place. I could not grasp the Minister’s argument, but it seems to me that the Bill as it stands is not satisfactory. However, it would appear that the Government’s Amendment No. 42 puts the ball in the court of the account holder, who must actually ask the bank to make the account dormant, otherwise it is not. If that is the case, and assuming Amendment No. 42 is passed, all will be well and good. It certainly gives the extra protection that we are looking for. For the time being, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Noakes moved Amendment No. 38:
“( ) the bank or building society in question is aware that the holder of the account is unable to access the account for any reason,”The noble Baroness said: Amendment No. 38 seeks to add a new paragraph after paragraph (a) of Clause 10(2). Subsection (2) defines the accounts which are treated as not dormant and my amendment would add that,
- “the bank or building society in question is aware that the holder of the account is unable to access the account for any reason”.
Clause 10 appears to contain no opportunity for banks to use their knowledge of account holders’ circumstances to prevent the attribution of dormancy. The way in which the clause is drafted contains reference to instructions or transactions but does not take account of any other knowledge.
For example, let us suppose that when Aung San Suu Kyi returned to Burma in 1988 she left some bank accounts in the UK. That would not be implausible because she did not intend to spend the rest of her life outside the UK, and certainly would not have predicted that she would have been a virtual prisoner for most of that time. If she had such bank accounts in her name, would the banks under this definition be able to treat them as dormant? I suspect that they could. If she was not able to instruct any transactions within the terms of subsection (1)—and I rather doubt she would have instructed the bank not to communicate within the terms of subsection (2)—technically there is the potential for dormancy to arise. But if the bank knew of her personal circumstances—either because its officials read the newspapers or her UK family told the bank—surely that would be enough to stop dormancy arising. I beg to move.
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Lord Newby: This is a sensible amendment. I have two comments. First, in the case of someone like Aung San Suu Kyi, if by any chance she found herself with a dormant account 30 years afterwards, she would still be able to access it under the legislation.
Secondly, the noble Baroness is suggesting that the banks should exercise their discretion. My experience is that the banks increasingly feel unable to exercise discretion and are bound by rigid rules for fear of litigation of various kinds. The obvious example is that as a result of the money-laundering regulations, even where you are a customer of the bank and the bank knows everything it can about your circumstances, if you wish to change accounts or add your signature to another account at the same bank, you have to go through the same procedure as if you were a complete stranger.
The way in which banks are now behaving goes against the grain. It is a pity because the amendment would provide a logical and common-sense approach. However, the world in which we live is moving away from logic and common sense to a rule-based approach in virtually every case.
Lord Davies of Oldham: I hear what the noble Lord, Lord Newby, says, but we are making strenuous efforts with this legislation to minimise the rules imposed by statute. That is what the Bill is all about. I am grateful to the noble Baroness, Lady Noakes, for giving a fascinating illustration of a potential bank account. On the blessed day when Aung San Suu Kyi becomes free, it would be a pretty dim bank that was not able to respond to her claims upon resources which she might have lodged in the United Kingdom.
Let us remember where we are starting from: these are the minimum bases for an account being dormant; the bank is involved in judgment on other matters. The noble Lord, Lord Newby, referred to the regulations on money laundering, which is an important consideration, but with dormant accounts the bank has other means at its disposal beyond just the minimum. It is quite clear from the Banking Codethat banks will err on the side of protecting the customer—that is their obligation—and the account holder still has the right to claim even when a transfer to the reclaim fund has occurred.
I hope I have been able to respond positively enough to this probing amendment to reassure the noble Baroness. At the root of this and other anxieties about how far we should go on definitions, the concept behind the Bill is not to impose the money-laundering regulatory definitions to which the noble Lord, Lord Newby, referred; this is an attempt to get the co-operation of the banking and building society institutions in a flexible scheme with the minimum amount of statutory constraint.
2.45 pm
Lord Hamilton of Epsom: It is not a point of substance, but the Minister said that it would be an insensitive and extraordinary bank that did not know about Aung San Suu Kyi. Personally, I find that I do not get written to by individuals—it is the computer
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Lord Davies of Oldham: I imagine that all noble Lords share that sentiment.
Baroness Noakes: I thank noble Lords who have spoken. I accept that there is always the possibility that reuniting can take place, but it is a fall-back and not the core activity. The amendments that I propose in this small group to Clause 10 try to ensure only that the definition is robust. As my noble friend Lord Hamilton said, computers are stupid and, as the noble Lord, Lord Newby, said, banks do not actually exercise their common sense. This is about ensuring that a series of technical rules do not result in a non-common-sense approach and a number of accounts being declared dormant, because that would mean that being imposed on an account holder was the requirement for reuniting. That would not necessarily be something that we should seek to do.
The Minister said that the banks would err on the side of protecting customers. I can say only that he is an extraordinarily optimistic man about how banks as commercial institutions acutely operate. I have tried in these amendments to ensure that the Bill protects the customer in those instances in which rules are insensitively applied, and the customer is not protected but required to go through unnecessary procedures such as reuniting.
Lord Davies of Oldham: I would not want to be accused of excessive naivety about how financial institutions work. We should recall the purpose of the transfer of funds. If the bank reaches a judgment that the account is dormant, the bank is not the beneficiary;—the funds go to the reclaim fund. I am not being excessively naive in this case.
Baroness Noakes: No, but the Minister did suggest that the banks would be out there exercising discretion to make this work properly. It is not evident from the experience of this side of the Committee that that would be the case and that the rules in Clause 10 would militate against that. We may well return to this theme, but for the time being I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Noakes moved Amendment No. 39:
( ) the bank or building society in question was under instructions from the holder of the account to pay any interest accruing on the account to—(i) a person other than the holder of the account, or(ii) another account whether or not in the name of the holder of the account.”The noble Baroness said: Staying with the theme of what constitutes a dormant account, I move Amendment No. 39, which would add a new paragraph to Clause 10(2). It probes an issue that has been raised with us by an individual. The amendment
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The bank account would simply have been left. No transactions or instructions would be made, with interest mandated to be paid somewhere else. That could be part of an arrangement to provide an income to someone other than the account holder. All kinds of circumstances where that might happen could arise.
Clause 10(1) refers to transactions,
The question arises whether the payment of interest to another account, in whatever name, or the payment to someone other than the account holder, constitutes a transaction in relation to the account within the terms of subsection (1). I suggest to the Minister that interest that does not touch the account might be calculated in relation to the account, but is not a transaction in relation to it, because the account was never intended to have transactions. It was just sitting there to provide an income stream for another person or another account. I hope that the Minister will explain how such accounts are treated under Clause 10. I beg to move.
Lord Newby: Perhaps I may ask the Minister a question that I should probably have raised under another amendment. The noble Baroness has raised an interesting point. Clause 10(2) states that,
- “an account is to be treated as not dormant if at any time ... the bank or building society in question was under instructions from the holder ... not to communicate with that person”.
If I have an account for which I am fed up with getting statements and say to the bank, “I don’t want you to talk to me about this again”, does that mean that the bank will then not communicate with me, and that the account will stay dormant until I communicate with the bank possibly 30 years down the line, or be deemed to be dormant on my demise?
Lord Davies of Oldham: The answer to the noble Lord is definitively yes. Instructions would have been given and the bank would therefore operate under them. Those instructions would obtain, until, for some reason which would have to be justifiable in terms of law, the bank was able to show that the claimant no longer had a claim on those assets. Others potentially would, and the bank would therefore not be able to put such resources into the reclaim fund.
I say in response to the more specific point raised by the noble Baroness that circumstances where the bank is under instruction to pay interest accrued on the account to another person or to another account are already covered by subsection (1)(b), as whenever interest is paid from one account to another account, that is a transaction on the instructions of the holder of the account. It is a live transaction, until it is countermanded by the person who has so instructed
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Baroness Noakes: I asked whether subsection (1) dealt with that. The account sits there; no transaction goes through it; interest is not transferred from it; it is calculated outside the account and goes to another account. The core account, therefore, is not touched; there is not a transaction that involves it. I raised the amendment to clarify whether that separate calculation and payment of interest were correctly described as a transaction in relation to the account when it had not been touched.
Lord Davies of Oldham: That is an interesting point. It is so interesting that I am lost in interest rather than able to provide an immediate reply. As I said, I have had it confirmed that if a transaction occurs in relation to the account, it must be because of an instruction given by the account holder. As long as such transactions are live, the account cannot become dormant. That is the best that I can do.
Baroness Noakes: I am grateful to the Minister. I will consider his response carefully and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Noakes moved Amendment No. 40:
( ) the bank or building society in question had been put on notice by any person who appeared to the bank or building society to have a relevant interest in the account that the account was not in fact dormant.”The noble Baroness said: Amendment No. 40 is also a probing amendment on the meaning of “dormant” in relation to Clause 10. The amendment deals with an issue raised with me by an individual and concerns an account that requires instructions to be given by joint holders of the account, but where one of the joint holders is either unable or unwilling to join the other account holder in giving instructions. Members of the Committee may think that that sounds fanciful, that if they reflect on the strange way in which families sometimes behave, they will see that it has a ring of truth. The joint account that was described to me is held in the name of two people who are related but who for deep and inscrutable family reasons do not communicate with each other. One of the family members absolutely refuses to discuss any transactions on the account and so the money sits there, as it has done for many years, accumulating interest, but being put to no other purpose.
Remedies to such situations can involve legal process, but access to the law can often be prohibitively costly, so the situation runs on with one of the account holders hoping that the other will relent or perhaps, through natural causes, cease to be a problem. My amendment would allow one of the account holders to write to the bank saying that he is a joint account holder, he cannot currently agree
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