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The amendment does not require the bank to settle any matter of law. The bank has to note that someone who may have a valid interest does not want the account to be treated as dormant, which would involve going through the dormant accounts regime and the complexities of reuniting it in due course. I cannot see that the current drafting of the Bill would help to avoid the designation of dormancy, so I hope that the Minister will look kindly on the amendment, which I reiterate was raised with us as a live example by an individual. I beg to move.
Lord Davies of Oldham: The noble Baroness is fertile in producing some interesting illustrations of how dormancy may not be defined in the Bill. This is another interesting illustration, which I will probably need to reflect on, as will my officials. However, she will recognise that banks are not totally unfamiliar with the complexities that can arise from joint accounts, some of which need multiple signatures. A submission by an individual who is a joint account holder may not as defined in the Bill protect the account from going into dormancy, but it is a relevant transaction. If an account holder writes to the bank, it is certainly a communication with the bank that falls outside the definition of dormancy for which we are searching, which is the bank having an understanding that there is no person with interest—I am using interest in the general sense—in the account at all.
I emphasise to the noble Baroness that I can see how complex things can become, but the claim upon the moneys in the account still obtains, even if the resources go to the reclaim fund. The individual who has been able to make no progress within a certain timeframe may be able to make progress later because of changed circumstances, and claims upon the reclaim fund can be entertained at any stage.
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I recognise the issue that the noble Baroness raised, but if we tried to cover every eventuality in the definition of dormancy—we have been fairly productive this afternoon, but I have not the slightest doubt that many other illustrations could be brought to our attention—the Bill would have very extensive categorisations about dormancy. We think that because dormancy merely relates to the transfer of resources, not the ending of entitlement, we can defend the definition in the Bill.
Baroness Noakes: The Minister said that the definition in Clause 10 would cover the situation, but I put to him that it would not because it would not have been a transaction carried out in relation to the account—the receiving of a communication by one of a pair who could give instructions would not be a transaction—and it would not be within subsection (2) because it would not be under instruction from the
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The Minister’s fall back is that they can get their money back in due course. I do not think that is an adequate answer because people do not want to see their moneys temporarily confiscated so that they have to go through the reclaim procedure for accounts that they know about. What is missing from the Bill is something that would go beyond this rule base because, as we explored earlier, it does not require the banks to take account of other knowledge, which could come in a number of different ways, that puts them on notice that the account is not regarded by the account holder, or somebody who could be the account holder, as dormant. What will happen is that computer programs will be written to sweep all these accounts into the reclaim fund. There will not be individual judgments on individual accounts; a series of algorithms will produce the answer. Individuals who have spoken to me are rather aggrieved that an algorithm could sweep an account that has not been touched for a number of years for the reasons that I explained into the reclaim fund. The current definition is flawed to the extent that it will allow an algorithm approach without requiring the bank to take account of knowledge of any other facts. I may well want to return to this issue at the next stage, unless the Minister wants to say anything else at this stage.
Lord Davies of Oldham: The definitions of dormancy are limited because they mean that a customer sees those resources going into the reclaim fund. They are minimalist definitions. The bank can follow its normal procedures for reaching a judgment on whether an account is dormant in the circumstances that the noble Baroness identified. She said that if the other person survived or relented on his obduracy in his obstruction of the account and sought to activate it, it might take some time to reclaim it from the fund. By definition, time has already elapsed, otherwise the abuse would not be as the noble Baroness defined it, with two account holders who cannot agree to activate an account at any stage. I take it that that is not meant to happen over a very short period of time but over a considerable period of time.
Secondly, I maintain again that the banks can take this matter into account if the other joint account holder makes a submission to the bank. I know that that does not fall within the law. We have not tried to construct the law with a precise, exclusive definition of dormancy because, if we sought to do so, we would have a Bill as long as some of our greatest pieces of legislation. The banks are intending to operate this scheme in a manner consistent with the Banking Code, under which they are used to having to exercise judgment on issues of flexibility. The noble Baroness gave the example of a joint account holder making a submission and illustrating why he could not get access to the account or affect it in any way, shape or form, although he had an interest in it, but it would be a very odd banking judgment if that was regarded as not being a declaration of activity.
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Baroness Noakes: I think that we will be returning to this topic on Report because the Minister consistently articulates the issue in terms of what banks do and I consistently try to articulate it in terms of the account holder and his right to have his account ring-fenced from the ambit of this legislation if he so chooses. On the whole, I do not believe that people would want their accounts to be swept into the reclaim fund, as that would push them into a reuniting situation. As we discussed during our previous day in Committee, the reclaim fund may well run out of money for various reasons and it will probably have a lower covenant value than the major commercial banks. Therefore, there is no reason why an account holder should be forced to have his money temporarily confiscated through this legislation, which is drafted from the perspective of the banks rather than that of account holders. As I said, we will return to this matter on Report but, for today, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Noakes moved Amendment No. 41:
( ) the bank or building society in question had at any time been instructed by the holder of the account not to treat the account as dormant.”The noble Baroness said: I move Amendment No. 41 not with any great hope of it being accepted but because it raises an issue that I think should be debated. The amendment adds another reason for an account not to be treated as dormant under Clause 10(2). It says that an account is not to be treated as dormant if,
- “the bank or building society in question had at any time been instructed by the holder of the account not to treat the account as dormant”.
We know that the scheme for dormant accounts set out in the Bill is voluntary in the sense that it is entirely open to the banks or building societies whether to take part. However, this voluntarism is confined to the banks and building societies, which do not own the dormant bank accounts—indeed, those accounts are the liabilities of the banks and not their assets. The assets—the money represented by the accounts—are owned by the account holders, but the Bill does not allow an account holder to say that he does not want his money to be swept into the reclaim fund for onward transmission to the Big Lottery Fund. It seems to me that it is a very basic property right for an account holder to say that he does not want his account to be part of this scheme.
Not all accounts will be in the names of UK citizens or even UK residents. Some will not share the Government’s enthusiasm for their pet social and environmental schemes of youth, financial exclusion or social investment. There will be others who simply will not like the idea that the banks can hand over their accounts to someone over whom they have no control or influence. I contend that it does not matter what motivates an individual to opt out of the dormant accounts scheme; he should not be deprived of his right to say what can be done with his money as a matter of principle.
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Of course, I do not intend the amendment to result in the banks changing their standard terms and conditions so that the small print has all customers opting out of the dormant account scheme, as that would plainly fly in the face of the agreement thrashed out between the Treasury and the banks and building societies. If the banks and building societies went down that route they would unwind the consensus on which this Bill is apparently built and would deserve whatever government action was decided to be taken in response. But I do not believe that, in practice, banks would seek to exploit an exemption of that nature, as provided for by my amendment. It is a principled amendment to assert the property rights of an account holder. I beg to move.
Lord Monson: The noble Baroness, Lady Noakes, is far too modest about this amendment, which is excellent. It has much the same purpose as Amendment No. 37, which I withdrew, but provides much more comprehensive protection to the account holder as well as being more neatly drafted. This amendment is much easier to comprehend for anyone studying the Act. It is particularly important that we should pursue this, because on closer reading government Amendment No. 42 does not provide the degree of protection that I had first imagined and I apologise for having eulogised so much an hour ago. I know that the noble Baroness says that this is a probing amendment, but I hope that at the next stage it will be a non-probing amendment to be pursued with the utmost vigour—unless, of course, the Minister sees fit to accept its obvious merits today and save us all a great deal of trouble.
Lord Newby: I assumed that this amendment states what would happen anyway. Going back to our earlier discussions on banks and building societies writing to people who have not been in touch with them for 15 years—someone gets the letter and they write back to the bank to say, “I just want to maintain the account”— presumably that is enough to stop the account being deemed to be dormant, which is what this amendment seeks to do. If that is the case, my only question would be whether this is not almost too obvious. Equally, I would welcome the Minister’s reply.
Lord Davies of Oldham: Well, I think I have been guilty of making things too obvious. Let me emphasise that I would have thought that the fact that the specification that this account was to be defined as non-dormant was something that the bank would take into account. We are indicating that in a number of other areas the bank is motivated by the scheme to seek to ensure that assets are reclaimed by the holders. If a bank receives a straightforward instruction that an account is not to be directed towards the dormant category and taken into the reclaim fund, it is obviously part of banking practice. If that action were taken after the account had been opened, I cannot think of anything that is likely to render the bank more liable to criticism than the straightforward instruction that, even in 15 years’ time or beyond, the account is to be defined as non-dormant. There has been an instruction to the bank.
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So I do not see a need to put this into legislation. I am sorry not to be helpful to the Committee. I was surprised at the eulogy of the Government by the noble Lord, Lord Monson, but it did not manage to survive more than an hour this afternoon. In fact, I have been counting the minutes of its endurance. I know that he will speak shortly and I will certainly do my best to reawaken his faith in the Government’s position when we reach Amendment No. 42. For now, I can reply only in the way that I have replied to other representations on the definition of dormancy; but regarding this amendment, nothing could be more explicit to the bank and we would expect the bank or building society to follow that explicit instruction.
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Baroness Noakes: The Government are making very encouraging noises about my amendment. I think the Minister said that it was obvious that this was what banks would do and that they would be liable to criticism if they did not do it, but my point is that that is not what the Bill says. The Bill sets out criteria for dormancy, which, as I have been trying to tease out in this series of amendments, have lost touch with some common-sense roots. For example, if a bank account holder says, “I don’t want to be part of this scheme”, he should not be. I am glad that the Minister agreed with that but it is not what the Bill says. That is the purpose of teasing out all these points in the amendments.
The Bill needs to be able to cover not only the slightly more advanced things set out in subsections (1) and (2) but also the basics, such as what would happen if an account holder did not want to take part. What would happen if an account holder or a joint account holder told the bank that they did not think that the account should be treated as dormant until issues relating to the validity of the joint account were sorted out? What would happen if someone was out of the country and could not issue instructions? All these common-sense aspects of dormancy are nowhere to be found in the Bill, and that is why I have been teasing out these points in the amendments.
I am sorry that the Minister has not seen fit simply to accept my common-sense amendment, as he was invited to do by the noble Lord, Lord Monson, whose support I greatly value, and I think that we will have to return to this whole aspect on Report. I had hoped that we would be able to dispense with many of these issues during Committee but clearly we cannot. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Noakes moved Amendment No. 41A:
( ) the bank was aware of the current address of the holder of the account.”The noble Baroness said: This amendment would add another sub-paragraph at the end of Clause 10(2). Its effect would be that an account should not be treated as dormant if the bank is aware of the current address of the account holder. This is one of the amendments suggested to us by the Law Society
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A bank may be aware of the current address of a customer because it has other accounts with that customer or because it has had some other correspondence with the customer. The whole point of the Bill is to enable accounts which are “lost” to be put to good use. However, an account can never be lost if the bank is aware of the current address, and it would not be right for some technical definition, such as we have been talking about, to override practical common sense, which is the theme that has been emerging so far this afternoon.
This is similar to Amendment No. 36, which I moved earlier, requiring banks or building societies to write to their customers alerting them to the consequences of the legislation. We know that not all addresses will be current and perhaps even a majority will not be current but, where an address is current and there is knowledge that it is current, that should be sufficient proof that the account is not dormant and it should not be transferred to the reclaim fund, with all the added complications for repayment that would ensue. I beg to move.
Lord Davies of Oldham: We have already cantered around this course several times and each of the jumps is becoming increasingly familiar. With this amendment, the noble Baroness again wants a fully inclusive definition of “dormancy” to be put in statute, imposing on the banks all the circumstances in which they will be obliged to recognise that an account is not dormant. However, this is a voluntary scheme. The banks and building societies have given pledges about how they intend it to operate and they have been clear about how they intend to treat dormant accounts. Not being able to contact an account holder can be an indication of dormancy. Being able to contact one indicates the exact opposite—it is clear that it is very unlikely that the account is dormant.
I understand that we are to return to these issues on Report. It looks as though we are involved in a clash of principles on how the Bill should look on this important issue. I regret that. The noble Baroness must find herself in a slightly strange position by being involved in an excessive degree of regulation with regard to a private scheme into which these institutions have entered voluntarily, for which they have a code and pledges of conduct that indicate how they intent to operate the scheme; but the noble Baroness wants it in statute.
At this stage, the Government are not convinced by those arguments, but no doubt we will return to them and we will have to wait and see what degree of success the noble Baroness has.
Baroness Noakes: The Minister almost makes the case for my amendments, but draws back at the end by saying that although I have made a good point, it cannot go into legislation. The Minister accuses me of excessive regulation, but that is entirely unjust. I have been trying to ensure that there are clear definitions
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We appear to have a clash of principle in our approach to the Bill and that will have to be played out when we can seek the opinion of the House, which I regret we cannot do this afternoon. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Davies of Oldham moved Amendment No. 42:
“( ) For the purposes of subsection (1) an account is to be treated as remaining open where it is closed otherwise than on the instructions of the holder of the account.”
The noble Lord said: We have been considering these issues for some time, but as this is a government amendment I need to put it in context. Clause 10 defines when an account will be regarded as dormant. Meeting that definition makes an account eligible for transfer to the scheme. An account will be regarded as dormant if it has been opened for 15 years without any customer-initiated transactions occurring during that time.
This technical amendment means that an account is treated as being in existence for the purposes of the scheme unless it has been closed on the instructions of the account holder. This does not change how the scheme is intended to operate and the amendment’s only purpose is to provide additional clarification. It clarifies that accounts and institutions may have closed for operational reasons, but where the money is still owed to the customer, they are eligible for inclusion in the scheme after 15 years if there have been no customer transactions. Institutions may close accounts under the account’s terms and conditions or through building society rules if the account holder has been inactive or if the institution no longer has the account holder’s current address. This is to protect the account from fraud. This technical amendment clarifies that such accounts are eligible for the scheme when they otherwise meet the definition of a dormant account specified in the Bill. I beg to move.
Lord Shutt of Greetland: I would like to speak to this amendment, because I referred to it earlier when I moved the first amendment of the day. The noble Baroness, Lady Noakes, mentioned “getting under the skin” of the customer and it is possible to get under the skin of the bank. I want to speak as if I am a trustee for the good causes, because that is another skin that we can get under. It is absolutely crucial that we get this clear at this stage. We keep talking about named accounts that look as though no one has touched them for a while. I am talking about balances that have not been touched for very many years and the bank or building society has already said, “They have gone; they have vanished; we will put the account in suspense”. If it is in suspense, then it is in
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