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( ) Notwithstanding anything in subsections (1) and (2), a bank or building society must use its knowledge of its accounts, its account holders and any other relevant matters in determining whether an account is dormant.
The noble Baroness said: My Lords, Clause 10 contains some technical rules on what is dormant. Subsection (1) defines what is dormant and subsection (2) defines what is not. In Grand Committee we probed the definitions with many examples of real-life situations where the technical rules may have been met. For instance, we raised the case of an account that would have been classified as dormant within the terms of Clause 10 although in reality it was not dormant. This includes cases where the customer has told the bank not to treat the account as dormant or where the customer does not want communications from the bank. If the noble Lord, Lord Monson, had been in his place, he would have explained that in the context of Amendment No. 11A. We also talked about family disputes where agreement cannot be reached on how trustees or executives can access accounts, so that although those accounts apparently remain dormant, they are not dormant. Some accounts exist merely to pay interest to another person but the capital is left untouched. I went through many other examples in Committee. The Government said that the banks would not treat those accounts as dormant, but the Bill would allow them to do so.
As we are dealing with accounts that do not belong to the banks, it should not be for the banks to determine whether an account is dormant. We are concerned with the property rights of individuals who would be entitled to tell banks how they want to be treated; for example, if they never want their accounts to be treated as dormant within the context of the Bill. We have a fear that the banks will write computer programs to identify dormant accounts in accordance with Clause 10 or with other defined mechanical criteria. That is how computers work. This algorithm would be used to identify dormant accounts which
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The existence of the reclaim fund does not deny people access to their money, but people may not want to go through the procedure of making a formal reclaim and possibly getting involved with a repayment claim in respect of the reclaim fund. As I explained in Committee, the covenant of the reclaim fund could well be considerably weaker than the covenant of the bank with which the account was held. So there is a very good reason why individuals may not want their accounts to be transferred for repayment purposes to the reclaim fund.
This is a small amendment. It is designed to get thinking involved in the process of designating accounts as dormant and not allowing plain rules to drive the transfer of money into the reclaim fund. I beg to move.
Lord Monson: My Lords, as I was not aware that the noble Baroness, Lady Noakes, was not proposing to move Amendment No. 11, I was having a relaxed cup of coffee and missed my turn to move Amendment No. 11A. However, as Amendment No. 12 is in many ways an alternative to it, perhaps I may speak to them both.
Amendment No. 11A was based on the presumption that it is not unreasonable for an individual to decide to put few hundred or a few thousand pounds into a bank or building society for the proverbial rainy day, and to leave that sum wholly undisturbed for 15, 20 or even 25 years if such a day never arrives. If that is accepted, the account holder should not have to stay awake at night worrying whether his account might be declared dormant against his wishes, nor should he be put to any other form of inconvenience. However, as the Bill is drafted, the only other way in which he can be 100 per cent confident of not having to worry is by formally declaring that he does not want to receive any communication whatever from the bank or building society concerning the account. Who but the most extreme eccentric would in practice want to opt for such a course? I suppose that the only exception would be someone who does not want other members of his family to know that he has a large amount of money stashed away in an account. But such people cannot amount to more than one depositor in 1,000, at the outside.
I submit that most normal people would positively want to receive a statement at least once a year to verify that their account was still in existence and had not been misappropriated by some rogue trader. They would also want to know what interest had been earned and what bank charges, if any, had been deducted. Indeed, where interest-bearing accounts are concernedand most such accounts will earn interest, however littleI suspect that it would be illegal for the bank or building society to fail to send
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Amendment No. 11A, which cannot now be moved, would have ensured that such basic information is provided and that the account remains officially non-dormantofficially being the point. It may be that the noble Baronesss amendment will achieve the same objective in a more roundabout way, the only snag being that the ball would then be entirely in the court of the bank or building society. At least 99 per cent of them can be trusted to be conscientious about this matter, but a few might not be. However, we shall have to wait to hear what the Minister has to say about that.
Lord Bach: My Lords, we believe that Amendment No. 12 is unnecessary. It does not alter the position of account holders potentially affected by the scheme. Instead, the amendment mirrors how the scheme is intended to operate: that banks and building societies will transfer only genuinely dormant accounts to the scheme.
The Bills provisions set a clear minimum requirement that an account must meet for it to be eligible for transfer to the scheme. First, there must have been no customer-initiated transaction in the account for 15 years. The scheme is voluntary for financial institutions, and we believe that one of its key advantages is that banks and building societies will have the flexibility to refer to other forms of customer-initiated activity before deciding whether an account is truly dormant. That includes correspondence, e-mails, telephone calls and activity on other accounts. Institutions may differ in the approach that they take to recording such activity, but we fully expect banks and building societies not to transfer these accounts where they are aware that an account is active.
Noble Lords have occasionally in our debates seemed sceptical of banks and building societies intention to act on their knowledge of customer activity under the definition provided in the Bill. However, the scheme has been designed to give both banks and building societies the ability to act on whatever knowledge they may have about the account or the account holder. This will allow individual institutions to take a more sophisticated approach, suited to their particular capabilities, to identifying dormant accounts. This approach will be more sophisticated than would be permitted under similar international schemes which commonly focus only on customer-initiated transactions.
We are also clear that the scheme should draw on existing regulatory procedures in keeping with our attempt to maintain the schemes light-touch approach. With great respect, this amendment is out of step with those intentions and goes no further in protecting consumers. The Banking Code already refers to dormant accounts, and, in section 9.16, explains that if a customer has money in a dormant account, it will always belong to that account holder.
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On 8 November, the BBA made an announcement confirming that the banking industry itself is in the process of amending the Banking Code to reflect just this. The BBA and the Building Societies Association also have 10 core pledges underpinning their existing tracing schemes for dormant-account holders. These set out how banks and building societies, in addition to the BBA and the BSA, should treat dormant-account holders. The pledges will be updated to reflect our new scheme. They will continue to require a bank or building society to try to re-establish contact with a customer before making their account dormant; to inform customers about their policy and when an account may be deemed dormant; and to inform them about the process for reclaiming money in a transferred dormant account.
Should the customer seek repayment when the balance in an account is transferred to the scheme, they will be able to contact their bank or building society. It is envisaged that the process for these customers to reclaim what is their own money should be no different from the process to reclaim an account which an institution has deemed dormant for internal purposes but where the institution has not transferred the money to the scheme. The Bill gives affected account holders a right to repayment. The scheme has been designed so that banks and building societies will be able to refer to a range of consumer activities in deciding whether an account is dormant.
As the noble Lord, Lord Monson, spoke to his amendment I shall out of courtesy deal briefly with what he said. It is quite similar to what I said in response to the amendment of the noble Baroness, Lady Noakes. It is intended to base the scheme on genuinely dormant bank and building society accounts which have been forgotten or lost by the account holder. The noble Lords amendment would extend the exclusion from the scheme of no-mail accounts to accounts where the holder has instructed their bank or building society to send periodic only statements but no other mail.
Generally, no-mail accounts are those where, as the House will know, the account holder has requested that their bank does not contact them. If the bank or building society has not had a statement returned to them indicating that the account holder is no longer at that address, then it is possible that the account holder is still aware of their account. However, in some circumstances a bank may wish to clarify to clarify with the account holdernot only for the purposes of the scheme, but for its own operational purposeswhether the account holder is aware of the account. If the account is operating under strict no-mail conditions then it follows that the bank simply cannot contact the account holder to establish that. However, if the account is operating under more usual arrangements, the bank will be able to contact the account holder to establish whether the account is dormant or merely rarely used.
The voluntary nature of this scheme will allow banks and building societies the flexibility to refer to customer-initiated activities that may indicate that an account is, in fact, not dormant even if there have been no transactions on the account. If the institution understands the account holder to be aware of their accountfor example, by requesting periodic statementswe fully expect institutions to take note of the relevant circumstances and not transfer such accounts.
Ultimately, carving the accounts to which the noble Lord refers out of the scope of the Bill could remove a large amount of possible dormant account money that could go to good causes. This step is unnecessary because the schemes flexibility allows banks and building societies to make a judgment and to take a sophisticated approach to determining whether accounts are dormant. That is why, although we understand exactly the intention behind the two amendments, neither is necessary. If this were a compulsory scheme then there may well be a need for such provision in the Bill. However, because the scheme is voluntarya scheme which I think is supported by most noble Lords on all sides of the Houseneither amendment is necessary.
Baroness Noakes: My Lords, I apologise to the noble Lord, Lord Monson. I looked for him to tell him that I did not intend to move Amendment No.11 but he was not in his place and I did not know which place he was in. I hope his concerns are covered by my own amendment, as I said in my introductory remarks.
The Government said that they fully expect the banks to behave in a way that meets the concerns I have raised and that money would not be transferred. The Minister says that the Act is designed to give the banks the ability to act on their knowledge. However, our concern is that they must act on the knowledge they have or on any other information that is available to them.
The Minister also referred to the Banking Code, which is welcome and sets out some useful points. However, that is a voluntary code and not universal. Finally, he referred to this as a voluntary scheme. However, for the account holders it will become a compulsory scheme if the banks are allowed to define their own rules without reference to their knowledge of the account holders. I therefore wish to test the opinion of the House.
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