APPENDIX 3: SALE OF STUDENT LOANS BILL
Memorandum by the Department for Innovation, Universities
and Skills
Introduction
1. The Sale of Student Loans Bill enables a programme
of sales of the Government's rights and responsibilities relating
to income-contingent repayment student loans. It is expected to
raise £6 billion in receipts by the end of financial year
2008-09, and will represent a genuine transfer of risk away from
the public sector. The Government will retain the power to set
terms and conditions for all loans.
2. The Sale of Student Loans Bill does not include
any new regulation-making powers. It does, however, include two
clauses that make minor changes to existing powers in s. 22 Teaching
and Higher Education Act 1998 and which will affect the way in
which the Secretary of State for Innovation, Universities and
Skills can make regulations regarding student loans. The clauses
in question are Clause 4 (Loan regulations) and Clause 5 (Repayment).
Territorial Extent
3. The Bill extends to England and Wales only.
The Bill confers the right to conduct loan sales on the Welsh
Ministers. It does not devolve further powers or amend other delegated
legislation making powers held by Welsh Ministers.
Clause 4 (Loan Regulations)
4. Clause 4(2) permits the Secretary of State
to amend loan regulations so that borrowers repayments (other
than those made through employers) made through a third party
can be payable directly to the loan purchaser or his agent. This
provision allows the Student Loans Company (SLC) and others to
collect additional repayments from borrowers in a capacity as
the agent of the purchaser. This is required so that, for example,
borrowers of sold loans can make additional repayments to those
collected through the tax system.
5. Clause 4(3) allows regulations to provide
for purchasers to have the same rights as the Secretary of State
in terms of requiring borrowers to reimburse them for expenses
caused by a borrower's failure to make a payment that is due.
Without this provision, there would be no way of ensuring that
such monies would be payable to the purchaser.
6. Clause 4(4) and 4(5) enables the Government
to apply any future change in loan regulations to sold loans as
well as those which are still owned by the Government and includes
loans which are taken out before such changes take effect, where
the change would be retrospective. This is to ensure that all
borrowers can be treated equally, for example if the repayment
threshold (the level of annual income at which point borrowers
are required to start making repayments) were to be altered by
the Government.
Clause 5 (Repayment)
7. Clause 5(1) permits the amendment of regulations
so that repayments and any other money due from a borrower in
relation to a sold loan can be payable to the purchaser. This
provision is a central part of the Bill - without it, borrowers
could not be obliged to make repayments to loan purchasers. In
this case student loans would clearly not be a saleable asset.
8. At present Her Majesty's Revenues and Customs
(HMRC) collects the majority of repayments through the tax system
but the SLC also plays a role in collecting repayments from some
borrowers - for example, those who move overseas and those who
wish to make additional repayments. Clause 5(2) allows for the
amendment of regulations so that payment through the taxation
system or through an agent of the purchaser (presently the SLC)
can continue with respect to sold loans.
9. Although the provisions of clause 5(3) do
not, in fact, amend existing delegated legislation powers, they
will, for payments due in relation to sold loans, require references
to the Secretary of State in the loan regulations to be read as
references to the loan purchaser and require payment to be made
to the purchaser (note- unless alternative arrangement is made
in the transfer arrangements themselves- see clause 5(4).
Scrutiny
10. The wider regulations permitted by these
changes will be subject to the scrutiny applying to the existing
legislation under which they will be made. It is not proposed
that any additional, formal type of parliamentary scrutiny is
applied to any of the powers for regulatory reform outlined above.
The Government believes these amended powers are purely consequential
- their purpose is to grant loan purchasers the same rights with
regard to sold loans as the Secretary of State has with regard
to retained loans, and to ensure that all borrowers are treated
equally regardless of whether their loan is sold or not.
Department for Innovation, Universities and Skills
January 2008
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