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Lord Tope: I support the amendment. The Minister said several times tonight and on previous occasions that he is keen to encourage choice. As I understand it, the objective of the scheme is to offer that choice to students. But we are asking, indeed the Government wish to encourage, students to move from a scheme where a loan is guaranteed through the Student Loans Company into a private sector scheme where there is no guarantee that a loan will be forthcoming. It is important that they are offered the security of knowing the reasons

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that they are refused a loan. As the noble Lord, Lord Morris of Castle Morris, said, the refusal of a loan can affect the student's creditworthiness for many years to come. We all know of and hear about stories and occasions where dreadful and appalling errors of fact are made, completely unknown to the person concerned. If the students have no knowledge of the reason that they have been refused a loan, they can suffer for that whenever they seek creditworthiness in the future.

For better or worse, some form of student loan, by whatever term and by whatever repayment method, will be a fact of student life. We have to seek a way of offering students at least the reassurance that if they have to embark on a private sector loan the refusal of that loan will not blight them for many years to come in their attempts to seek another loan.

When the Minister replies, I hope that he will be able to offer reassurance on a point which is of great concern to many students, and will be increasingly so. Without such a reassurance, the Bill will be even more flawed than it is already.

Lord Ponsonby of Shulbrede: The points have been made succinctly by the two previous speakers. Choice is available for the banks; it is not available for students. Students need money to exist. I believe that that puts them in a different category from other borrowers of money. The Government are requiring them to make this application to incur debt. The banks may refuse that application. That puts the student in a different category. For that reason, students should be better treated than other applicants. If they are informed as to why their application has been turned down, they can either put some misapprehensions right, or they will know the problem for future applications.

Amendment No. 7 also provides an imaginative way of meeting our concern. I shall be interested to hear the Minister's principled arguments as regards putting students in the same category as those who wish to borrow money for cars, houses or any other reason. Why should students be treated in the same way when undertaking such a vital task as getting themselves properly educated?

Lord Henley: I dare say that we shall reach Amendment No. 7 in due course. I had originally wanted to group the amendments but I believe that the party opposite wished to "ungroup" them.

The amendment highlights a philosophical difference between our approach and that of the Opposition. We believe quite simply in the benefits of private sector involvement and the freedom it must be given to deliver those benefits. I suspect that the Opposition are mistrustful of the private sector and want to regulate it into inertia.

To get the benefits of the private sector, you need to work with the grain of the private sector's approach. It would be quite wrong to impose particular rules on how private companies should deal with loan applications. They are lending and risking their own money. That is one of the points behind the Bill. They must be free to reject applications; and they must be free to decide what to tell

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such applicants. We would not dream of doing so where, for example, students are refused current accounts or graduates are refused mortgages.

I appreciate that we are talking about public money in the form of subsidy. But the money risked on a loan is largely the private lender's. If we are to involve commercial practices, we must trust them. We cannot trust them and over-regulate them at the same time.

I think that the concerns on this issue are simply disproportionate. I do not accept that private lenders will be falling over themselves to reject applications, or that they will be secretive about their decisions.

I believe that it will be a strongly competitive market. Private lenders will not commit themselves to student loans unless they are keen to be major lenders to students. They will be committed to securing a fair share of the market. They will not achieve that by being over-selective or secretive.

Those students who are rejected will have the ability to turn to competitors; and the Student Loans Company will still be there as a formidable competitor available to all. I believe, therefore, that it would be as unreasonable as it is unnecessary to put on private lenders the restriction that the amendment imposes.

The noble Lord, Lord Morris, also asked about the role of the banking and building societies' ombudsman who will be able to consider genuine complaints from student loan borrowers about the service that they receive from the private lenders. I thought that I had made the position clear at Second Reading but perhaps I did not in the time available. Contrary to the remarks made by Mr. Byers (a colleague of the noble Lord, Lord Morris of Castle Morris) during Report stage of the Bill in another place, the ombudsman will look into complaints about an institution's refusal to offer a loan provided that the complainant has a piece of evidence of substance, however small, that the institution acted unfairly or illegally in granting a loan. I am certainly confident that the ombudsman will offer a rigorous and effective safeguard.

As we are only on Amendment No. 5 at twenty to seven, I hope that the noble Lord will feel able to withdraw his amendment.

Lord Morris of Castle Morris: I am grateful to the Minister for that reply. He clarified the matter of the ombudsman. He did not make clear why a student should not be entitled to be given the reasons for the refusal of the loan under the Bill. However, at this hour of the night it is time that we got on. We shall return to the question of creditworthiness on Amendment No. 7. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Borrie moved Amendment No. 6:

Page 1, line 13, at end insert--
("( ) The Secretary of State shall require any person to whom subsidy is to be paid to maintain confidentiality in relation to any details provided by eligible students and, in particular, not to make available to any third party (other than the eligible student concerned or to the Secretary of State) without the applicant's permission any information on whether an application by an eligible student was accepted or rejected or the reasons for such acceptance or rejection."").

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The noble Lord said: In moving the amendment, I accept that when a student seeks a private sector loan, as when anyone seeks any type of loan, he or she must expect to answer questions about himself or herself and the financial circumstances. That is necessary not only for the lender's sake but for the applicant's sake, to ensure that he or she is not over-committed.

Confidentiality about the student should be maintained to a particularly high degree. It should apply not only to the information supplied by the student but also to the decisions that are made to deny a loan to the student applicant. As I understand it, the Data Protection Act 1984 already protects the confidentiality of the loan records of a student. If so, it would be helpful if the Minister would confirm that. It is important that lenders should not be able to pass on to others--particularly credit reference agencies--any information as to whether a student loan application has been rejected and the reasons for such a rejection, if any have been given.

I know what is the normal behaviour in the private sector and fully understand it. If I am asking for special treatment for students, it is because at the stage of life of a normal student one would not wish any stigma to attach to a refusal which would detract from--I use the same word as my noble friends when debating the last amendment--the creditworthiness of the student. I beg to move.

Lord Tope: There is not much more to say. As might be expected, the noble Lord, Lord Borrie, has put the case very well. This is another amendment concerned with the future of students, and it is important that it should be supported.

Lord Henley: I hope I can persuade the noble Lord, Lord Borrie, that his amendment is unnecessary. It may be helpful if I say a little about it. In seeking to regulate the flow of information from lenders of subsidised student loans to other parties the amendment assumes that other parties (in particular, I presume, other lenders) will have something to gain from knowing why a lender has rejected a student's application.

As mentioned earlier, private lenders will to some extent have their own selection policies and procedures. Just because a student has been rejected by one private lender, it does not follow that he will be rejected by all the rest. As the noble Lord will appreciate, such information can quickly go out of date anyway. I do not believe that a private lender will reject applications out of hand on the basis of old information about a student.

In any case, as the noble Lord is aware and as I mentioned, there is already significant protection. It is right that lenders should not be allowed to provide third parties with information for the purpose of soliciting goods or custom. The Student Loans Act 1990 prevents that and we intend to keep the provision. It will be applied to private sector lenders. In addition, there are specific safeguards in the Data Protection Act, mentioned by the noble Lord, Lord Borrie. It may be helpful if I set out what they are. They require that a financial institution be registered and that the

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registration includes details of what information it will hold, for what purpose it will be used, and to whom it could be passed.

The borrower has a right to know what information is held and to have any mistakes corrected. Borrowers also have the right of access to all personal computerised records on them held by a lender. Banks and building societies would have to follow those requirements in their dealings with student borrowers, as with other lenders. I do not believe that further safeguards are required. I hope that on this occasion the noble Lord will agree to withdraw the amendment.

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