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Lord Kingsland: We support this amendment and hope that the Government will also do so. In that context, I was particularly struck by the words of the Minister in response to Amendment No. 47 earlier today. I sought then to say that the FSA would find it very difficult to prevent financial crime, but the Minister was not prepared to accept that. If the noble Lord thinks that the FSA can prevent financial crime, he surely must think it well within its grasp to facilitate, as far as possible, access to financial services for disadvantaged consumers.
Lord McIntosh of Haringey: Before I discuss my noble friend's amendment I wish to say a few words about the home service insurance business, to which she referred. The Government have announced that the industrial assurance Acts, which have always been so burdensome and have regulated home service insurance business, will be repealed. The business will be regulated under the Bill. This has been welcomed by the insurance industry. We are also taking steps to help credit unions and friendly societies to conduct their business more effectively. We recognise the importance of the role they play in helping the financially excluded.
When the Joint Committee published its first report its conclusion was that, if the Government wished to impose social and ethical obligations on financial services businesses, they should do so directly rather than via the FSA. The Government agree with that conclusion. The Joint Committee stated at paragraph 62 of its first report that additional duties,
In any case, the terms of the consumer protection and public awareness objectives are relevant to tackling financial exclusion. The objectives do not exclude disadvantaged consumers; they are applied to all consumers. For example, the appropriate level of protection will depend on the nature of the consumer and of the product and will affect our proposals for the deregulation of business carried on by a number of mutual societies. They will enable those societies to provide services which they are not able to provide at present.
I turn to Amendment No. 61. Clause 5 expands on what is meant by the FSA's regulatory objective of protecting consumers. It deals with the protection appropriate to different types of consumers. There will, of course, be wide experience and expertise across society as a whole. Therefore the needs of consumers for advice and information will differ, and their particular circumstances will be one factor in that equation.
But this clause already requires the FSA to have regard to that spectrum of needs. Adding a paragraph requiring that the interests of particular social groups should be taken into account would at best muddy the waters and at worst lead to an unfair focus on the needs of particular groups, possibly at the expense of the needs of consumers in other groups. I do not want to be too particular because obviously the noble Lord could have produced a whole range of disadvantaged consumers. However, I suggest that his list would place particular importance on the needs of, let us say, an experienced financial adviser who is retiring to the countryside--two of the criteria on the noble Lord's list would apply to such a person--but would exclude people who were, for example, poorly educated, or
It is essential that the FSA, in seeking to secure the appropriate degree of protection for consumers, takes account of the various needs of all consumers, whatever the origin of those needs. Clause 5(2) currently embraces all consumers, including those consumers who might fall into one of the groups referred to in the amendment.
I appreciate that Amendment No. 51 has gained support from all sides of the Chamber. I can only repeat my sympathy with its objectives. However, it would not be an appropriate measure for a regulatory body concerned with prudential supervision. I hope that my noble friend will treat it as a probing amendment.
Lord Fraser of Carmyllie: Before the noble Baroness decides whether or not to withdraw the amendment, I wish to ask the Minister a question. He has advanced a clear and coherent argument as to why this measure should not be imposed on a financial services regulator. At the present time the Utilities Bill is progressing through another place. I understand that the Government intend to impose certain social and ethical duties on utilities regulators which would cover disadvantaged customers. If that is an appropriate course to follow in the case of gas, electricity or water, I am baffled as to why that should not apply also to financial services.
Lord McIntosh of Haringey: After many years in this Chamber I have learned never to look at Commons Bills until they have finished their passage through the Commons. In that way I concentrate only on the final version rather than on a version which may be before another place at any particular time. The Utilities Bill is a particularly good example of that philosophy. I would have wasted my time had I spent days mugging up on the telecommunications and water parts of the Utilities Bill. There are differences as between financial services, utilities and postal services, which have been referred to. I can best illustrate that point by referring to what happened this morning. We take seriously the needs of disadvantaged consumers of banks. That is why we have referred the relevant aspects of the Cruickshank report to the Competition Commission. We do not intend to do nothing, but we think that such action is not appropriate for this Bill.
Baroness Turner of Camden: I thank my noble friend for that response. I described the amendment as a probing amendment. I wrote it and I was not absolutely certain whether it was technically correct. I hoped that if I spoke to it my noble friend might agree to consider it and bring back a government amendment along the same lines on Report. Unfortunately, my noble friend has not said that. However, he has commented helpfully on home service insurance and on credit unions, for which I thank him.
Nevertheless, I still feel that there is, or should be, a responsibility on the FSA to take some account of the socially disadvantaged, mainly because, as I said when I moved the amendment, the Government expect the financial services industry to play a social role and to provide services for people who many years ago may have looked to the state to provide those services. In other words, the financial services industry is expected to fill the gap, as it were, that is left by the withdrawal of the state from a number of welfare services.
I do not intend to seek the view of the Committee on the amendment this afternoon. I shall consider what has been said. The issue is sufficiently important to return to it on Report, having considered what my noble friend has said and having considered the contributions that those on all sides of the Chamber have made. I thank those who have contributed to the debate. I am grateful for the level of support that has been evidenced this afternoon. I hope that it will have convinced my noble friend that the Government should reconsider this matter before Report. In the meantime I beg leave to withdraw the amendment.
As long ago as the 19th century, the common law recognised that in selling goods, even to business consumers and traders, the crude rule of caveat emptor was modified by a condition that the goods be reasonably fit for their purpose and be "merchantable", a word which is out of date and is now translated in modern language as "of reasonable quality". In more recent years in the 20th century, any contractual clause seeking to exclude such a condition that goods be reasonably fit for their purpose and of reasonable quality has been rendered void in the case of ordinary consumers and is subject to a test of reasonableness in the case of business consumers.
In regard to the requirement that the consumer takes responsibility when buying financial services, my amendment seeks to qualify the consumer's responsibility for his or her decision to buy a financial product by requiring the authority to have regard to whether in any particular case it is reasonable for the consumer to take responsibility for his or her decision. If the product is not reasonably fit or suitable for the consumer's purpose, where the provider has completed a so-called "fact find"--as he normally has to do nowadays--and therefore knows all about the consumer's circumstances, it would not be reasonable for the consumer to take the full, unqualified responsibility and to have no come back on the provider. Financial products are very often more important than ordinary consumer goods; they are normally less frequently purchased than ordinary consumer goods, and it is odd that the consumer should have so much less protection.
The Minister will be aware that the annual report for 1999 of the Financial Services Consumer Panel recommended a complete deletion of this part of Clause 5 of the Bill; it recommended the deletion of the so-called general principle that consumers should take responsibility for their decisions. I do not want to quote all of the report, just one sentence. The consumer panel said:
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