Contribution
My Lords, Amendment 126 would require the independent person, who will be appointed by the Minister for the Cabinet Office to review the PSFA powers under Part 1 of the Act, to carry out an additional assessment of the impact of the whole Act on the number of people facing financial exclusion. I hope that that clears up the question raised by the noble Lord, Lord Vaux. The reviewer is the one for the PSFA bit, and the impact would be for the whole Act, as the amendment is currently drafted.
I recognise the intent behind the amendment put forward by the noble Lord, Lord Palmer. I assure stakeholders in the financial sector—should they be watching—that we have heard the concerns that they have raised with us on these matters. I am confident, however, that this reporting on potential financial exclusion will not be necessary.
First, I want to talk a little wider and acknowledge that the Government recognise the place of financial services in the lives of millions of people and businesses across the UK. That is why we have already taken steps to give people greater protection against their bank accounts being closed, as part of our plan for change. To do so, the Government introduced rules under the Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025 that require banks to give customers at least 90 days’ notice before closing accounts. The rules stipulate that, when doing so, the bank must provide a clear explanation in writing as to why they intend to close someone’s account. That gives people clarity on why the decision has been taken and, crucially, more time to challenge such decisions through bodies such as the Financial Ombudsman Service. These changes have been made off the back of consultation with industry and will take effect from April 2026.
Moreover, there are statutory protections to protect individuals most in need. The nine largest UK providers of personal current accounts are required by law to offer basic bank accounts to individual customers legally resident in the UK who do not have a bank account or who are not eligible for banks’ other accounts. Banks are prohibited by law from discriminating against UK consumers by reason of a range of protected characteristics, such as sex, ethnicity, disability and belief, when individuals apply for access to an account. So, while firms rightly have strict obligations to ensure the legitimacy of a business and to protect against financial crime, the Government have focused on account closures as a priority, given the material impact that a loss of banking services has on a business already in operation. That is the broader context.
Secondly, our approach on this Bill fits with that wider Government agenda on tackling financial exclusion. The DWP and the PSFA are working closely with stakeholders from the finance industry, including UK Finance and the Financial Conduct Authority, to ensure that no one is inadvertently or unintentionally excluded from access to financial services. As such, we have made provision in the legislation, where appropriate, to try to ensure that this is the case. For example, the DWP’s eligibility verification measure amends the Proceeds of Crime Act 2002 to make clear to financial institutions that they are exempt from returning a suspicious activity report in certain circumstances, if the information they have is only as a result of a data match from EVM. UK Finance agrees that this is an important exemption.
Thirdly, where appropriate, the codes of practice seek to provide further detail about banks’ duties in this space. For example, the code of practice for the EVN also clarifies that eligibility verification notices and the data returned in compliance with them are not intended to indicate that the DWP has any suspicion of fraud or financial wrongdoing, or that an error has occurred. The determination of any subsequent wrongdoing will be made following a further review of this evidence alongside other evidence, and is for DWP to determine, not the banks. We continue to engage with the financial industry and across government on drafting this to ensure that we get the wording right in our codes of practice.
For the PSFA, while the code of practice for Part 1 of the Bill is focused more on the new civil penalties, the PSFA will, in due course, publish guidance on the other powers in Part 1. This will consider these issues from the PSFA’s perspective and in more detail. For respective debt recovery measures, the PSFA and the DWP will align with the government debt policy, as well as abide by the standards set out by the government debt management function and the debt management vulnerability toolkit to handle those at potential risk of financial exclusion.
The Government acknowledge that financial exclusion is a serious problem, which is why we are taking steps to provide people with additional protections and to clarify duties in the Bill. I am confident that we have the necessary protections for individuals from financial exclusion in the Bill and therefore do not think that the amendment is needed. I therefore ask the noble Lord to withdraw his amendment.