The Minister of State, Department for Business and Trade and HM Treasury (Lord Stockwood) (Lab)

I thank noble Lords for the opportunity to set out the Government’s position on this important set of issues and for the constructive nature of the debate so far. Before we start, my interests are set out in the ministerial register. I invest in a number of funds that are regulated by the FCA. I start by addressing why Clause 1 and Schedule 1 should stand part of the Bill. The case for reform is straightforward. The Consumer Credit Act—the CCA—is more than 50 years old and was enacted long before the creation of the FCA. It no longer delivers as it should for today’s consumers, who engage with modern products in an increasingly digital world. It too often results in people being sent lengthy, complex documents that they do not read, do not understand and cannot use with confidence. It is important to say that one in seven adults has literacy skills at or below those expected of a 9 to 11 year-old and 34% of adults have poor or low levels of numeracy involving financial concepts, yet the CCA regime means that some of the information provided on credit cards requires a far higher reading age. Debt advice charities have criticised the way in which the CCA requirements often result in borrowers being sent arrears notices even when they have agreed a repayment plan, causing confusion and alarm. To address the point raised by the noble Baroness in her amendments, this demonstrates that it is not just the content of the arrears notices that is the problem but the inflexible legislative triggers that mean they must be sent even when there is no clear purpose and they cause more harm than good. There are many more examples of where the CCA results in poor outcomes for consumers and anachronistic procedures for lenders. That is why this Bill continues the work that began in 2012 of repealing this outdated legislation so that it can be replaced with updated rules that better meet the needs of consumers and are fit for the digital age. The Government strongly believe that those replacement rules should, in the main, reside in the FCA rulebook, not in primary legislation. The FCA has extensive experience in developing firm-facing rules for retail markets, including mortgages, insurance and investments. Its rule-making approach is underpinned by consultation and consumer testing so that protections remain robust, proportionate and relevant. The FCA’s new rules for buy now, pay later, which come into force next month, demonstrate what a modern, FCA rules-based regime can deliver for consumers. I have heard the concerns of some noble Lords that the Bill does not set out how the repealed provisions of the CCA should be replaced and that this has been left to the FCA to determine at a future time. While I appreciate that concern, this is entirely consistent with the model of regulation established in the Financial Services and Markets Act 2000. These provisions sit in the CCA only because this model of regulation did not exist in 1974. Parliament has already vested the FCA with significant responsibilities in this space, objectives that include a primary consumer protection objective, powers to allow it to fulfil its role and a comprehensive system of transparency, governance and oversight. Parliament will have a key role in scrutinising the FCA as it makes these replacement rules. The FCA is required to advance its objectives through its rules, including its consumer protection objective. The FCA is required to consult, to conduct a cost-benefit analysis on rule changes and to submit copies of those consultations to the relevant parliamentary committees. They include the Financial Services Regulation Committee, ably chaired by the noble Baroness, Lady Noakes. The FCA has a comprehensive set of enforcement powers that will help it to ensure compliance with its rules and to act decisively where firms are failing to comply. As well as ensuring that an expert body with the right objectives, powers and resources can fulfil this function, this approach ensures that the rules can adapt as needed in the future to stay current and respond to future trends. The noble Baroness, Lady Neville-Rolfe, asked when Parliament will see the replacement rules and how the transition period might work. The FCA will set out the detail of the new rules through its normal rule-making process. Repeal of legislation will be commenced only once the relevant FCA rules are in place. The Bill contains a power for HMT to allow for an orderly transition. In practice, Parliament, consumer groups and stakeholders will see the FCA rules at consultation stage before the new regime takes effect. I am aware that some noble Lords have tabled amendments to strengthen parliamentary scrutiny further. The Government believe that the current arrangements work effectively, but I look forward to debating them in more detail later. CCA reform is an important opportunity to create a clearer, more flexible and more accessible framework that better reflects today’s consumer credit landscape. The noble Baroness asked what rights and protections will remain in legislation. Where rights and protections require legislation to work, they will remain in legislation. Criminal offences will remain, so canvassing to minors and doorstep selling will remain in legislation, along with other key protections such as Section 75. The noble Baroness, Lady Neville-Rolfe, also asked about the impact on smaller firms, as the FCA replaces parts of the Consumer Credit Act. I can assure her that the aim of the reform is to create a more proportionate set of regulations for all firms, including smaller lenders. Everyone will benefit from this modernised regime. I hope I have provided the Committee with some assurances that the CCA reforms are vital. I ask the noble Baroness, Lady Neville-Rolfe, to withdraw her amendment.