Baroness Neville-Rolfe (Con)

My Lords, I am grateful to noble Lords across the Committee. I have noted the variety of concerns expressed on this part of the Bill. As noble Lords have heard, my party has announced proposals to remove the Financial Ombudsman Service and replace it with a new financial adjudication service. That proposal is not before the Committee in this group, but we have an agreed amendment; we will have the opportunity to debate it properly at a future stage. I start by speaking to Amendment 32 in my name and that of my noble friend Lord Altrincham. The amendment would retain the existing six-year longstop rather than extending it to 10 years, as Clause 6 would do. As I have already said, I am concerned about this move, albeit for different reasons to some other Peers who have spoken. I accept that there is a balance to be struck here: consumers must have access to proper, effective and fair redress mechanisms. Where a consumer has suffered detriment because of misconduct, poor practice or a failure by a firm, there should be a clear route through which a complaint can be considered and, where appropriate, redress can be provided. However, this does not mean that time limits are unimportant. On the contrary, time limits are an essential part of a fair system. Claims can be heard fairly only when sufficient information is available to both sides to allow them to mount a proper case. That means records, correspondence, product documents, internal decision-making, staff recollections and the wider factual context in which the relevant decision was made. The further back in time a complaint goes, the more difficult this becomes. Evidence may be incomplete and documents may no longer exist. The people involved may have left the organisation, systems may have changed, products may no longer be offered and the regulatory context may have moved on. A complaint may still be sincerely brought, but the ability of the firm to respond fairly and fully may be materially impaired. That is why limitation periods exist: they reflect the basic principle of justice that, after a certain period, it becomes harder to determine matters fairly and reliably. That principle applies in the courts, and I believe that it should continue to be properly reflected in the ombudsman’s framework. I am concerned that extending the longstop from six years to 10 years risks pushing the system beyond that fair balance. I have noted the comments made by the noble Lord, Lord Davies of Brixton, in particular his references to pensions and endowment mortgages. I will be interested in the Minister’s response on how those products are dealt with and whether the exemptions are intended to cover that area. On this occasion, I do not agree with the noble Lord, Lord Sharkey—although we often agree on other matters—because there is a genuine concern in the industry about vexatious or speculative claims. We should not be naive about this. There is a whole claims management industry dedicated to identifying and pursuing potential claims. Some of those claims may be legitimate, and consumers should not be denied redress where redress is due, but others may be weak, opportunistic or based on limited evidence. If the period is extended significantly, the volume of such claims may increase, so firms will have to devote more resource to investigating and defending matters from many years ago. All this has a cost and makes all concerned more risk-averse, so it becomes more difficult for providers to accept customers at the margin. This matters for not only firms but the wider economy. We cannot stimulate growth, support lending, encourage investment and improve productivity if banks and financial services firms are pouring ever more resources into fighting historic claims, rather than serving customers, lending to businesses, supporting economic activity and innovating. There is a real opportunity cost here. My noble friend Lord Roborough is unable to be here today, but I understand that his Amendments 38 to 41 are intended to probe whether the reforms in the Bill provide sufficient certainty for regulated firms that, where they have complied with the relevant rules and requirements, the Financial Ombudsman Service will not be able to go substantially beyond that framework in finding fault or imposing redress. This is not to question the proper role of the ombudsman in cases such as car finance commissions, where the courts have confirmed the relevance of undisclosed conflicts of interest; rather, it is to test whether the current “fair and reasonable” jurisdiction risks giving the FOS a quasi-regulatory role, including through inconsistent interpretation, the retrospective application of standards or decisions that go beyond the rules in force at the time. This is the core issue that has been raised time and again: the FOS needs to be reined in, but does the Bill do it? At the same time, I recognise the number of views on this question. It is for the Minister to show that the proposed changes do not weaken the ability of consumers, including vulnerable consumers—particularly those in serious circumstances, such as terminal illness—to obtain fair redress. I have been told, for example, that there is a variance between companies over acceptance rates in such cases. The Minister might want to look into that. Serious concerns have been raised. I look forward to hearing the Minister’s response to this group. My own concern remains that, as drafted, the Bill shifts the balance too far. It extends exposure to firms in a way that may appear consumer-friendly at first sight but risks generating delay, uncertainty and large volumes of contested claims. The six-year longstop strikes the right balance, so why 10 years? What evidence has led the Government to conclude that six years is insufficient? Can the Minister break that down by product or financial services type? What assessment has been made of the impact on firms, on complaint volumes, on the claims management sector and on the resources of the ombudsman itself? How will the Government ensure that extending the longstop does not simply create a larger backlog of older and more difficult cases? I would be grateful if the Minister could also address the practical point about record-keeping. Do the Government now expect banks and other firms to retain detailed customer records for 10 years in anticipation of potential FOS complaints? If so, what assessment has been made of the cost and operational burden of doing so? I speak as a former company secretary in a large company; I know about the problems in keeping data. Indeed, what about doing it retrospectively? I hope that the Minister will reflect carefully on the points I have made on the possibility of retaining the six-year longstop. I very much look forward to his response.