Dormant Bank and Building Society Accounts Bill [HL]

My Lords, we believe that Amendment No. 12 is unnecessary. It does not alter the position of account holders potentially affected by the scheme. Instead, the amendment mirrors how the scheme is intended to operate: that banks and building societies will transfer only genuinely dormant accounts to the scheme. The Bill’s provisions set a clear minimum requirement that an account must meet for it to be eligible for transfer to the scheme. First, there must have been no customer-initiated transaction in the account for 15 years. The scheme is voluntary for financial institutions, and we believe that one of its key advantages is that banks and building societies will have the flexibility to refer to other forms of customer-initiated activity before deciding whether an account is truly dormant. That includes correspondence, e-mails, telephone calls and activity on other accounts. Institutions may differ in the approach that they take to recording such activity, but we fully expect banks and building societies not to transfer these accounts where they are aware that an account is active. Noble Lords have occasionally in our debates seemed sceptical of banks’ and building societies’ intention to act on their knowledge of customer activity under the definition provided in the Bill. However, the scheme has been designed to give both banks and building societies the ability to act on whatever knowledge they may have about the account or the account holder. This will allow individual institutions to take a more sophisticated approach, suited to their particular capabilities, to identifying dormant accounts. This approach will be more sophisticated than would be permitted under similar international schemes which commonly focus only on customer-initiated transactions. We are also clear that the scheme should draw on existing regulatory procedures in keeping with our attempt to maintain the scheme’s light-touch approach. With great respect, this amendment is out of step with those intentions and goes no further in protecting consumers. The Banking Code already refers to dormant accounts, and, in section 9.16, explains that if a customer has money in a dormant account, it will always belong to that account holder. Once the scheme is operational, banks and building societies will be required to follow the Banking Code provisions relating to the scheme. Each institution will be required by the Banking Code to publish its policy on determining when an account is dormant and to inform its customers of its approach. On 8 November, the BBA made an announcement confirming that the banking industry itself is in the process of amending the Banking Code to reflect just this. The BBA and the Building Societies Association also have 10 core pledges underpinning their existing tracing schemes for dormant-account holders. These set out how banks and building societies, in addition to the BBA and the BSA, should treat dormant-account holders. The pledges will be updated to reflect our new scheme. They will continue to require a bank or building society to try to re-establish contact with a customer before making their account dormant; to inform customers about their policy and when an account may be deemed dormant; and to inform them about the process for reclaiming money in a transferred dormant account. Should the customer seek repayment when the balance in an account is transferred to the scheme, they will be able to contact their bank or building society. It is envisaged that the process for these customers to reclaim what is their own money should be no different from the process to reclaim an account which an institution has deemed dormant for internal purposes but where the institution has not transferred the money to the scheme. The Bill gives affected account holders a right to repayment. The scheme has been designed so that banks and building societies will be able to refer to a range of consumer activities in deciding whether an account is dormant. As the noble Lord, Lord Monson, spoke to his amendment I shall out of courtesy deal briefly with what he said. It is quite similar to what I said in response to the amendment of the noble Baroness, Lady Noakes. It is intended to base the scheme on genuinely dormant bank and building society accounts which have been forgotten or lost by the account holder. The noble Lord’s amendment would extend the exclusion from the scheme of no-mail accounts to accounts where the holder has instructed their bank or building society to send periodic only statements but no other mail. Generally, no-mail accounts are those where, as the House will know, the account holder has requested that their bank does not contact them. If the bank or building society has not had a statement returned to them indicating that the account holder is no longer at that address, then it is possible that the account holder is still aware of their account. However, in some circumstances a bank may wish to clarify to clarify with the account holder—not only for the purposes of the scheme, but for its own operational purposes—whether the account holder is aware of the account. If the account is operating under strict no-mail conditions then it follows that the bank simply cannot contact the account holder to establish that. However, if the account is operating under more usual arrangements, the bank will be able to contact the account holder to establish whether the account is dormant or merely rarely used. The voluntary nature of this scheme will allow banks and building societies the flexibility to refer to customer-initiated activities that may indicate that an account is, in fact, not dormant even if there have been no transactions on the account. If the institution understands the account holder to be aware of their account—for example, by requesting periodic statements—we fully expect institutions to take note of the relevant circumstances and not transfer such accounts. Ultimately, carving the accounts to which the noble Lord refers out of the scope of the Bill could remove a large amount of possible dormant account money that could go to good causes. This step is unnecessary because the scheme’s flexibility allows banks and building societies to make a judgment and to take a sophisticated approach to determining whether accounts are dormant. That is why, although we understand exactly the intention behind the two amendments, neither is necessary. If this were a compulsory scheme then there may well be a need for such provision in the Bill. However, because the scheme is voluntary—a scheme which I think is supported by most noble Lords on all sides of the House—neither amendment is necessary.