HC Deb 12 November 1996 vol 285 cc202-4W
Mr. Tom Clarke

To ask the Secretary of State for Social Security, pursuant to the letter of 14 October from the Minister for Social Security and Disabled People, what external legal advice he has received on potential discrimination caused by(a) payment of bonus shares being made only once to a named building society member and (b) building society requirements that a person with a mental impairment incapable of handling his own affairs is unable to be the first or sole named person on an account. [2748]

Mr. Burt

None. As with all legislation, it is for individual service providers to seek any legal advice they might require on their responsibilities.

Mr. Clarke

To ask the Secretary of State for Social Security if he will publish in theOfficial Report the letter of 14 October from the Minister of State for Social Security and Disabled People relating to the question of the Disability Discrimination Act 1995 and building societies. [2749]

Mr. Burt

Yes. The letter reads as followsThank you for your letter of 23 July concerning disabled people and building societies. I apologise for the delay in providing a full reply but, as I explained in my letter of 30th September, these matters are both important and complex. They have, therefore, necessitated investigation with the Treasury, the Building Societies Commission and the Building Societies Association. The question of the treatment of some disabled customers by building societies first arose earlier in the summer in discussions between my officials and representatives of disability organisations. The NDS has also been taking an interest. The main problem concerns building society accounts held by disabled people but operated under a power of attorney. In certain circumstances, where the account is held in the name of the attorney, it may be that the disabled person does not receive an allocation of bonus shares on the flotation of a society. This would therefore appear to be less favourable treatment contrary to the Disability Discrimination Act 1995 (DDA). First I should explain that it is not always the case that the person with power of attorney necessarily becomes the member of a building society. An individual may appoint an attorney to deal with his account. However, if the account is held in the name of that individual he or she will remain the member. Alternatively if the account is opened by and held in the name of the attorney then the attorney would be the member and, therefore, be the person entitled to vote and to receive the benefits of membership. Similarly, a trustee or someone else acting on behalf of a disabled person may be the sole or first named person on the building society account, which would mean that they, rather than the disabled person, would be entitled to privileges of membership including the payment of bonus shares or cash. It is not discriminatory in itself for payment of bonus shares or cash to be made to someone acting on behalf of a disabled person rather than the disabled person himself. A trustee, attorney or other person first named on an account is under an obligation to account to the beneficial owner of the account for any benefits received. The individual should not suffer financially and is not receiving the service (the perks of membership) on less favourable terms. Further, the payment of bonus shares or cash to the first named member is a requirement under the Building Societies Act 1986. Therefore the building societies would be acting "in pursuance of an enactment" and would come with section 59 of the DDA. This section provides that if you are required to do something under another law this takes precedence over anything required by the DDA. In any event, the practice in itself is unlikely to be discriminatory for the reasons set out above. The difficulty comes in the situation that you identify in your letter, where the attorney or other trustee or first named person also has an account in his or her own right and receives a single benefit in respect of both accounts. This is usually the result of a society's decision to make its distribution scheme "member based", that is to say, linked to the entitlement of a member to vote on the transfer proposals (in building societies, as mutual organisations, members have by law only one vote regardless of the amount held in an account or of the number of accounts held). In the case of the Chelternham & Gloucester, however, the society elected to make its scheme "account based", with each qualifying account, rather than each qualifying member, being entitled to receive a cash payment calculated in accordance with the terms of that scheme, so that a member with a number of different accounts received a payment in respect of each account. The decisions as to which type of transfer arrangement and scheme to adopt is one for the society—and for its members—to vote on. It is not a statutory requirement in the same way as the payment of bonus shares or cash to the first named member. The payment of bonus shares being made only once to each named member, however many accounts he may have on his own or others' behalf. may well result in discrimination contrary to the DDA, in that a disabled person may not receive the benefits of membership in the same way as a non-disabled person. Finally, if it is a building society's requirement that a person with a mental impairment. who is not capable of handling his own affairs, cannot be the first or sole named on the account, it is possible that there is discrimination under the DDA. The disabled person is being offered less favourable terms, for a reason relating to his disability. because he does not have the same choices in the opening of his account. However, this less favourable treatment may be justified under section 20(4)(b) of the DDA. If a building society reasonably believes that a disabled person is incapable of entering into an enforceable agreement, it would seem reasonable to treat that person differently in the opening of his account and require that someone capable deals with these important matters on his behalf. Regulations provide, however, that this subsection does not apply where an attorney is acting on behalf of a disabled person. As you are aware, the relevant sections of the DDA do not come into force until the 2nd of December. If, after this date, a disabled person can show that they have received less favourable treatment in terms of not receiving the benefits of membership, he or she may be able to argue that they have been unjustifiably discriminated against contrary to the DDA. Ultimately, it will be for the courts to decide whether discrimination has occurred. I understand that the Building Societies Association has already identified a number of these issues and will shortly be issuing guidance to it members. I will be taking steps to ensure that both the Building Societies Association and the Building Societies Commission are aware of all the potential issues. Thank you for this opportunity to explain the situation. I apologise again for the delay in replying.