Financial Guidance and Claims Bill [HL]

Lord Hunt of Wirral Excerpts

3rd reading (Minutes of Proceedings): House of Lords
Tuesday 21st November 2017 Lords Chamber

However, this set of amendments is special for another reason: it is a rare example of good co-operation between the UK and Scottish Governments. In fact, in this Chamber last night we debated the mechanics of devolution and how the UK Government and the devolved Administrations work. This is a wonderful example of how it should work, and it has worked to the advantage of our fellow citizens. I am therefore delighted, I very much hope that this will be oft repeated, and I thank the Minister again.

[Lord Hunt of Wirral (Con)]

My Lords, I declare my interests as set out in the register, as I have just entered the 50th year of my partnership in the global legal firm DAC Beachcroft. I also chair the British Insurance Brokers’ Association. Colleagues will recall that I have made a number of speeches about the need to regulate the claims management sector. Further reform is urgently needed, but these amendments are a step in the right direction and I welcome them.

One of the biggest problems posed by CMCs is the potential for consumers to lose a large proportion of their damages in fees, despite the fact that the level of expertise required for a CMC to manage claims is remarkably low. The regulation of these firms should therefore be consistent across the whole sector. I will just mention two significant benefits that come from what the Government are now doing. First, we will have a robust authorisation regime based on understanding the business models of individual CMCs, which will prevent those firms that do not offer good value for consumers operating. Secondly, we will have personal accountability for senior managers of CMCs to ensure that when a firm is struck off, its directors cannot simply resurface as a new CMC.

The FCA now has the power to cap under these amendments, but it should urgently consider extending the cap to other claims to address the drastic spike in claims related, for instance, to gastric sickness while on holiday, to which the noble Earl, Lord Kinnoull, drew attention in earlier debates. It is no coincidence that there has been this massive surge in claims, just as CMCs prepare for the deadline for bringing PPI claims and the introduction of measures to tackle the high number of whiplash claims. We are therefore dealing with quite a range of possible actions that the Government need to take.

I was disappointed, not by anything my noble friend Lady Buscombe has ever said or done, but because the Government published a consultation response last week entitled Cutting Costs for Consumers in Financial Claims which was completely silent on any plans for action in the sector. By need for action I mean the need to control charges in the personal injury sector, especially as the Government move forward with long overdue plans for whiplash reform. Question 20 in the original consultation paper was:

“Is there a need to consider further fee controls in other regulated claims sectors such as Personal Injury or Employment in future?”.


I do not know what the replies to that question were but, sadly, there was complete silence in response. I just hope that, as the FCA prepares to regulate this sector, it will bear in mind at the height of its agenda the customer/consumer detriment from the actions of CMCs, which we have debated many times in this House. At last, it appears that action is being taken, but it will have to go much wider than these amendments, although they are a very good start.

[Baroness Buscombe]

Perhaps I may respond quickly to my noble friend Lord Hunt. Both we and the Financial Conduct Authority are aware that our plans for whiplash reform could have an impact on this market. I reassure him that the FCA will certainly keep this sector under review and will monitor developments closely during the implementation phase.

Financial Guidance and Claims Bill [HL]

Lord Hunt of Wirral Excerpts

Report: 2nd sitting (Hansard): House of Lords
Tuesday 31st October 2017 Lords Chamber

Moved by

[Lord Hunt of Wirral]

39A: Clause 16, page 12, line 38, at end insert—
“(ba) arranging the provision of temporary replacement motor vehicles,”

[Lord Hunt of Wirral (Con)]

My Lords, I declare my interests as set out in the register, particularly as a partner in the global legal firm DAC Beachcroft LLP and as chair of the British Insurance Brokers’ Association.

I return to matters I have raised previously. The context for the further concerns about the regulatory framework for claims farmers lies in the Government’s plans for whiplash reform, as outlined in the Queen’s Speech. The aim of that reform package is to crack down on,

“minor, exaggerated and fraudulent road traffic accident related soft tissue injury claims”.

That quote is from my noble and learned friend Lord Keen of Elie in his foreword to the Government’s consultation paper nearly a year ago.

Noble Lords expressed their dismay in Committee at the rich harvest of unsolicited and unwanted nuisance calls and texts, which Members of this House and millions of our fellow citizens continue to receive as I speak. I spoke previously about the need for every loophole to be closed and for a commitment that where there is a claim there is regulation.

--- Later in debate ---

I hope my noble friend will agree that it is too early to presume that there will need to be a fee cap for CMCs operating in the personal injury market, which has a different business model to financial services. I hope he agrees that the FCA is well placed to monitor and respond to any emerging risks. In light of that, I encourage him to withdraw his amendment.

[Lord Hunt of Wirral]

My Lords, I am very grateful to the noble Earl, Lord Kinnoull. I completely understand his reference to Meccano; I suppose it is easy to pretend that we have moved on, as the noble Lord, Lord Deben, said—advised, no doubt, by his grandchildren. I understand the point that there needs to be a structure; it is that about which I was hoping to persuade the Minister.

I am also very grateful to my noble friends Lord Flight and Lord Deben for their support. I sensed a feeling around the House that something needs to be done. Does the Minister understand that I have been gnawing away at this particular problem for over 10 years? I think it was the noble Baroness, Lady Ashton, who took through a Bill some considerable time ago that recognised the need to regulate claims management companies. Many examples were given then, many years ago, of how that represented a growing market. Looking around us today, particularly at holiday sickness claims, you suddenly realise that a new breed of companies are exploiting the admitted rights of individuals to compensation, but in return are demanding a share of that compensation. That has become the lifeblood of these claims management companies; and they keep changing. One moment, you impose a different form of regulation, then the next, you see that the companies have completely escaped any form of regulation.

It may well be that the Minister is right to look to the future with confidence, knowing that the Financial Conduct Authority will now be dealing with the problem. He is right to point out that the FCA has power under existing legislation. Perhaps we will see at last a reining in of these individuals, who have been feeding on the lifeblood of victims who cannot afford to allow part of their compensation to be siphoned off into a developing, stronger claims management company. In a way, I suppose my noble friend was saying that I have made a serious error of judgment in labelling them all as claims management companies. It may well be that they do not fit that description, but I think we all know what we are talking about when we refer to claims management companies. I call them claims farmers. I recently attended a conference where I was asked why I have this vendetta against claims farmers; I admitted that it is because they have no justification for what they do and for the way in which their business model has developed. The Minister has made a number of commitments—I can see him quickly checking his notes on what commitments I am referring to—and I sensed a considerable amount of sympathy for the point I was making. I want to reflect carefully on all the points.

[The Earl of Kinnoull]

I have here the report I referred to, from the Competition and Markets Authority. Paragraph 2.37 states:

“The range of services provided by CMCs can include … (d)”—


among other things—

“providing credit repair and credit hire for non-fault claimants”.

In other words, as far as the CMA is concerned, claims management companies certainly include credit hire companies. In my bit of the industry—underwriting—we would absolutely think that they are part of the same thing. No one has objected to that. It is very clear throughout that section of the CMA report that they are one and the same.

[Lord Hunt of Wirral]

I am grateful to the noble Earl for making that important point. I do not necessarily want to speak on behalf of the Minister, but I sense that his response may be that other people do that work as well. We need to try to ensure that we fulfil my objective that where there is a claim, there should be regulation. There should be a structure whereby there is some control of the companies seeking to exploit the situations certain people who need to bring a claim find themselves in.

I will reflect carefully on all the points my noble friend the Minister raised, but this problem is not going to go away. I can see it increasing.

As I am already becoming aware, there is other legislation in respect of which claims managers are looking at new areas to fasten on to and exploit. We have to be prepared to deal with that in advance, rather than seek to catch up, as we have tried to do for the last 10 years. Let us move ahead. In the meantime, I thank my noble friend for all he has said and I beg leave to withdraw the amendment.

Amendment 39A withdrawn.

Financial Guidance and Claims Bill [HL]

Lord Hunt of Wirral Excerpts

2nd reading (Hansard): House of Lords
Wednesday 5th July 2017 Lords Chamber

[Lord Hunt of Wirral (Con)]

In declaring my interests as set out in the register, I welcome the Bill. I particularly welcome the establishment of a single financial guidance body. I do not want to spend any time on Part 1 except to flag up five issues to which I will return in Committee—I understand the first day in Committee will be 19 July —first, signposting to the new body; secondly, the Cridland proposal of a mid-life MOT; thirdly, the pensions dashboard; fourthly, while I support one body, customer focus has to be clear, and that the service for debt, money and pensions will be separate for most customers; and, fifthly, funding.

I shall concentrate my remarks on Part 2. We have spoken in this House before about the need for proportionate and effective regulation, but claims management companies is one area where, I agree with the noble Lord, we could do with more regulation not less. There have been numerous calls for the transfer of CMC regulation to the Financial Conduct Authority, and in her excellent opening speech my noble friend mentioned that one of the principal options proposed in the review by Carol Brady of CMC regulation in 2016 was to this effect. In my opinion, the transfer cannot come soon enough.

I hope noble Lords will permit me the indulgence of a short history lesson. It was as long ago as 2004 that Sir David Arculus, in his report Better Routes to Redress, identified a need for claims management companies to be regulated. He was especially concerned about aggressive marketing techniques encouraging frivolous or even fictitious claims and misleading consumers about charging options.

I had the privilege when in opposition of working with the noble Baroness, Lady Ashton of Upholland, when the Compensation Bill, which introduced regulation by the Ministry of Justice, was considered in this House in 2006. The noble Baroness’s priority was to safeguard consumer interests, and that must surely remain our principal concern today. In Grand Committee on that Bill, I made the point—if one is allowed to quote oneself—in the following words:

“there should be no gaps in the regulatory cover, no loopholes in the provisions, no ‘wriggle’ room, no types of relevant activity left out, no types of relevant people missed”.—[Official Report, 20/1/06; col. GC 143.]

Then in 2010 my noble friend and colleague Lord Young of Graffham produced his report, Common Sense Common Safety. He concluded that the rise of CMCs had had a dramatic impact on the way we perceived the nature of compensation. In my noble friend’s view, regulations controlling CMCs did not go far enough. They allowed companies to advertise in a way that encouraged individuals to believe that they could easily claim compensation for the most minor of incidents and even be financially rewarded once a claim was accepted.

As Carol Brady found when she conducted her review in late 2015, what we undoubtedly still have, despite all these laudable efforts, is a problem. It is even possible that Members of this House might receive an unsolicited text message during this debate informing us that we can claim thousands of pounds in compensation, for an injury we have not suffered, in an accident we have not had. Kevin Roussell and his excellent team at the MoJ have done some sterling work over the past 10 years, but they have not had the necessary clout to stop the tiresome deluge of nuisance calls and text messages. The problem lies in the difficulty in identifying and catching the true culprits behind these companies. The one thing the FCA regime will cure is just that. The application of the senior managers’ regime will mean that the people who control these companies can themselves be brought to book. No longer will they be able to shut down one company and then open up another one overnight to escape fines for bad behaviour. The buck will stop with them.

I would like to ask my noble friend the Minister to consider three points. First, I go back to the comments I made in 2006 about closing every loophole. There is a pressing need to ensure that everyone attempting to provide services in the compensation system is regulated. It is too easy for these businesses to stick another finger into the pie, whether by offering a “free” replacement vehicle on credit or commissioning a medical report and taking a large chunk of the reporting doctor’s fee. The latest thing is to telephone people who have just returned from holiday asking whether they had a problem with their tummies. If so, they can claim damages against the hotel. These firms continue to treat claimants as a commodity, an entry ticket to maximising profit. Most of the add-on activities could be caught by a slightly extended definition in the secondary legislation of what constitutes “regulated activity”. Will my noble friend commit to examining whether the definition in any order made under new Section 419B could be extended to close these loopholes?

The second point considers the proposed power in Clause 17 to make rules restricting the charges that CMCs can levy. Such measures are long overdue. When I met Carol Brady and her review team in 2015, I made the point that you have to “follow the money”. These companies are all about profit rather than service, and it is of critical importance that controls be put in place to protect consumers. My request is that the Minister should look at extending such controls beyond the original MoJ suggestion of applying them to financial mis-selling claims alone, ensuring that charges are capped in every area where CMCs are active. Such charges are typically deducted from any compensation recovered or even levied up front. Although I am sure that the FCA will look closely at how such services are sold, the track record throughout this sector is not a healthy one.

My third point concerns Scotland. This part of the Bill and the regime it transfers currently applies only to England and Wales, yet research shows that Scottish residents receive even more nuisance calls than elsewhere in the UK. This problem is not new. In response to a Scottish Government consultation in 2009, 85% of respondents believed that it was necessary to introduce protection for Scottish consumers. The failure to include Scotland should be addressed. The remit of the FCA extends to Scotland, as does the rest of this Bill. Measures are currently before the Scottish Parliament to enable solicitors there to charge success fees—to take a proportion of their clients’ damages as part of their charges. At the same time, claims farmers in Scotland can operate without any regulation whatever. That has the horrible feeling about it of history repeating itself.

Tackling the effective regulation of CMCs may appear to be a Herculean labour. As with the Lernaean hydra, every time you chop off one head, two more grow in its place. My noble friend the Minister may not need to divert rivers, as Hercules did, and I still do not know why Augeas gave his son some 3,000 cattle, but at least he found an answer. I just hope that my noble friend will do well in cleaning out these Augean stables.

Leveson Inquiry

Lord Hunt of Wirral Excerpts

Friday 11th January 2013 Lords Chamber

[Lord Hunt of Wirral]

My Lords, I declare an interest as chair and now sole owner of the Press Complaints Commission, and as a practising solicitor and partner in the international commercial law firm DAC Beachcroft.

I was appointed to the PCC in October 2011 specifically to lead the renewal and regeneration of the system of self-regulation. In that context, I welcome the debate and the opportunity to listen to views from all sides of the House. I know that my noble friend Lord Black of Brentwood is sad that he cannot be here, but he has to be in Paris discussing press freedom.

I start by echoing the many others in this House and elsewhere who have rightly welcomed Sir Brian’s remarkably thoughtful, comprehensive and far-reaching report. It reminds us all too vividly of the horrors of the past and is replete with some good and positive ideas for the future. I have been through the entire report, and I hope that others have too, and I am delighted that Sir Brian decided not to recommend a system of self-regulation established by statute. Like many others, I would have regarded that as a step too far and an unacceptable imposition upon freedom of expression. It is also, I believe, unnecessary. A truly effective but non-statutory regulatory system can and must be created to establish once and for all the highest possible professional standards right across the newspaper and magazine industry, and among digital-only news publishers too, all underpinned by law, but civil contract law.

As a consequence of Sir Brian’s wise judgment, there is already a wide measure of consensus on the way forward, wider than many of us had ever thought possible, across the political parties, the newspaper and magazine industry and beyond. All the parties are now fully signed up to seeing the regulatory structure recommended by Sir Brian Leveson up and running as soon as is practicable, but it must satisfy the principles of the Leveson report. It should be buttressed by incentives and its independence and effectiveness must be verified by an authoritative, independent body of some kind.

I have to report that yesterday, I hosted the third in a series of three meetings, each of which brought together editorial and non-editorial figures from right across the newspaper and magazine industry and from right across the United Kingdom. It is clear to me that the industry now understands that, between the existing and inadequate system of self-regulation and what Leveson proposes, there is no acceptable “third way”.

I now have a dual role. First, it remains my responsibility and that of my two fellow directors at the PCC to ensure that until the new structure is fully up and running, the PCC continues to deliver its fast, fair and free service to the public. Every year, the PCC helps hundreds of people who feel they have a legitimate complaint against a newspaper, magazine or online article and have no one else to whom they are able to turn. I have to tell the House that in the most recent survey of complainants to the PCC, 86% of respondents who gave an opinion said that the staff were either “satisfactory”, “helpful” or, indeed, “very helpful”. I pay tribute to the excellent staff and commissioners at the PCC for remaining on board to deliver that first-class service.

My other role is to establish the new regulatory architecture as called for by Sir Brian Leveson. I want to keep quoting from the report, but time will limit the extent to which I can. On page 1,769, he says:

“It is worth repeating that the ideal outcome is a satisfactory independent regulatory body, established by the industry, that is able to secure the voluntary support and membership of the entire industry and thus able to command the support of the public”.

He repeats that 10 times in the report, and if anyone wants to read that, I am very happy to supply it.

I am confident that, together with the industry, I can deliver that new structure with comprehensive sign-up right across the newspaper and magazine industry by the middle of this year. It will then be for others both here and in the other place to decide whether any form of statute is required, either to guarantee the independence of the new regulator or to underpin the proposed incentives to membership.

In view of the remarks of my noble friend Lady Bonham-Carter of Yarnbury—I refer her to pages 1,760 and 1,761—I acknowledge that I have approached the present chair of the Advertising Standards Authority and the chair of the Environment Agency, the noble Lord, Lord Smith of Finsbury; also Sir Simon Jenkins, who was a member of the Calcutt committee, and the immediate past president of the Supreme Court, the noble and learned Lord, Lord Phillips of Worth Matravers, to assist me. I am very grateful to them for that. Under the chairmanship of Paul Vickers of Trinity Mirror, an implementation group from the industry itself is seeking to close the ever-smaller gap that remains between the industry and full compliance with Leveson principles. A group of lawyers is developing the contract and fleshing out how the proposed arbitral arm might function. This will require a delicate balance to which my noble friend Lord Lester of Herne Hill has already referred.

I am optimistic of a good outcome. We shall see a profound change of culture and an end to sloppy journalism ruining the lives of innocent people without losing all that is good in our press. We shall demonstrate that, for a good journalist, freedom of expression and professional principles can and must be inseparable, indeed symbiotic. To the victims, finally, I say this: those victims of unacceptable press behaviour in the past which has been so forensically exposed by Sir Brian Leveson—the McCanns, Chris Jefferies, Margaret Watson, the Dowlers—the clear message must be never, never, never, never, never again.

Health and Safety: Common Sense Common Safety

Lord Hunt of Wirral Excerpts

Thursday 25th November 2010 Lords Chamber

[Lord Hunt of Wirral]

My Lords, it is my privilege to pay tribute to my noble friend Lord Faulks for what I believe to have been one of the best maiden speeches that we have heard in this Chamber. Not only is my noble friend known as a supreme advocate but also he has a fine balance in his attitude towards right and wrong, which we heard in his reference to the Human Rights Act. He is also a foremost barrister. He gave us an indication that it is about 37 years since he was called to the Bar, but last year he achieved a great accolade in becoming the “Personal Injury and Clinical Negligence Silk of the Year”. I think we all know why. It is because he has established an outstanding reputation as one of our foremost legal practitioners. We look forward to many speeches from my noble friend in the future.

Declaring my interest as a partner now for 41 years in the national commercial law firm Beachcroft LLP, as president of the All-Party Group on Occupational Safety and Health and as deputy president of the Royal Society for the Prevention of Accidents, I am delighted that my friend opposite, the noble Lord, Lord Jordan, is going to follow me. He is my president, and I am sure that I shall agree very much with what he says.

I warmly welcome the report of my noble friend Lord Young of Graffham, not least for the clear and concise way in which he has covered some complex problems. It is this simplifying style which must surely underpin our approach to the whole issue of the compensation culture and how to solve it.

This debate is remarkable because I found myself in complete agreement with every word that the noble Lord, Lord Sugar, said. Claims management companies or “claims farmers”, as I prefer to term them, seem to specialise in trying to make the system more mysterious and more complex. In truth, that suits their purposes, because the more complex is the process, the more it is alleged that you need specialist advice to unlock its mysteries. Complexity is the friend of the claims farmer; simplicity and clarity are the enemies.

We have heard many speeches today about whether we have a compensation culture. My first contribution on this subject was to a debate in the other place on the report of the Royal Commission on Civil Liability and Compensation for Personal Injury, chaired by Lord Pearson, as far back as 1978. I have not changed my views since then. I shall not repeat them now, except to make three short points: first, sadly, I believe that we now have a compensation culture; secondly, the solution is to put genuine claimants back at the centre of the whole process; and, thirdly, health and safety legislation must now focus on what business can do, not on what it cannot.

In his report of 2004, Sir David Arculus found only a perception of a compensation culture, but no-win, no-fee excesses, coupled with a system of lawyers paying ever growing referral fees to claims farmers and others, have created a regime in which the high-pressure selling techniques so clearly outlined by my noble friend can flourish. With those advertising techniques that we are now seeing, a claim for compensation is seen not as the means by which genuine claimants can receive proper redress, but as some sort of windfall or bonus.

Sir David Arculus's views were based on statistics as to claims costs from 2000, which predated the use of conditional fee agreements. We now have the advantage of the compendious review of civil litigation costs by Lord Justice Jackson—one of my partners at Beachcroft, Andrew Parker, was one of the assessors in that review. I pay tribute to Sir Rupert not only for the breadth of his report but for the way in which he has considered all the vested interests and has delivered recommendations which are in the public interest. It is a salutary lesson to us all. My noble friend Lord Young is right to conclude that the Jackson review should be implemented in full. What that means in practice is that the attitude of the claims farmers which I have described has to be removed, so that any incident must not necessarily lead to compensation but could and occasionally should lead to some form of redress.

Today's claimant is told that he needs a lawyer on no win, no fee, a claims farmer, and an “after the event” legal expenses policy to cover the risk of losing. All those mouths need to be fed. By the time the lawyer, the farmer, the broker and the others have had their cut, the claimant's interests trail in in some remote fourth or fifth. That is why I wholeheartedly endorse the conclusions of both Sir Rupert and my noble friend that we must have strictly controlled legal costs in all injury claims of up to £25,000 in value. I am delighted to hear that my friends and colleagues in the National Health Service Litigation Authority have also put forward a proposal to my noble friend which I strongly support.

The approach in health and safety has now to change from “you can't” to “you can”. No one will deny that we have made great strides in reducing fatal and serious accidents. The noble Lord, Lord Ramsbotham, concluded correctly by echoing the words of the Prime Minister in the foreword to the report: “We simply cannot go on like this”. This time, we really can deliver and we must follow this through in the way that my noble friend has so clearly outlined.