Financial Services Bill

Lord Kennedy of Southwark Excerpts

Monday 15th October 2012 Lords Chamber

Moved by

[Lord Kennedy of Southwark]

187TA: Schedule 11, page 246, line 28, at end insert—
“29 After paragraph 22 insert—
“Part 5Complainant representativesIntroduction23 This Part of this Schedule applies to a complaint under the compulsory jurisdiction, the consumer credit jurisdiction or the voluntary jurisdiction in respect of which the complainant has entered into an agreement with a complainant representative.
24 A “complainant representative” is a person who has entered into an agreement with a complainant with respect to a complaint pursuant to which any fee has been, will be or may be paid by the complainant.
Complainant representative rules25 The scheme operator must make rules, to be known as “complainant representative rules”, which are to set out requirements applicable to complainant representatives and to complaints falling within paragraph 1.
26 Complainant representative rules may, among other things—
(a) require that a complainant representative disclose to the scheme operator the agreement referred to in paragraph 2 when a complaint within paragraph 1 is made;(b) require a complainant representative to take reasonable steps to obtain from the complainant, and as appropriate to supply to the ombudsman, such information as an ombudsman might reasonably require to determine a complaint;(c) provide for the consequences if a complainant representative does not comply with complainant representative rules or other applicable legal or regulatory requirements, including requiring or enabling the ombudsman not to consider any complaint or to consider a complaint only if conditions specified by the ombudsman have been satisfied;(d) enable the ombudsman to dismiss a complaint without consideration of its merits where the complainant representative has not cooperated with reasonable requests made by the respondent, including not providing adequate information as to the true nature of the complaint.27 Complainant representative rules shall not require the disclosure to the ombudsman scheme of any material which is legally privileged.
Consultation28 If the scheme operator proposes to make any complainant representative rules it must publish a draft of the proposed rules in the way appearing to it to be best calculated to bring them to the attention of persons appearing as likely to be affected.
29 The draft must be accompanied by a statement that representations about the proposals may be made to the scheme operator within a time specified in the statement.
30 Before making the proposed complainant representative rules, the scheme operator must have regard to any representations made to it under paragraph 7.
31 The consent of the Authority is required before any complainant representative rules may be made.””

[Lord Kennedy of Southwark]

My Lords, in moving this amendment I am seeking to get a proportionate framework in place that is good for consumers, but which is also good for the financial institutions complained about and the responsible claims management companies that take up complaints on behalf of consumers. That will move us all on from the unsatisfactory situation we find ourselves in at the moment.

A number of CMCs do not adhere to best practice and the consumer has little redress. My amendment would improve that situation for them with the drawing up of claimant representative rules, which are long overdue. Between April 2011 and March 2012, CMCs operating in the PPI sector generated 74% of consumer complaints overall. Of these, the majority related to some 15-20 CMCs. The source for these figures is the Ministry of Justice claims management regulation unit, so they are government figures.

I am very clear that in the mis-selling of PPI, the banks and other financial institutions behaved very badly. It is right that consumers have proper redress and compensation for their loss. I agree with my noble friend Lady Hayter that the banks could have done much more much sooner to deal with these issues.

However, the bombarding of financial institutions with claims from people who have never had any sort of relationship with the financial institution is bad practice. It is a fishing expedition that wastes the time and the money of the institution, and it clogs up the system for people who have a legitimate claim, making them wait even longer for redress.

Why is this done? Because there are huge sums of money to be made in fees. Who has not had an unwanted text message or phone call? While there are regulations already in place and mechanisms to deal with these breaches, we all know that they are not enforced and it is the consumer that suffers. An example of this is the Hinckley and Rugby Building Society, which revealed that 97% of the PPI-related complaints it has received in the three months to September 2012 were from people who are not members of, or have any relationship whatever with, the society. While that figure is lower for banks, there is still a huge number of pointless vexatious claims. Last year 69% of all PPI cases went to the ombudsman via CMCs. A small number of CMCs which are not playing by the rules are making an unfortunate situation even worse. They are not acting in the consumers’ interests. My amendment is an attempt to find a positive way forward, good for consumers, good for the financial institutions and good for the responsible claims management companies.

I hope that the noble Lord can give us a full response so that we can understand where the Government are on this matter. While I have no intention of pressing this to a vote, I hope that the noble Lord will agree to my meeting the relevant Minister outside the Chamber as I want to use this process to improve the lot for consumers, and the time has come for the Government to act.

[Lord McFall of Alcluith]

My Lords, I support my noble friend Lord Kennedy in his proposal, not least because, on my way down on the train today, I received a call from 0843 5600827. They wished to talk to me about my PPI claim of £3,350. Notwithstanding that, I received a text message saying that “time is running out”. I have never taken out a PPI policy.

This is an example of the instability which the industry is suffering at the moment because of this situation. I did chair a committee with consumer and industry representatives two months ago, in order for them to approach the MoJ to try to sort this issue out. Given these demands that have been made on the industry, the £8 billion that has been put aside for PPI mis-selling will surely increase. Let us not forget that we have interest rate swaps. On one of the sub-committees of the Parliamentary Commission on Banking Standards, of which I am a member along with the noble Lord, Lord Lawson, I asked an expert on interest rate swaps about the £8 billion. He said that that mis-selling could dwarf the £8 billion for PPI.

So this issue is current and will have a destabilising effect on the industry for the next few years, and also on consumers’ confidence. I do not think that the Government can escape their responsibilities on that by saying that this is not really a financial services matter, but for the MoJ. It is most certainly having an impact on financial services at the moment. Therefore, as a matter of urgency, the Government should take note of my noble friend Lord Kennedy’s amendment so that they can look at this issue in the cold light of day, outwith this Chamber, and get an adequate and decent solution, both for the industry and for the consumers who are suffering.

--- Later in debate ---

[Lord Newby]

My Lords, I share the concerns behind the amendment about the activities of CMCs in relation to financial services products. Like all noble Lords, I have been approached by them with the most spurious and ridiculous arguments about why I should give them details about my financial affairs in return for some often unspecified benefit. We start off by sharing that concern.

I would be more sympathetic to the amendment if I did not think that the Government were already doing something about it. I am very happy to meet noble Lords who would like to discuss the matter, along with colleagues from MoJ, to see what might be done to expedite effective action. But I do not think that it is necessary or appropriate to expect the FOS to step in as a quasi-regulator and make its own conduct rules. The role of the FOS should be to act as an independent dispute resolution service and not to act as a quasi-regulator of CMCs. It is just the wrong organisation to do that.

As I have said, I am sympathetic to what the noble Lord is seeking to achieve and I give an undertaking to set up a meeting to discuss it further. On that basis, I hope that the noble Lord can withdraw his amendment.

[Lord Kennedy of Southwark]

I thank the noble Lord for his response. I certainly think that we need to work on something. I know he says that things are in place but it is fair to say that they are not working well at the moment and that we need to do much better. On that basis, I beg leave to withdraw the amendment.

Amendment 187TA withdrawn.