Financial Guidance and Claims Bill [HL]

Baroness Buscombe Excerpts

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

Moved by

[Baroness Buscombe]

1: Insert the following new Clause—
“Objectives
(1) The objectives of the single financial guidance body are—
(a) to improve the ability of members of the public to make informed financial decisions,
(b) to support the provision of information, guidance and advice in areas where it is lacking,
(c) to secure that information, guidance and advice is provided to members of the public in the clearest and most cost-effective way (including having regard to information provided by other organisations),
(d) to ensure that information, guidance and advice is available to those most in need of it (and to allocate its resources accordingly), bearing in mind in particular the needs of people in vulnerable circumstances, and
(e) to work closely with the devolved authorities as regards the provision of information, guidance and advice to members of the public in Scotland, Wales and Northern Ireland.
(2) The single financial guidance body must have regard to its objectives when it exercises its functions.
(3) In this section “information, guidance and advice” means—
(a) information and guidance on matters relating to occupational and personal pensions,
(b) information and advice on debt, and
(c) information and guidance designed to enhance people’s understanding and knowledge of financial matters and their ability to manage their own financial affairs.”

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, on Report I agreed to consider a range of matters concerning Clause 2, and I now make reference to government Amendments 1, 3 to 9, 12 to 13 and 32. During our debates on the Bill I think that we have all been in agreement that the provisions articulated in Clause 2 were important in setting the tone and ethos for how the single financial guidance body should operate. In the debates on Report, we discussed the need for these provisions to be well structured and clear. I believe that this group of amendments provides that clarity and structure. They tidy up the framework on which the body will progress towards achieving its objectives and assist it and all those with whom it will work closely in understanding our expectations in relation to its activities. I am extremely grateful for the enormous contribution that noble Lords have made to the Bill. Indeed, so significant has been that contribution that we have ended up with a rather long and unwieldy Clause 2, so for this reason we propose to split it into three separate clauses.

Government Amendments 1 and 6 remove the objectives from the end of Clause 2 and insert them as a separate clause immediately before the clause. This reordering picks up on the points made by the noble Lord, Lord Stevenson, that starting with functions and moving on to objectives was perhaps the wrong way around. I agree with him. Placing the body’s objectives upfront will emphasise and aid a wider public understanding of the overarching objectives of the body and how it carries out its functions. Government Amendment 8 divides the remaining provisions in Clause 2 into two. The first sets out the broad functions of the body and the second contains the specific cold- calling provisions pertaining to the broad consumer protection function. It does not change the content of the cold-calling provisions.

Setting out the detail of the body’s new consumer protection function in a separate clause is consistent with the approach we have taken in the Bill. For example, this is how we have, from the introduction of the Bill at Second Reading, treated the specific detail about pensions guidance, which is articulated in a separate clause after Clause 2. Alongside relocating the body’s objectives, this amendment simplifies what had become a very long and complex clause. The Government want the legislation for the single financial guidance body to be clear and to flow in a way that the people who will use it, including the body itself, are able to read and understand. On the whole, people will not have had the benefit of our debates in Parliament, at least not without considerable reference to Hansard. The easier the Bill is to read when coming to it for the first time, the better.

In addition, I have considered the case that was made well by the noble Baronesses, Lady Finlay, Lady Coussins and Lady Hollins, and the noble Lord, Lord McKenzie, about the need for clarity around access to financial guidance and awareness of financial services for people who find themselves in vulnerable circumstances. Again, I agree that we should be clear about the body supporting vulnerable people in exercising its functions. Government Amendment 1 therefore strengthens the body’s objective to ensure that its information, guidance and advice is available to those most in need of it, bearing in mind in particular the needs of people in vulnerable circumstances.

Moving on to government Amendment 3, as I indicated on Report, facilitating the bringing together of expertise to address the difficult and sometimes interrelated financial issues that people experience in terms of budgeting, savings, retirement planning and problem debt is a cornerstone of the policy for the single financial guidance body. We want to make it easier for people to access the help they need to make effective financial decisions. This amendment speaks to the concerns raised by the noble Lords, Lord McKenzie and Lord Stevenson, and places an obligation on the body and its delivery partners to consider all the financial guidance and debt advice needs of people accessing its services, and whether they would benefit from receiving other services that the body provides.

Government Amendments 4 and 5 make small changes to the strategic function of the body. They address points raised by several noble Lords during our debates in Committee about the lack of clarity around the body’s role in developing a national strategy to improve people’s financial capability and ability to manage debt. The strategic function currently requires the body to work with the financial services industry, the devolved authorities, and the public and voluntary sectors to support the development of a national strategy.

These amendments make it more evident that the single financial guidance body will lead on developing the strategy and that it will have some responsibility for overseeing the delivery of activities stemming from the strategy. I believe these amendments address the concerns about accountability that a number of noble Lords expressed.

Finally, Amendments 7, 9, 12, 13 and 32 are minor and technical in nature. Amendments 7, 12 and 13 are together a tidying-up measure. They remove the definition of devolved Administrations from Clauses 2 and 14 and insert the definition into Clause 19, “Interpretation of Part 1”. Amendment 9 corrects a technical defect in Clause 3(2), replacing the reference to the Pension Schemes Act 2015 with one to the relevant section of the Financial Services and Markets Act 2000. Amendment 32 allows for differential commencement by area. This is so that, in accordance with Cabinet Office guidelines, if it is necessary to commence at a later date for Northern Ireland there is a power to do so.

I trust and hope noble Lords will agree that these amendments provide sensible and pragmatic adjustments to the Bill, improving its structure and providing clarity. I beg to move.

[Baroness Coussins (CB)]

My Lords, I welcome Amendment 1 and remind noble Lords of my interest as president of the Money Advice Trust. The amendment, in clarifying the single financial guidance body’s objectives, will ensure that its services are available to those most in need of them, specifically with the inclusion of the words in proposed new subsection (1)(d), “bearing in mind”, the particular,

“needs of people in vulnerable circumstances”.

As noble Lords heard during our debate on this on Report, there has been a great deal of progress in this area in the financial services industry in recent years, including through the work of the Financial Services Vulnerability Taskforce. It is very good to see that the SFGB should give similar prominence to vulnerability in its work. The explicit inclusion of “vulnerable circumstances” in Amendment 1 is an excellent example of this approach.

I offer my sincere thanks to the Minister for listening so carefully to what I and my noble friends Lady Finlay and Lady Hollins said on this matter at an earlier stage, and for agreeing to reflect this in the Bill. I am very pleased to support Amendment 1.

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[The Earl of Listowel (CB)]

I, too, thank the Minister and noble Lords for making significant progress. Perhaps I may ask for clarification: will care leavers be included in the “vulnerable” group? I apologise to your Lordships for being absent from Report—I was not able to be present—so I ask this question now.

[Baroness Buscombe]

There is no question: care leavers will be included in this group.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I declare an interest as a member of the Financial Inclusion Commission and a former chair of StepChange, the debt charity. Before I get on to the nature of the amendments, which we support, I want to pick up on the tone that has already established itself around the House of a group of people with expertise and knowledge, willing to put aside any political differences they might have at the start of such a Bill, and with a fierce commitment to work together to improve what we have before us. We have just heard a series of short comments which are redolent of a much greater and more important truth: namely, that when the House does this, it really does it well. I am very grateful to all concerned who have been part of this. We are seeing today a Bill that has been transformed, not because of any particular line or argument in a political or wider sense but because people genuinely believed that there were things here that could be made better and that, as a result, the lives of people right around this country would be improved. I think it is very important that we hold on to that.

I thank the Minister, as everyone else has, for introducing this group of amendments which reorganise and expand the objectives and functions of the new single financial guidance body and set the tone for its future activities. We are pleased to support the group of amendments, as I said. It is important to get a sense of the journey we have been on: we made it clear at Second Reading that, although we agreed with the Bill, we thought it was a framework Bill and not a Bill that had the substantial and important powers that we thought were needed. We wanted to make sure that by the time it left your Lordships’ House it had been changed a lot—and of course it has.

As originally drafted, it was too narrowly focused on the near-term task of bolting together the three separate functions that were being brought together—debt advice, pensions guidance and financial capability—and on transferring the very important responsibility for claims management to the FCA. It was really short—a lot of people picked this up—on the vision that the body should have and what the sector was going to be in the medium term. It seemed to devalue the work on strategy that was so important and is now at the centre of the activities. The fact, as the noble Baroness said, that the original Clause 2 led on functions and only later referred to objectives meant that the Bill, I think unintentionally, gave the impression that the main purpose was the enactment of what would be simply a series of structural adjustments.

This, as we have been reminded, was at a time when the Government had decided to change the terms of trade in financial inclusion by creating a new Minister at the DWP, the department that is sponsoring the Bill, but had not set out clearly what they expected the Minister to do. We all agreed, I think, right around the House, that the Bill and the new functions of the SFGB would actually be about delivering a holistic financial inclusion policy. As we have already learned from its chair, the excellent Lords Select Committee that reported at about this time on a range of issues around financial inclusion made the case for extending the Bill to cover a number of specific proposals.

Towards the end of Report, when it was clear that the Bill had changed and was going to contain much more about the application of financial inclusion policies, as we will hear again later today, we suggested that Clause 2 should be revamped. What we wanted was a bit more of the longer-term vision that the SFGB should be aiming for, and we argued that putting the objectives first and then dealing with the functions at the new body’s disposal was a better way of doing that—and I think that splitting the original clause into separate groups is a concrete way of doing it. So we are very grateful to the Minister for seeing the merit of our arguments and we thank the Bill team for working very hard to get the new draft into shape. I have a reputation in your Lordships’ House for not being very good at drafting, so I was delighted when they agreed to take it away and bring it back in the form in which we now have it: it is so much better.

The noble Baronesses who spoke on the vulnerability issue did the House a great service by raising with great passion the need to make sure that the Bill, as well as generally describing the new body, focuses on vulnerable people. We are very grateful to see that amendment here today. With that, we support these amendments.

[Baroness Buscombe]

My Lords, I thank noble Lords for this short debate and for their support for this amendment. In reply to the question raised by the noble Lord, Lord Kirkwood, yes, we expect persons in vulnerable circumstances to be robustly signposted to UC and other benefits where appropriate.

Amendment 1 agreed.

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Moved by

[Baroness Buscombe]

2: Page 2, line 21, at end insert “, and
(b) advice to the Secretary of State on the establishment of a debt respite scheme (see section (Debt respite scheme: advice to the Secretary of State)).”

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[Baroness Buscombe]

My Lords, I turn to the protection of indebted consumers, in particular the idea of providing a breathing space scheme, referred to in the amendment as a debt respite scheme. I thank noble Lords for their insightful and constructive contributions to previous debates on the subject.

I promised on Report that the Government would do further work on the issue in time for Third Reading. My officials and I have worked hard to produce an amendment that enables breathing space to be delivered quickly and effectively, a case for which noble Lords—in particular, the noble Lord, Lord Stevenson—put forward eloquent and powerful arguments. Indeed, the wording of the amendment builds on the amendment tabled by the noble Lord, to which the noble Lord, Lord Sharkey, and the noble Baroness, Lady Altmann, added their names on Report.

The best of your Lordships’ House has been on show in the development of the amendment. The way in which the Government and the Opposition have worked together to achieve consensus on a workable amendment which will enable the successful delivery of a breathing space scheme has been impressive, and it is my pleasure to introduce the amendment to your Lordships’ House. I know that there is broad agreement across your Lordships’ House that a breathing space scheme is both necessary and important. It has the potential to help thousands of vulnerable families out of problem debt, and provide a better life for individuals and their families.

I reassure the House that the Government remain strongly committed to the implementation of a breathing space scheme that is well designed and delivered at the earliest opportunity. We have already set out a clear timetable for developing the policy; the amendment provides the legislation that will allow us to implement it. Beyond enabling the introduction of a breathing space, the amendment contains many similarities with the one tabled by noble Lords on Report. For instance, it provides for details of the scheme to be set out once more detailed policy design has taken place. This is crucial, given that the Government are committed to listening to expert views put forward in the call for evidence. It also requires the Government to receive advice on the design of the scheme from the single financial guidance body, which will be important given the body’s expertise and central role in supporting indebted consumers. However, noble Lords may also notice a few differences from the amendment tabled on Report.

The noble Lord, Lord Stevenson, and I are in agreement that the Government’s amendment enables breathing space to be designed in a more effective way, building on, rather than duplicating, the work already commenced through the call for evidence, while still allowing for its introduction to take place swiftly.

I will outline a couple of the specific changes. First, the amendment enables the single financial guidance body to be involved in the design of the policy in a more suitable way. The Government plan to complete an extensive policy development and consultation process over the next year. As set out previously, we published a call for evidence last month on this topic, and intend to consult on a specific policy proposal in the first half of 2018. Through this process we will have established a robust blueprint of a breathing space scheme, informed by the expert views of the sector. Given this, we have agreed that it would not be the best use of the new body’s time and resources to require it to redo this work in its entirety once it is set up. Instead, our amendment would require the single financial guidance body to provide advice on specific issues requested by the Government.

The body must provide this advice within 12 months of its being established, which we expect to be in late 2018. On receipt of this advice, we will make regulations to set up the scheme as soon as is practicable—and certainly within 12 months of receiving the advice. This process will enable the body to supplement, rather than duplicate, the policy work the Government will have done up to that point. It could also speed up the introduction of the scheme, given that the advice is likely to be more targeted.

Secondly, we are in agreement that the amendment provides for more flexibility in designing the eventual scheme, potentially allowing for a scheme with a wider scope. For instance, our amendment enables—but does not mandate—the scheme to extend to Wales and Northern Ireland. We will assess the preferred geographic scope of the policy through our consultation, and the amendment allows us to deliver on the outcome of this process.

These are important changes, which we have reached a clear consensus on. However, after long and exhaustive discussions with House officials we have been informed that, for these changes to remain within scope of the Bill, we must take a power to make these regulations rather than a duty. I must be clear: in our view, this wording change has no practical impact. We have been clear, here and elsewhere, that we will deliver a breathing space scheme. This was a manifesto commitment and we are already midway through an intensive policy consultation process. This is simply a necessary step to give us the power we need to establish the scheme through this Bill. The Government’s position is clear. This amendment reflects the strength of our commitment to implementing a successful breathing space scheme. It sees the scheme delivered quickly and effectively and it ensures the sound design, implementation and operation of the scheme.

I turn to Amendment 33, tabled in the name of the noble Lord, Lord Sharkey. I begin by making it clear that this amendment is, with respect, neither necessary nor meaningful; it is actually entirely meaningless. As the House will have seen, the Government have tabled their own amendment to ensure that the Long Title of the Bill reflects the content following the additions made on Report. I must stress that my view remains that it is standard practice to add wording such as that tabled by the Government to the Long Title, and that it is perfectly adequate as tabled.

I also take this opportunity to remind noble Lords that the content of the Bill informs the Long Title; it is not the other way around. Indeed, the Companion to Standing Orders says that,

“amendments to the long title are not in order unless they are to rectify a mistake in the original title, to restate the title more clearly or to reflect amendments to the bill which are relevant to the bill but not covered by the former long title”.

Clearly, it is the third of these purposes which is relevant to this instance. Any amendment to the Title must therefore reflect amendments made, or being made, to the Bill. It is for this reason that we tabled an amendment to the Long Title to accompany the amendments that we tabled in respect of debt respite. The purpose is not to enlarge the scope of a Bill by amending the Long Title.

I am afraid that I must also express my disappointment that the noble Lord, Lord Sharkey, did not feel that he could discuss his original amendment, which he has now withdrawn, with me. Had he done so, I would have pointed out to him that I did not consider that it accurately reflected the contents of the Bill. His current amendment accurately reflects the content of the Bill so—in the spirit of consensus and because, as I have described, the amendment does not affect the scope of the Bill—I am prepared to accept it. On that basis, I shall not move Amendment 34 standing in my name and shall accept Amendment 33, tabled in the name of the noble Lord, Lord Sharkey.

[Lord Stevenson of Balmacara]

My Lords, I thank the Minister for introducing the amendments in this group which, as she says, will primarily establish a much-needed statutory debt respite scheme. As she also said, it is necessary and important. We have signed some of the amendments in this group and are absolutely delighted to support their inclusion in the Bill.

The failure to include a breathing space in the Bill left a substantial gap in the services which the debt charities need, if they are to offer the best support to those struggling with unmanageable debt, so we have been pursuing it through the various stages of the Bill and challenging the Government to up their game and honour their manifesto commitment. Initially, I think it was clear to the whole House that the Minister was under strict instructions to agree to nothing. But it is to her considerable credit that, after listening to the arguments and consulting widely, she decided that the case had been made. She and her Bill team then went out to bat for the proposal and, from a standing start, secured support for the amendment from her government colleagues. Only those who have witnessed the turf wars that this sort of decision—to introduce a breathing space—must have precipitated can appreciate what has been going on in Whitehall over the last few weeks. I have seen that at close quarters and it is not a pretty sight. I therefore salute the hard work that the Minister and her team have put into this, and I am lost in admiration at their ability to persuade—at ridiculously short notice—her ministerial colleagues to back this amendment today.

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[Baroness Buscombe]

My Lords, I shall be brief. I respond first to the noble Earl, Lord Listowel. I very much welcome the opportunity to write to him on his question about council tax for care leavers. On the scheme, I say to both the noble Earl and the noble Lord, Lord Kirkwood, that the Treasury has already issued a call for evidence. I attended a meeting at the Treasury with officials from Scotland, along with Treasury Ministers and officials to discuss how it works, what the processes have been and the path and history behind the debt respite scheme in Scotland. That is already under way.

Perhaps I should repeat one brief paragraph just to reassure the noble Lord. The single financial guidance body must provide advice within 12 months of being established, and on receipt of this advice, we will make regulations to set up the scheme as soon as is practicable, and certainly within 12 months of receiving the advice. It must be no later than 12 months, but we shall make every effort to do it as soon as we can.

I should also add that the scheme can apply to public debts, but we do not want to prejudge the consultation that we are progressing. A number of questions that the noble Lord raised rightly rest with the consultation process.

[Baroness Altmann]

I intervene briefly to ask my noble friend for some gentle reassurance about the issue of cold calling. I am enormously grateful that we have the debt respite scheme agreed, and the new wording, on which I congratulate the department, and the new wording for the Long Title, which explicitly includes cold calling. Can my noble friend reassure us that the ban on cold calling that the Government intend to introduce will be as effective as possible and that, rather than using the ICO, which has very broad powers, the direct regulator—in particular, on pensions, the FCA—will be responsible for enforcing the ban? Regulatory imposition and enforcement by existing regulators is surely more effective in achieving compliance than relying on enforcement of widely drawn regulation.

This weekend, a story in the Mail on Sunday exposed the problems of nuisance calls to vulnerable elderly people about funeral plans. It was absolutely clear how ineffective the ICO has actually been in enforcing a ban on cold calling. It merely tries to sweep up the mess afterwards. It is cited as saying,

“where we find the law has been breached we will … take … action”.

[Baroness Buscombe]

I am so sorry to interrupt my noble friend, but there is no amendment in respect of cold calling tabled at Third Reading, and therefore we cannot speak to it. I reassure her that we have already committed to introducing legislation to ban cold calling in the other place.

Amendment 2 agreed.

Moved by

[Baroness Buscombe]

3: Page 3, line 15, at end insert—
“( ) Where the single financial guidance body provides information, guidance or advice to a person in pursuance of one of the functions mentioned in subsection (1)(a) to (c), it must consider whether the person would benefit from receiving information, guidance or advice in pursuance of any other of those functions (and it must ensure that SFGB delivery partners are under a similar duty).”

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Moved by

[Baroness Buscombe]

9: Page 4, line 1, leave out from “In” to “insert” in line 2 and insert “section 137FB of the Financial Services and Markets Act 2000 (FCA general rules: disclosure of information about the availability of pensions guidance), after subsection (3)”

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Moved by

[Baroness Buscombe]

10: Insert the following new Clause—
“Debt respite scheme: advice to the Secretary of State
(1) The Secretary of State must, within three months of the establishment of the single financial guidance body, seek advice from the body on the establishment of a debt respite scheme.
(2) A debt respite scheme is a scheme designed to do one or more of the following—
(a) protect individuals in debt from the accrual of further interest or charges on their debts during the period specified by the scheme,
(b) protect individuals in debt from enforcement action from their creditors during that period, and
(c) help individuals in debt and their creditors to devise a realistic plan for the repayment of some or all of the debts.
(3) The matters on which the Secretary of State may seek advice include (but are not limited to)—
(a) the appropriate person to administer the scheme (and the single financial guidance body may recommend the creation of a new body for this purpose);
(b) whether the scheme should apply in England only, or whether it should also apply in Wales or Northern Ireland (or both);
(c) the scope and design of the scheme, for example—
(i) the types of debtors and the types of debts it should cover; (ii) the types of protections it should give;
(iii) the time period for which the protections should apply;
(iv) what the obligations on debtors and creditors should be during any period for which protections apply, including any period of a repayment plan;
(v) the consequences of a failure by a debtor or a creditor to comply with a repayment plan;
(d) how the scheme should work, for example—
(i) how an application should be made for the protections given by the scheme;
(ii) suitable arrangements to keep creditors informed;
(iii) whether there should be a central register of persons admitted to the scheme;
(e) how the scheme should be implemented.
(4) The single financial guidance body must provide the advice sought within 12 months of its establishment.
(5) The Secretary of State must publish the advice.”

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Moved by

[Baroness Buscombe]

12: Page 12, line 29, leave out subsection (9)

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Moved by

[Baroness Buscombe]

13: Page 15, line 4, at end insert—
“the “devolved authorities” means— (a) the Scottish Ministers,
(b) the Welsh Ministers, and
(c) the Department for Communities in Northern Ireland;”

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Moved by

[Baroness Buscombe]

14: Page 15, line 32, leave out “England or Wales” and insert “Great Britain”

[Baroness Buscombe]

My Lords, I announced on Report in response to amendments tabled by the noble Baroness, Lady Meacher, the Government would bring forward amendments to introduce an interim fee cap in respect of PPI claims management services. Amendments 25, 26, 27, 29 and 30 honour that commitment—and I am sorry to see that the noble Baroness is not in her place.

As noble Lords are aware, this Bill already puts a duty on the FCA to cap fees charged in respect of financial services claims. This will ensure fair and proportionate prices for consumers using these services. However, as we have previously discussed, the implementation of the new regulatory regime and an effective, robust cap will necessarily take some time. This is a particular concern, given that the FCA’s PPI claims deadline may have passed by the time the FCA’s fee cap is in place. That is why the Government are introducing an amendment to set a fee cap at 20%, excluding VAT, of the claim value. The interim fee cap will apply to both CMCs and legal services providers that carry out claims management services in relation to PPI claims, to be enforced by the relevant regulators. It will be enforced by relevant regulators from two months after the Bill receives Royal Assent, until the FCA is in a position to implement its own cap. This cap will complement the range of measures in relation to PPI and other financial claims that the claims management regulation unit has announced. These include banning upfront fees and banning charges, where it is identified that the consumer does not have a relationship or relevant policy with the lender, as well as ensuring that all cancellation charges are reasonable and that consumers are provided with an itemised bill setting out details of what they relate to. This package of measures will support the Government’s aim to ensure that the claims management sector works in the interests of consumers by protecting them from excessive fees.

On Report, I also committed to tabling a government amendment to extend the FCA regulation of claims management to Scotland, should the UK and Scottish Governments agree that position. I am pleased to be able to confirm that the Scottish Government have now written to the UK Government to confirm agreement to extending regulation there. It highlighted that the situation in Scotland has changed since this issue was first discussed earlier this year. Legislation is currently progressing through the Scottish Parliament that will allow Scottish solicitors to offer increased funding options to clients on a no-win no-fee basis. As a result of these changes, Scottish solicitors will no longer need to set up CMCs to offer damages-based agreements to clients, and the CMC landscape is expected to change significantly.

To ensure that CMCs are not able to take advantage of this potential gap in regulation by targeting Scottish consumers, the UK and Scottish Governments have now agreed that FCA claims management regulation should extend to Scotland. This will ensure that there are appropriate regulatory standards in place to deal with CMC practices across Great Britain. These amendments follow up on my commitment on Report and do just that, extending FCA regulation of CMCs to Scotland, which will ensure that Scottish consumers are protected in the same way as those in England and Wales.

I note that the constitutional position of this issue has not been entirely straightforward as CMC regulation clearly concerns a mix of reserved and devolved matters. The regulation of the legal profession in Scotland is of course devolved, whereas matters of competition and aspects of consumer protection are reserved. It is the UK Government’s view that CMC regulation concerns reserved matters of competition and consumer protection. The Scottish Government have confirmed that they will seek the legislative consent of the Scottish Parliament for the CMC provisions as part of the wider legislative consent Motion for this Bill.

For the purposes of record, I should note that the UK Government’s view is that only Clause 20(4) relating to consumer advocacy is relevant to the legislative consent process, although I am aware that the Scottish Government might take a broader interpretation of how much of this is covered by the LCM. Nevertheless, the crucial issue here is that we have agreement that FCA regulation of CMCs should cover Scotland. I believe that this represents a sensible outcome which will benefit and protect consumers across Great Britain.

I am sure your Lordships will agree that the introduction of an interim restriction on charges in respect of CMCs is a positive step forward in ensuring that the claims management sector works in the interests of consumers. I am sure you will also agree that it is desirable to extend FCA regulation of CMCs to Scotland, given the change in circumstances there. I beg to move.

[Baroness Kramer]

My Lords, I apologise, as when I last spoke, I attributed to the noble Viscount, Lord Trenchard, a very eloquent speech that was made on cold calling and the way it targets vulnerable people, when it was the noble Viscount, Lord Brookeborough, who made that speech. I apologise to both parties. If I have any excuse, it is that I confuse my own children, and one of them is male and the other is female, so it is even more embarrassing.

As regards this group of amendments, my only regret is that the cap on fees is set at 20%. It would have been better to have a lower cap. However, we congratulate the Government on the underlying principle of taking temporary action because it is very likely that by the time the FCA gets its grip on this issue we will be beyond the reach of future PPI claims. However, other than that, I once again thank the Minister for being responsive to the issues that have been raised all around the House, including this one and those of cold calling, debt respite and financial inclusion. This is a very important move by the Minister and her name will be attached to these issues well into the future.

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[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.

[Lord McKenzie of Luton (Lab)]

My Lords, given the strong consensus that has emerged from the noble Lords who have spoken on these amendments—the noble Baronesses, Lady Kramer and Lady Altmann, the noble Earl, Lord Kinnoull, and the noble Lord, Lord Hunt—I can be brief. We support these amendments and we also support the provisions in the Bill, particularly in relation to a senior manager regime. That is very important.

Amendments 14 to 24 respond to the Scottish Government’s request for the regulation of CMCs to be extended to Scotland, and they will also help to negate the concerns that have been expressed about cross-border planning.

With regard to Amendment 25, although she is not here today, we should place on record our thanks to the noble Baroness, Lady Meacher, for leading the charge on this issue. As others have noted, the cap has been set at 20% exclusive of VAT, which is at the upper end of the range on which the Government consulted. However, we should see that in context. Currently it is suggested that the average fee rate for CMCs is some 37% of gross revenue, which is almost double the level at which the cap has been set.

It may be appropriate to remind ourselves of the scale of PPI, which I know will be coming to an end in August. I think that banks’ finance companies have paid out more than £26 billion in compensation over recent years. That is an extraordinary amount of money, and I wonder what that injection of funding to the consumer has done to the economy. It is important that the cap bites as soon as possible. Can the Minister confirm that the cap will apply to charges arising after the entering into force of Clause 21—just two months after this legislation comes into force—notwithstanding that the claims to which they relate may have preceded that? Can she confirm that it is not the date of the claim that is relevant for these purposes but the date when the compensation is paid?

Amendment 29 would appear to limit the application of the cap so that it does not apply to Scotland in respect of charges relating to claims prior to the transfer of regulation to the FCA. Perhaps the Minister could confirm that my understanding is correct. It would also seem to deny the application of Schedule 4 to Scotland. This schedule is concerned in part with transfer schemes in relation to the FCA. Perhaps the Minister could say what, if any, restructuring in Scotland might be affected by this change and how it would be affected if Schedule 4 were not applied to it.

Overall, we support these important amendments and look forward to the Minister’s reply.

[Baroness Buscombe]

I thank the noble Lord, Lord McKenzie. I am so afraid of making a mistake at this late stage that I would prefer to write to him in reply.

Amendment 14 agreed.

Moved by

[Baroness Buscombe]

15: Page 15, line 42, leave out “England or Wales” and insert “Great Britain”

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Moved by

[Baroness Buscombe]

25: Insert the following new Clause—
“PPI claims and charges for claims management services: general
(1) This section and sections (PPI claims: interim restriction on charges before transfer of regulation to FCA) and (PPI claims: interim restriction on charges after transfer of regulation to FCA) make provision for a fee cap to apply in certain circumstances to charges for regulated services provided in connection with a PPI claim.
(2) The following provisions explain terms used in those sections.
(3) The fee cap applicable to the amount charged for regulated services provided in connection with a PPI claim is 20% of the amount recovered for the claimant in satisfaction of the claim.
Accordingly, where nothing is recovered (whether or not a claim has been made or concluded) the fee cap is zero.
(4) But the charging of a reasonable amount for work done for the claimant is not to be regarded as exceeding the fee cap for a PPI claim if—
(a) the amount is charged for regulated services provided in connection with the claim,
(b) no other amount is charged for those services,
(c) the claimant has terminated the agreement governing the provision of such services (whether before or after the making of a claim), and
(d) the termination was not achieved by the cancellation of the agreement during a cooling off period available to the claimant by right (whether conferred by the agreement or otherwise).
(5) References to a claim are to a claim (however described) seeking compensation, restitution, repayment or any other financial remedy or relief, whether or not the claim is made or could be made by way of legal proceedings.
(6) References to the amount charged for regulated services provided in connection with a PPI claim are references to a sum comprising all amounts charged for such services in connection with the claim (whether or not charged under a single agreement), exclusive of VAT.
(7) References to the amount recovered for the claimant, in relation to a PPI claim, include a reference to any amount which (instead of being paid to or to the order of the claimant)—
(a) is set off against a debt due from the claimant to the person against whom the claim is made, or
(b) is paid to any person other than the claimant (whether a person providing regulated services in connection with the claim or any other person) with a view to discharging the whole or part of a debt due from the claimant.
(8) In this section references to regulated services are—
(a) so far as relevant for the purposes of section (PPI claims: interim restriction on charges before transfer of regulation to FCA), to be read as referring to regulated claims management services, and
(b) so far as relevant for the purposes of section (PPI claims: interim restriction on charges after transfer of regulation to FCA), to be read as referring to any service which is a regulated claims management activity.
(9) “PPI claim” means a claim relating to the selling of payment protection insurance (whether it concerns amounts paid by the policyholder or otherwise).
(10) “Regulated claims management services”—
(a) does not include any reserved legal activities of the kind mentioned in section 12(1)(a) or (b) of the Legal Services Act 2007 (exercise of a right of audience or the conduct of litigation), but
(b) otherwise, has the same meaning as in the Compensation Act 2006 (see section 14 of that Act).
(11) “Regulated claims management activity” has the same meaning as in the Financial Services and Markets Act 2000 (see the definition inserted by this Act in section 417(1) of that Act).
(12) “Section 22(1B) specified activity provisions” means provisions of an order made under section 22(1B) of the Financial Services and Markets Act 2000 (as inserted by this Act) which specify a kind of activity as a regulated activity within the meaning of that Act.
(13) “The FCA” means the Financial Conduct Authority.”

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Moved by

[Baroness Buscombe]

28: Page 19, line 20, at end insert—
“( ) Sections (Debt respite scheme: advice to the Secretary of State) and (Debt respite scheme: regulations) extend to England and Wales and Northern Ireland.”

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Moved by

[Baroness Buscombe]

30: Page 19, line 38, at end insert—
“( ) Sections (PPI claims and charges for claims management services: general) to (PPI claims: interim restriction on charges after transfer of regulation to FCA) come into force at the end of the period of two months beginning with the day on which this Act is passed.”

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Moved by

[Baroness Buscombe]

That the Bill do now pass.

[Baroness Buscombe]

My Lords, I would like to take a moment to reflect on the Bill and its passage through your Lordships’ House. This is important legislation that will benefit members of the public and provide a sustainable legislative framework for public financial guidance and the regulation of claims management companies in the future. It has improving financial capability at its heart and I am proud to be associated with it.

At Second Reading I said that I hoped we would have constructive engagement as the Bill progressed through this House. Your Lordships have not disappointed. The Bill has rightly been accorded due and diligent attention from noble Lords across the House, and I would like to thank all those who have engaged on the Floor of the House and also in the many meetings we have had outside.

I would like also to thank my noble friend Lord Young of Cookham for all his help and assistance as the Bill has progressed. He has been a tower of strength and a more than able co-pilot throughout.

Finally, but importantly, I would like to thank the Bill team and officials across the Department for Work and Pensions, Her Majesty’s Treasury, the Department for Digital, Culture, Media and Sport, and the Ministry of Justice. Many of them have put in incredibly long hours to support my noble friend and me during debates, facilitate briefing meetings and provide the updates, letters and briefings that many noble Lords have received. I may add that other noble Lords, in particular the noble Lord, Lord Stevenson, referenced the cross-departmental support we have had. It has been amazing and has made an enormous difference to the outcome of the Bill.

Throughout the passage of the Bill we have listened to the arguments and suggestions made by noble Lords, and, in many cases, have agreed and brought forward amendments that strengthen it. I think we can all agree that this Bill leaves here in good shape, and I believe that this is in no small part due to the helpful and constructive manner in which all sides of the House have engaged with it.

[Lord McKenzie of Luton]

My Lords, I will say just a few words. I start by thanking the noble Baroness, Lady Buscombe, for her kind words. We are grateful again for the open-minded manner in which she and her co-pilot, the noble Lord, Lord Young, have approached the Bill. I never had the opportunity to ask him whether Luton Airport was on the flight path, but I will try to on a future occasion.

Invariably it is said at the end of a Bill process that the House of Lords has improved the Bill from its starting point. While tenuous in some instances, it is definitely true with this Bill. Support across the Chamber has enabled the framework for a debt respite scheme; consumer protection on cold calling; strengthening access to information and guidance on accessing pensions; a duty of care on setting standards; requiring that pensions guidance functions are provided freely and impartially; strengthening offences of mimicking; as well as securing the dashboard. These changes have come about because, broadly, we have had a shared analysis of what the Bill could achieve; a shared analysis with the Lib Dems and Cross-Benchers as well as with the Government, including the noble Baroness, Lady Altmann.

We are very grateful for the proactive approach of the Bill team, which went above and beyond in trying to fit our amendments into the confines of the scope of the Bill. I do not know how many variations of the debt respite provisions the team had to cope with, but there were many. I offer my thanks to the Lib Dems for their joint working on some key areas, among them the noble Lords, Lord Sharkey and Lord Kirkwood, and the noble Baroness, Lady Kramer.

Finally, I thank my colleagues, my noble friend Lady Drake, our pensions supremo who unfortunately is not in her place today, and of course my noble friend Lord Stevenson for his experience and passion on matters of the debt space. It has made my role a good deal easier.