Communications Act 2003 (Maximum Penalty for Persistent Misuse of Network or Service) Order 2010

Baroness Wilcox Excerpts

Wednesday 21st July 2010 Grand Committee

Moved By

[Baroness Wilcox]

That the Grand Committee do report to the House that it has considered the Communications Act 2003 (Maximum Penalty for Persistent Misuse of Network or Service) Order 2010.

Relevant document: 1st Report from the Joint Committee on Statutory Instruments.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, the order before the Committee aims to strengthen both consumer protection and the regulatory regime concerning persistent misuse of an electronic communications network or service. It covers a number of misuses but focuses primarily on silent and abandoned calls. Misuse, as defined in the Communications Act 2003, is when a person uses an electronic communications network or service such that it causes another person unnecessary annoyance, inconvenience or anxiety. Examples of misuse other than from silent and abandoned calls include the misuse of automated calling systems, number scanning, misuse of a calling line identification facility, misuse for dishonest gain and misuse of allocated telephone numbers.

The order attempts to ensure that consumers are more adequately protected from misuse, especially silent and abandoned calls, and so makes the following provision: it raises from £50,000 to £2 million the maximum penalty which Ofcom can impose on anyone who persistently misuses electronic communications networks or services.

Silent and abandoned calls are usually made by marketing companies, which use a computerised calling device that dials a telephone number and automatically transfers the call to an available sales agent whenever a call is answered. If, however, no agent is available, the line is disconnected, which results in the consumer receiving an abandoned call. If no recorded information message is played, it becomes a silent call. Your Lordships will no doubt appreciate that such calls are very annoying and can cause distress, especially to vulnerable consumers. The fact that a caller’s number is often withheld only adds to people’s anxiety or frustration.

Such calls may also be generated by other organisations, whether in financial services or market research, or by companies engaged in number scanning activities, which dial a sequence of telephone numbers to find out which ones are in service; their purpose is to develop a “clean list” of numbers with commercial value.

The impact of silent calls is more than anecdotal. Research undertaken by Ofcom between December 2009 and March 2010 found that 73 per cent of respondents were very or fairly inconvenienced by silent calls. More than 5,000 consumers contacted BT’s nuisance calls bureau in the three months to June this year. In the past month alone there have been more than 12,000 callers to the bureau who listened to recorded advice about silent calls. In the first half of 2010, Ofcom received 2,500 complaints about silent calls. I am sure, therefore, that your Lordships will agree that there is indeed a need for us to take effective action to protect consumers from unwanted calls.

Last year, Ofcom asked the Government to consider raising the maximum penalty for persistent misuse from £50,000 to £2 million. Ofcom considered that the current maximum penalty was not high enough to serve as a real sanction or effective deterrent to those who persistently make silent and abandoned calls to consumers. In 2008 Ofcom dealt with a serious case, where Barclaycard was found to have made an extremely large number of silent calls over an eight-month period. Ofcom was constrained in only being able to issue the £50,000 maximum penalty.

Ofcom has other penalty powers. These include turnover-based broadcasting powers, which it used in relation to the premium rate service phone-in scandal when GMTV was fined £2 million. Ofcom's view is that although harm is difficult to quantify in relation to silent calls, in that there is no financial loss, vulnerable consumers may still suffer. In such circumstances, a £2 million maximum penalty does not seem unreasonable.

Indeed, a 12-week public consultation, which ran from 26 October 2009, found respondents overwhelmingly in favour of increasing the maximum penalty to £2 million. We believe that the proposed maximum penalty will provide a more substantial deterrent to most call centres that employ up to 400 employees. Although it is possible that larger call centres may not be fully deterred, it is likely that the adverse media attention of a £2 million penalty will deter the most persistent offenders from making silent and abandoned calls.

Ofcom will work on a case-by-case basis where enforcement is necessary, taking a firm but flexible approach towards those who make silent and abandoned calls or engage in other forms of persistent misuse. Ofcom will monitor complaints and other cases that it receives. It will work closely with the different nuisance call bureaux to identify trends in silent and abandoned call rates, as well as the organisations making such calls. Where appropriate, Ofcom will use its formal powers to require information and is committed to taking decisive action, including the use of financial penalties wherever appropriate.

One of Ofcom’s main duties is to act in the interests of consumers. Under the Communications Act 2003, Ofcom can take enforcement action when it has reasonable grounds for believing that someone has engaged in persistent misuse. Under Section 128 of the Act, it can issue a financial penalty to any organisation that it notifies, and it can notify a company whenever it has sufficient evidence to indicate that the company has not acted in accordance with its policy on silent and abandoned calls. The penalty level is assessed, taking careful account of the extent of the identified misuse, and this increased maximum penalty level will allow Ofcom to impose a more proportional penalty to better fit the seriousness of the offence. The order will ensure that consumers are better protected from silent and abandoned calls, by implementing a higher, more appropriate penalty that is more consistent with the harm that the calls generate. Additionally, the order will help to reduce the need for some consumers to purchase, at their own expense, devices that combat silent and abandoned calls. I beg to move.

[Lord Young of Norwood Green]

My Lords, I welcome the order, which is hardly surprising as the previous Government initiated this legislation. We have been playing this role quite often recently. I also welcome the comments of the Minister. As she indicated, the aim is to deter, by ensuring that the cost of compliance is less than that of non-compliance, at least in most cases. Automated dialling that leads to silent and abandoned calls causes anxiety and distress. Since 2007, there have been a number of cases involving large and well known companies—I will not name them all—and a high-profile case that the Minister did name in which Ofcom imposed the maximum penalty but would have gone further.

I will make a couple of points. How will companies be informed of the increase in the penalty? We hope that publicising the change will form part of the deterrent programme. I welcome Ofcom’s monitoring review and the guidance and education procedures. However, will Ofcom require companies that use this equipment to confirm in writing that their procedures have been checked and are fully compliant?

--- Later in debate ---

[Baroness Wilcox]

My Lords, I thank the Committee for its consideration of the draft instrument today. I think we have all agreed that this is an important issue, and I have been interested in the questions that have arisen from it. The noble Lord, Lord Young, rightly says that during his time as Minister he did a lot of work on this, and I am really only finishing the work that he started. I am delighted to do so today.

The noble Lord asked two questions. One was how people are going to be informed of the increase in the penalty. I am told that this will be publicised by BIS and Ofcom, and that Ofcom has a statement on persistent misuse on its website, which is kept updated. I do not know if that is the best that it could do; I am always worried that decisions are taken and then not best spread in the ways that we would hope. I sometimes wonder why we do not use magazines more often; we all read magazines, books and so on, and there are many other ways of doing this rather than just electronically. It is a good question and I would like to see a better answer than this, from us and from Ofcom.

The noble Lord’s second question was about requiring companies to confirm in writing that they are fully compliant. Companies are required to abide by Ofcom’s persistent misuse guidelines, which they receive on their website. Those are the answers to both his questions, which I hope he will find partially satisfactory.

[Lord Young of Norwood Green]

The companies get the guidance, but that is not confirmation. I cannot help feeling that if Ofcom knows which companies are using this equipment, it ought to get some confirmation from them that they have current procedures that have been checked and are fully compliant. That would not necessarily mean that the answer was totally correct but at least it would force them to answer that, rather than Ofcom just assuming, because its guidance is available, that companies are aware of this. I offer that as a possible reinforcement.

[Baroness Wilcox]

I thank the noble Lord. I would like to point this out to the Information Commissioner and see if he cannot study this and come up with some better answers.

My noble friend Lord Razzall asked two questions. He reminded us all about the calls from “heavy breathers” before this technology was developed. As a woman picking up a telephone, in the days before I went ex-directory, I have heard a heavy breather on the other end.

[Lord Razzall]

I’m not surprised.

[Baroness Wilcox]

Thank you. It is a worry, though—that awful pause when there is no voice on the other end of the phone. I think particularly of women on their own at home during the day, as well as older women who may be living alone and feeling very exposed. I have a fellow feeling for that.

The noble Lord moved on to political parties. I am interested to see what answer we can even give at this stage about the use of this technology by political parties in elections. We note the point and we will raise this, too, with the Information Commissioner. This is his area, and I am sure that he will be happy to have these things raised.

These have been valuable points and we are going to take them away with us. On that basis, I commend the order to the Committee.

Motion agreed.