Financial Guidance and Claims Bill [ Lords ] (Third sitting)

Debate between John Glen and Guy Opperman

Tuesday 6th February 2018 Public Bill Committees

[John Glen]

Clause 27 deals with the application and enforcement of the interim fee cap before the transfer of claims management regulation to the FCA. It states that the cap will be implemented by the claims management regulation unit and legal services regulators in England and Wales. It also defines the first interim period as the period beginning with the day the cap comes into force, two months after Royal Assent, until the day before regulation transfers to the FCA. It is clear that the clause plays an integral part in establishing the interim fee cap.

Question put and agreed to.

Clause 27 accordingly ordered to stand part of the Bill.

Clause 28 ordered to stand part of the Bill.

Clause 29

Extent

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

I beg to move amendment 7, in clause 29, page 25, line 32, leave out from beginning to “extends” and insert “Part 1, other than the provisions mentioned in subsections (2) to (3B),”

This amendment makes a minor drafting change, restructuring the extent clause, in consequence of the changes to that clause made by Amendment 8 and the amendments relating to Part 2.

--- Later in debate ---

[Guy Opperman]

The amendment is a minor change that removes the privilege amendment inserted in the House of Lords. Privilege amendments are inserted to acknowledge that it is the privilege of the House of Commons to control charges on the people or on public funds. Its removal is a formality.

Amendment 17 agreed to.

Clause 31, as amended, ordered to stand part of the Bill.

New Clause 1

Personal pension schemes: requirements to recommend guidance etc

“(1) Section 137FB of the Financial Services and Markets Act 2000 (FCA general rules: disclosure of information about the availability of pensions guidance) is amended as follows.

(2) After subsection (1), insert—

“(1A) The FCA must also make general rules requiring the trustees or managers of a relevant pension scheme to take the steps mentioned in subsections (1B) and (1C) in relation to an application from a member or survivor—

(a) to transfer any rights accrued under the scheme, or

(b) to start receiving benefits provided by the scheme.

(1B) As part of the application process, the trustees or managers must ask the member or survivor whether they have received appropriate pensions guidance or appropriate independent financial advice.

(1C) In a case where the member or survivor indicates that they have not received appropriate pensions guidance or appropriate independent financial advice, the trustees or managers must also—

(a) recommend that the member or survivor seeks such guidance or advice, and

(b) ask the member or survivor whether—

(i) they wish to wait until they have received such guidance or advice before deciding whether to proceed with the application, or

(ii) they wish to proceed with the application without having received it.

(1D) The rules may—

(a) specify what constitutes appropriate pensions guidance and appropriate independent financial advice;

(b) make further provision about how the trustees or managers must comply with the duties in subsections (1B) and (1C) (such as provision about methods of communication and time limits);

(c) specify what the duties of the trustees or managers are in the situation where a member or survivor does not respond to a question mentioned in subsection (1B) or (1C)(b);

(d) provide for exceptions to the duties in subsections (1B) and (1C) in specified cases.”

(3) In subsection (2), for “this section” substitute “subsection (1)”.

(4) After subsection (2) insert—

“(2A) Before the FCA publishes a draft of any rules to be made by virtue of subsection (1A), it must consult—

(a) the Secretary of State, and

(b) the single financial guidance body.”

(5) In subsection (3), for “the rules” substitute “rules to be made by virtue of subsection (1)”.

(6) After subsection (3) insert—

“(3A) In determining what provision to include in rules to be made by virtue of subsection (1A), the FCA must have regard to any regulations that are for the time being in force under section 113B of the Pension Schemes Act 1993 (occupational pension schemes: requirements to recommend guidance etc).”

(7) In subsection (4), for the definition of “pensions guidance” substitute—

““pensions guidance” means information or guidance provided by any person in pursuance of the requirements mentioned in section5 of the Financial Guidance and Claims Act 2018 (information etc about flexible benefits under pension schemes);”.” —(Guy Opperman.)

This new clause requires the FCA to make rules requiring trustees or managers of personal and stakeholder pension schemes to check whether members have either received guidance or advice or have opted out of receiving it before accessing or transferring their pension assets. It also makes consequential amendments to FSMA 2000. It would be inserted after clause 18.

Brought up, read the First and Second time, and added to the Bill.

New Clause 2

Occupational pension schemes: requirements to recommend guidance etc

“(1) The Pension Schemes Act 1993 is amended as set out in subsections (2) to (5).

(2) After section 113A insert—

“113B Occupational pension schemes: requirements to recommend guidance etc

(1) The Secretary of State must make regulations requiring the trustees or managers of an occupational pension scheme to take the steps mentioned in subsections (2) and (3) in relation to an application from a relevant beneficiary—

(a) to transfer any rights accrued under the scheme, or

(b) to start receiving benefits provided by the scheme.

(2) As part of the application process, the trustees or managers must ask the beneficiary whether they have received appropriate pensions guidance or appropriate independent financial advice.

(3) In a case where the beneficiary indicates that they have not received appropriate pensions guidance or appropriate independent financial advice, the trustees or managers must also—

(a) recommend that the beneficiary seeks such guidance or advice, and

(b) ask the beneficiary whether—

(i) they wish to wait until they have received such guidance or advice before deciding whether to proceed with the application, or

(ii) they wish to proceed with the application without having received it.

(4) The regulations may—

(a) specify what constitutes appropriate pensions guidance and appropriate independent financial advice;

(b) make further provision about how the trustees or managers must comply with the duties in subsections (2) and (3) (such as provision about methods of communication and time limits);

(c) specify what the duties of the trustees or managers are in the situation where a beneficiary does not respond to a question mentioned in subsection (2) or (3)(b);

(d) provide for exceptions to the duties in subsections (2) and (3) in specified cases;

(e) provide for the Secretary of State or another prescribed person to issue guidance for the purposes of this section, to which trustees or managers must have regard in complying with their duties under the regulations.

(5) In determining what provision to include in the regulations, the Secretary of State must have regard to any rules that are for the time being in force under section 137FB(1A) of the Financial Services and Markets Act 2000.

(6) In this section—

“relevant beneficiary”, in relation to a pension scheme, means—

(a) a member of the scheme, or

(b) another person of a prescribed description,

who has a right or entitlement to flexible benefits under the scheme;

“flexible benefits” has the meaning given by section 74 of the Pension Schemes Act 2015;

“pensions guidance” means information or guidance provided by any person in pursuance of the requirements mentioned in section5 of the Financial Guidance and Claims Act 2018 (information etc about flexible benefits under pension schemes).”

(3) In section 115 (powers as respects failure to comply with information requirements), in subsection (1), after “113” insert “, 113B”.

(4) In section 182(5) (power of Treasury to direct that regulation-making powers are exercisable only in conjunction with them), after “except” insert “regulations under section 113B or”.

(5) In section 185(2) (consultations about other regulations: exceptions), after paragraph (c) insert—

“(ca) regulations under section 113B; or”.

(6) The Pension Schemes (Northern Ireland) Act 1993 is amended as set out in subsections (7) to (9).

(7) After section 109A insert—

“109B Occupational pension schemes: requirements to recommend guidance etc

(1) The Department must make regulations requiring the trustees or managers of an occupational pension scheme to take the steps mentioned in subsections (2) and (3) in relation to an application from a relevant beneficiary—

(a) to transfer any rights accrued under the scheme, or

(b) to start receiving benefits provided by the scheme.

(2) As part of the application process, the trustees or managers must ask the beneficiary whether they have received appropriate pensions guidance or appropriate independent financial advice.

(3) In a case where the beneficiary indicates that they have not received appropriate pensions guidance or appropriate independent financial advice, the trustees or managers must also—

(a) recommend that the beneficiary seeks such guidance or advice, and

(b) ask the beneficiary whether—

(i) they wish to wait until they have received such guidance or advice before deciding whether to proceed with the application, or

(ii) they wish to proceed with the application without having received it.

(4) The regulations may—

(a) specify what constitutes appropriate pensions guidance and appropriate independent financial advice;

(b) make further provision about how the trustees or managers must comply with the duties in subsections (2) and (3) (such as provision about methods of communication and time limits);

(c) specify what the duties of the trustees or managers are in the situation where a beneficiary does not respond to a question mentioned in subsection (2) or (3)(b);

(d) provide for exceptions to the duties in subsections (2) and (3) in specified cases;

(e) provide for the Department or another prescribed person to issue guidance for the purposes of this section, to which trustees or managers must have regard in complying with their duties under the regulations.

(5) In determining what provision to include in the regulations, the Department must have regard to any rules that are for the time being in force under section 137FB(1A) of the Financial Services and Markets Act 2000.

(6) In this section—

“relevant beneficiary”, in relation to a pension scheme, means—

(a) a member of the scheme, or

(b) another person of a prescribed description,

who has a right or entitlement to flexible benefits under the scheme;

“flexible benefits” has the meaning given by section 74 of the Pension Schemes Act 2015;

“pensions guidance” means information or guidance provided by any person in pursuance of the requirements mentioned in section5 of the Financial Guidance and Claims Act 2018 (information etc about flexible benefits under pension schemes).”

(8) In section 111 (powers as respects failure to comply with information requirements), in subsection (1), after “109” insert “or 109B”.

(9) In section 177(6) (power of Department of Finance to direct that regulation-making powers are exercisable only in conjunction with them), after “except” insert “regulations under section 109B or”.” —(Guy Opperman.)

This new clause makes equivalent provision to that in NC1 for occupational pension schemes and requires the Secretary of State and the Department for Communities to make regulations corresponding to the FCA rules mentioned in NC1. It also makes consequential amendments to the Pension Schemes Act 1993 and the Pension Schemes (Northern Ireland) Act 1993.

Brought up, read the First and Second time, and added to the Bill.

New Clause 3

PPI claims: interim restriction on charges imposed by legal practitioners after transfer of regulation to FCA

“(1) A legal practitioner—

(a) must not charge a claimant, for a service which is a relevant claims management activity provided in connection with the claimant’s PPI claim, an amount which exceeds the fee cap for the claim, and

(b) must not enter into an agreement that provides for the payment by a claimant, for a service which is a relevant claims management activity provided in connection with the claimant’s PPI claim, of charges which would breach, or are capable of breaching, the prohibition in paragraph (a).

(2) Subsections (2) to (5) and (7) of section 27 apply for the purposes of the prohibitions in subsection (1) as they apply for the purposes of the prohibitions in section 27(1) but as if—

(a) references in those subsections to “regulated claims management services” were references to “relevant claims management activity” and references to “regulated persons” were references to “legal practitioners”, and

(b) the first entry in columns 1 and 2 of the table in subsection (5) were omitted.

(3) Subsection (1) applies as follows—

(a) the prohibition in subsection (1)(a) applies only to charges imposed by a legal practitioner under an agreement entered into during the period—

(i) beginning with the first day of the second interim period (within the meaning given by section28(6)), and

(ii) ending with the end date for that practitioner, and

(b) the prohibition in subsection (1)(b) applies only to agreements entered into by a legal practitioner during that period.

(4) For the purposes of subsection (3), the end date is—

(a) for a legal practitioner for whom the relevant regulator is the Law Society of England and Wales, the day before the coming into force of the first rule made by the Law Society of England and Wales under section (Legal services regulators’ rules: charges for claims management services) that applies to, or to any description of, PPI claims, and

(b) for any other legal practitioner, 29 April 2020.

(5) In this section “relevant claims management activity”—

(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, means activity of a kind specified in an order under section 22(1B) of the Financial Services and Markets Act 2000 (regulated activities: claims management services), disregarding any exemption in that order for activities carried on by, through, or at the direction of, a legal practitioner.” —(Guy Opperman.)

This new clause requires the Law Society of England and Wales, the Bar Council and the Chartered Institute of Legal Executives, after the transfer of regulation from the Claims Management Regulator to the FCA, to enforce a fee cap in respect of charges by lawyers for certain claims management services provided in connection with a PPI claim until, in the case of the Law Society, the Society has made its own rules about charges for PPI claims, and in any other case, 29 April 2020.

Brought up, read the First and Second time, and added to the Bill.

New Clause 4

Legal services regulators’ rules: charges for claims management services

“(1) The Law Society of England and Wales, the General Council of the Bar and the Chartered Institute of Legal Executives may make rules prohibiting regulated persons from—

(a) entering into a specified relevant claims management agreement that provides for the payment by a person of specified charges, and

(b) imposing specified charges on a person in connection with the provision of a service which is, or which is provided in connection with, a specified relevant claims management activity.

(2) The Law Society of England and Wales must exercise that power to make rules in relation to all relevant claims management agreements, and all relevant claims management activities, which concern claims in relation to financial products or services.

(3) The Law Society of Scotland may make rules prohibiting regulated persons from—

(a) entering into a relevant claims management agreement concerning a claim in relation to a financial product or service that provides for the payment by a person of specified charges, and

(b) imposing specified charges on a person in connection with the provision of a service which is, or which is provided in connection with, a relevant claims management activity concerning a claim in relation to a financial product or service.

(4) Rules under this section may make provision securing that for the purposes of the prohibition referred to in subsection (1)(a) or (3)(a) charges payable under a relevant claims management agreement are to be treated as including charges payable under an agreement treated by the rules as being connected with the relevant claims management agreement.

(5) In this section ‘regulated persons’ means—

(a) in relation to the Law Society of England and Wales—

(i) persons who, or licensable bodies which, are authorised by the Law Society to carry on a reserved legal activity,

(ii) European lawyers registered with the Law Society under the European Communities (Lawyer’s Practice) Regulations 2000 (S.I. 2000/1119), and

(iii) foreign lawyers registered with the Law Society under section 89 of the Courts and Legal Services Act 1990;

(b) in relation to the Law Society of Scotland, Scottish legal practitioners;

(c) in relation to the General Council of the Bar—

(i) persons who, or licensable bodies which, are authorised by the General Council to carry on a reserved legal activity, and

(ii) European lawyers registered with the General Council under the European Communities (Lawyer’s Practice) Regulations 2000;

(d) in relation to the Chartered Institute of Legal Executives, persons authorised by the Institute to carry on a reserved legal activity.

(6) The rules must be made with a view to securing an appropriate degree of protection against excessive charges for the provision of a service which is, or which is provided in connection with, a relevant claims management activity.

(7) The rules may specify charges by reference to charges of a specified class or description, or by reference to charges which exceed, or are capable of exceeding, a specified amount.

(8) The rules may not specify—

(a) charges for a reserved legal activity within the meaning of the Legal Services Act 2007 (see section 12 of that Act);

(b) charges imposed in respect of—

(i) the exercise of a right of audience by a Scottish legal practitioner;

(ii) the conduct of litigation by a Scottish legal practitioner.

(9) In subsection (8)(b)—

‘conduct of litigation’ means—

(a) the bringing of proceedings before any court in Scotland;

(b) the commencement, prosecution and defence of such proceedings;

(c) the performance of any ancillary functions in relation to such proceedings;

‘right of audience’ means the right to appear before and address a court in Scotland, including the right to call and examine witnesses.

(10) In relation to an agreement entered into, or charge imposed, in contravention of the rules, the rules may (amongst other things)—

(a) provide for the agreement, or obligation to pay the charge, to be unenforceable or unenforceable to a specified extent;

(b) provide for the recovery of amounts paid under the agreement or obligation;

(c) provide for the payment of compensation for any losses incurred as a result of paying amounts under the agreement or obligation.

(11) For the purposes of this section—

‘relevant claims management activity’ means activity of a kind specified in an order under section 22(1B) of the Financial Services and Markets Act 2000 (regulated activities: claims management services), disregarding any exemption in that order for activities carried on by, through, or at the direction of, a legal practitioner;

‘relevant claims management agreement’ means an agreement, the entering into or performance of which by either party is a relevant claims management activity;

‘Scottish legal practitioner’ means—

(a) a person qualified to practise as a solicitor in accordance with section 4 of the Solicitors (Scotland) Act 1980;

(b) European lawyers registered with the Law Society of Scotland under the European Communities (Lawyer’s Practice) (Scotland) Regulations 2000 (S.S.I. 2000/121);

(c) foreign lawyers registered with the Law Society of Scotland under section 60A of the Solicitors (Scotland) Act 1980;

(d) an incorporated practice within the meaning given by section 34(1A)(c) of the Solicitors (Scotland) Act 1980;

(e) a licensed legal services provider within the meaning of Part 2 of the Legal Services (Scotland) Act 2010 (see section 47 of that Act) that provides, or offers to provide, legal services under a licence issued by the Law Society of Scotland;

‘specified’ means specified in the rules, but ‘specified amount’ means an amount specified in or determined in accordance with the rules.

(12) This section does not limit any power of the Law Society of England and Wales, the Law Society of Scotland, the General Council of the Bar or the Chartered Institute of Legal Executives existing apart from this section to make rules.”—(John Glen.)

This new clause makes provision about rules prohibiting charges for claims management services which may be made by the Law Society of England and Wales, the General Council of the Bar, the Chartered Institute of Legal Executives and (where the claim concerns financial products or services) the Law Society of Scotland, and imposes a duty on the Law Society of England and Wales to make such rules in relation to claims concerning financial products or services.

Brought up, and read the First time.

[John Glen]

I beg to move, That the clause be read a Second time.