Breathing Space Scheme

Debate between John Glen and Jack Dromey

Wednesday 19th June 2019 Commons Chamber

[John Glen]

My hon. Friend is right to draw attention to the excellent work of Christians Against Poverty, which is indeed a key stakeholder. We engage widely with the sector, including the Money and Mental Health Policy Institute, StepChange, the Money Advice Trust and the charity National Debtline—it really is a collaborative effort—and I am pleased with their response to where we have got to.

[Jack Dromey (Birmingham, Erdington) (Lab)]

Debt ruins lives. Debt harms health. Debt damages relationship. Debt holds back children. In extreme circumstances, debt kills. When the Financial Guidance and Claims Act 2018—it established the Money and Pensions Service—was being taken through the House, the Government made a commitment to move on a breathing space scheme. Today’s announcement is therefore welcome, particularly the action being taken to defend the interests of those suffering mental ill health. In welcoming today’s announcement, I urge the Government to ensure that the new arrangements are properly resourced and that there is a sense of urgency in their implementation, because the sooner they are put in place, relieving that terrible burden that afflicts so many people in our country, the better.

[John Glen]

I am extremely grateful to the hon. Gentleman for his comments. He played a significant role in the passage of the legislation that led to today’s announcement. He urges me once again on the timeframe, and I can assure him that my Treasury officials are working as rapidly as possible, but we must also ensure that it actually works. One of the questions he asked me previously, about what is included in the scheme and the range of public sector debts, has been a significant driver in those conversations. I acknowledge and take on board his comments.

British Steel Pension Scheme: Transfers

Debate between John Glen and Jack Dromey

Wednesday 10th April 2019 Westminster Hall

[John Glen]

Following our meeting, I undertook to speak to Andrew Bailey, the chief executive. We are due to meet every few months, and our next meeting is imminent. I will speak to him about that. A number of live investigations are under way; I do not have investigative power myself, but I will take a close interest in those investigations. Individual companies—I will not name them—are being actively investigated now, and I expect the FCA to make announcements and recommendations consequent to those investigations imminently. I am not privy to the detail, but I am taking a close interest and will be speaking to the chief executive, because I realise that time is pressing on. This morning we have heard vivid accounts of individuals and families ruined by these decisions, and I take the matter seriously.

To get back to my script, the FCA leads on financial advice and has considerable power to act against firms and individuals who provide negligent advice. To be clear: the FCA can impose a financial penalty on a firm, require the firm to pay redress to its customers, restrict the firm’s permissions, or prohibit individuals from operating in financial services. The FCA can bring criminal prosecutions. I hear the enthusiasm for that action being taken, and I think the FCA hears it too, but it works closely with other organisations to support criminal prosecutions. Both the Government and the FCA are targeting their attention on the effective regulation of financial services and wider work to tackle scams, including the recent implementation of a ban on pensions cold calling.

[Jack Dromey]

That is helpful, but in the case of British Steel, I think it would send absolutely the right message to the workers concerned if the Minister said today that a sense of urgency is needed on the part of the FCA and the South Wales police about investigating potential criminal wrongdoing and taking action. The workers back at the plant would welcome that.

[John Glen]

I am happy to respond to that intervention by saying that it is absolutely imperative that the FCA works with all bodies to hold those individuals to account and to take the appropriate action in the light of the evidence presented to it. This is urgent; the individuals who have suffered this experience expect that of the FCA, and I believe the FCA is keenly aware of that.

The hon. Member for Blaenau Gwent talked about the regional presence of the FCA. It has more than 3,000 employees and runs an annual programme of regional supervisory workshops under its “Live and local” banner, in which it educates firms and gathers intelligence from across the country. That has included recent workshops on DB pension transfers. Although the FCA does not have a series of regional offices, there is a clear expectation on the part of the Government and the FCA itself that it will go out into communities across the country, to ensure it has a presence among the 35,000 IFAs that operate.

The regulator is also undertaking further work on the pensions transfer advice market. The FCA is analysing responses to a recent data request from firms that undertake pensions transfer advice and is planning a programme of work, which is likely to include further engagement with stakeholders, targeted education for firms involved in providing pension transfer advice, and assessment of those firms significantly involved in the provision of DB transfer advice. The FCA has already announced a requirement for all pension transfer specialists to obtain the same qualifications as fully regulated investment advisers, alongside their existing qualifications, by October 2020. In relation to the BSPS, the FCA intervened to stop 11 firms from providing pensions transfer advice, and several firms are still under investigation.

It is important to ensure that consumers are protected from poor-quality and unsuitable advice, and there are proper mechanisms for redress when they receive poor advice. The first port of call for consumers to seek compensation is to approach the firm itself. If they cannot resolve the issue, consumers can take their complaint to the Financial Ombudsman Service. The FOS is a free, independent service that provides an alternative to the courts. The maximum award it can recommend was increased at the beginning of this month from £150,000 to £350,000 per individual. If firms go into liquidation and cannot provide compensation to individuals, a second tier of protection is open through the financial services compensation scheme. The FSCS is mainly funded by an annual levy on the financial services industry. Since its founding, the FSCS has helped millions of people and paid billions of pounds in compensation.

It is important to note that in the British Steel case, only a very small minority of former steelworkers who have taken their claims through the FOS and the FSCS have not been fully compensated. That group were all clients of one firm, and the Government’s decision to make financial advice mandatory for those seeking to transfer their DB pension has therefore guaranteed a crucial layer of consumer protection to those individuals.

“Phoenixing”—firms or individuals seeking to avoid liabilities arising from poor investment advice by re-emerging as a different legal entity—can leave consumers and taxpayers out of pocket and tarnish the reputation of the industry. The FCA has a range of tools to identify and act against firms or individuals who try to avoid responsibility in that way. Those seeking to liquidate firms must provide information about outstanding complaints, and the assets of collapsed firms cannot be sold on or passed back to former directors without the prior consent of the regulator. The FCA has already used those powers to prevent several individuals and businesses from avoiding their liabilities, and other cases are under investigation. This has caused some individuals to withdraw their applications, knowing full well that they will not get through. Although I acknowledge that this will not give absolute comfort to those who have suffered, I believe that we now have in place a regime that will prevent the practice in future.

Financial Guidance and Claims Bill [Lords]

Debate between John Glen and Jack Dromey

3rd reading: House of Commons & Report: 3rd sitting: House of Commons
Tuesday 24th April 2018 Commons Chamber

[John Glen]

I have tried to make it clear that when we are setting up a new body, it is important that we take time to reflect on the evidence and that we take action in consultation with and alongside that body. I acknowledge the widespread concern that exists in other areas, and I think that the action we are taking gets the balance right when it comes to getting the evidence together and moving as quickly as possible when the case has been made.

The amendments that I have outlined are additional to the amendment that was made in Committee to introduce a ban on claims management cold calling, which will cover calls about claims on matters ranging from mis-sold payment protection insurance to holiday sickness and car accidents. That means that calls about PPI, whether we have been in a car accident or whether we were sick on holiday—we are all familiar with such calls—will be banned unless prior consent has been given to receiving them.

Having ensured that we can tackle cold calling effectively, we plan to remove the existing clause 4 by means of amendment 11. Amendments 12, 25, 26, 28, 29, 45 and 46 are minor and consequential to these changes. In particular, amendment 45 commences new clause 9 on Royal Assent to ensure that there is no unnecessary delay in making regulations, and amendments 44, 47 and 48 prepare the Bill for the new data protection legislation.

[Jack Dromey (Birmingham, Erdington) (Lab)]

I wish to address the issues of pensions cold calling in new clause 9, wider cold calling in amendments 8 and 9, and the duty of care in new clause 6.

Let me start by saying what this Bill is about. In Committee, we heard the story of the Port Talbot shift supervisor who broke down and wept uncontrollably when he met the Pensions Advisory Service. He described how he had been conned into going down the wrong path on his pension, losing tens of thousands of pounds as a consequence. The reason why he wept, he said, was that all 20 on his shift followed his lead, and therefore they, like him, now faced a much bleaker future than would otherwise have been the case.

Pension cold calling is a blight on people up and down the UK. As the Minister has said, we all know the feeling of answering the phone to a number that we do not recognise and hearing that familiar phrase, “We believe that you have been in a car accident.” Indeed, I was heading over to one of the Bill Committee sittings when I received such a call, not having had one for some years. Someone said that they understood that I had been in a car accident. I said that, yes, I had been in an accident 38 years ago, and it was because somebody had run into the back of me. Since then, I have had two subsequent annoying cold calls, yet mine is but a minor problem. The more significant one is the 11 million pensioners who are targeted annually by cold callers. Fraudsters are making 250 million calls a year, which is equivalent to eight every second.

As the Minister knows, we have approached the cold-calling element of this Bill on a four-pronged basis: first, banning pensions cold calling; secondly, pushing for a total ban now on cold calling for claims management companies, thereby tackling the scourge of unsolicited claims head on; thirdly, banning the use of information obtained through cold calling; and, fourthly, ensuring that the strongest possible sanctions are put on those who break the ban, which means that they are struck off.

The Government’s commitment to ban pensions cold calling from June is a necessary and wholly welcome step. May I make the point—such points are not often made in the House—that the Under-Secretary of State for Work and Pensions, the hon. Member for Hexham (Guy Opperman), and the Economic Secretary to the Treasury have engaged with us, the wider community and the pensions industry? Their approach has been constructive. Together, we have come a very long way, but I hope that they will go just that little bit further. Our amendments would tighten the provisions around the ban and ensure that it is fit for purpose. The dual additions of making it an offence to use the information obtained through cold calling and conferring functions on to the Financial Conduct Authority would mean that the ban could be much tighter and more effective.

Although the original clause means that the “introducers” who tend to commit a lot of cold calling in cases such as the British Steel scandal would not be restricted, as they are not covered by the FCA, our amendment would restrict them. The move to ban the use of the information means that those firms which provide financial services and are covered by the FCA will be banned from using the information that the “introducers” gather. This slight shifting of the ban is designed to strengthen it further, as the FCA has much stronger powers than the Information Commissioner’s Office and can strike off members who contravene the rules. We therefore hope that Ministers will reflect further on this.

I now move on to cold calling more widely. A crucial issue on which the Minister has touched is the speed with which we now act. It is not only pensions where cold calling has a negative impact. There are many other industries that have been blighted by cold calling that creates serious consequences for innocent consumers. It is common for claims management companies to try to harvest cases for road traffic accidents and holiday sickness. Unfortunately, and extraordinarily, the UK has become the world leader for holiday sickness claims. The Association of British Travel Agents said that there were about 35,000 claims of holiday sickness in 2016, which represents a 500% rise since 2013. One in five Britons—19%, or around 9.5million people—has been approached about making a compensation claim for holiday sickness. Statistics from just one tour operator, in July and August, show that there were 750,000 travelling British customers, 800,000 Germans and 375,000 Scandinavians. The Scandinavians lodged 39 claims for holiday sickness and the Germans filed 114. The Brits put in just under 4,000 claims.

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[Jack Dromey]

In the spirit of being able to get on to the next group, we welcome the ban on pension cold calling. We have sought to extend that ban to all cold calling. If the Minister is prepared to have discussions at the next stages, and before the Bill concludes its passage through Parliament, we would be prepared not to oppose Government amendment 11 or to move our amendments 8 and 9.

[John Glen]

I am grateful to the hon. Gentleman and I acknowledge his kind words, which are reciprocated from our Front Bench. We continue to have a meaningful dialogue on the outstanding concerns that exist between us.

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

Debate between John Glen and Jack Dromey

Tuesday 6th February 2018 Public Bill Committees

[John Glen]

I cannot talk about areas outside my responsibility, but I can address the new clause. I assure the hon. Member for Bermondsey and Old Southwark that I am engaging closely with the FCA and have already achieved an acceleration of its timetable for engagement. It is important that his constituents’ concerns, which he raised previously, are addressed, and I expect the FCA to take steps in that direction urgently.

I was delighted to hear from Macmillan that it has a tremendous working relationship with the FCA. The two organisations are engaged in dialogue, and last year they worked closely on the call for input on the challenges firms face in providing travel insurance for consumers who have had cancer. The FCA will be publishing a feedback statement and its next steps in due course. Dialogue is taking place, and there is responsiveness. For those reasons, it is not appropriate to include these regulatory principles in the Bill, so I request that the hon. Member for Birmingham, Erdington withdraw the amendment.

[Jack Dromey (Birmingham, Erdington) (Lab)]

On a point of order, Mr Rosindell. I seek your guidance. I will be speaking to Opposition new clause 7, but I note that Government amendments 3 and 4 are unobjectionable, so I may go straight on to making my remarks about new clause 7.

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[Jack Dromey]

With the greatest respect, the Government are prescriptive the whole time, and I think this is an area ripe for prescription. I stress again that we need to send an unmistakable message that regulated providers have certain obligations that fall upon them. There are already obligations imposed under law, for example on financial probity. We should add to those a duty of care to customers, particularly when they are suffering from or dying from cancer. I should have thought that was entirely unobjectionable. Macmillan is absolutely right and the Minister has been right to respond to its representations. I will come in a moment to what I hope will happen at the next stages.

To return to my point, staff did not have knowledge about the products and the help available to people affected by cancer. If we are to tackle such problems, the provision of appropriate support, flexibility in policies and procedures, and ensuring that staff are appropriately trained to support vulnerable customers need to be at the heart of banking culture.

One of the things that struck me most in the findings was that only one in 10 people with cancer had told their bank about their diagnosis in the first place. Many people with cancer still do not think their bank will be able to help them, while others worry that telling the bank will have negative consequences, so they are reluctant to disclose their diagnosis. Regardless of whether that negative perception is justified on all occasions, it represents a serious barrier to people seeking help early and tells us that the existing rules are not adequate. Despite some provisions in the area, the banking sector is still a long way off the point where meeting the needs of vulnerable customers is at the heart of corporate culture, hence the clear evidence from Macmillan.

The financial services consumer panel has noted that the regulatory principle of treating customers fairly does not adequately ensure that firms exercise appropriate levels of care towards their customers. It is interesting that the FCA’s own panel concluded that. If banks and building societies had a legal duty of care towards their customers, it would give people with cancer confidence to disclose their diagnosis, knowing that they could trust their bank to act in their best interests.

Consumers are also demanding action in this area. More than 20,000 people have signed an open letter from Macmillan Nurse Miranda, calling for a duty of care to be introduced. I urge the Government to look at the recommendation made by the House of Lords Financial Exclusion Committee on a duty of care, which has been strongly evidenced by Macmillan Cancer Support. The Committee concluded that, as first recommended by the financial services consumer panel, the Government should amend the Financial Services and Markets Act 2000

“to introduce a requirement for the FCA to make rules setting out a reasonable duty of care for financial services providers to exercise towards their customers.”

I appreciate that any change as significant as this must be subject to proper consideration and consultation, as the Minister said. It is therefore welcome that the FCA has recognised that and is committed to publishing a discussion paper on the issue. It is welcome that the Minister has pressed the FCA to bring that forward, and I will come on to timescale in a moment. However, the Government and the FCA have said that this must wait until after the withdrawal from the EU becomes clear. I think that now, as the Minister said earlier, that may no longer be the case, not least because who knows when we will withdraw from the European Union—

[John Glen]

We are very clear on that.

[Jack Dromey]

There is a certain lack of clarity on the part of the Government about that end. Given that the introduction of a duty of care would still require legislation, when can we expect it to be introduced if we do not use the opportunity presented by the Bill? Will the Minister clearly set out his view as to the likely timescale for the introduction of a duty of care, from the initial consultation process through to the point at which consumers begin to benefit from any change? Given the evidence that has been presented about the need for further support for vulnerable customers, is a prolonged delay acceptable? I urge the Minister to take note of the breadth of support for this issue and the strong evidence presented on the need for action. I suggest that the Government reflect on that further and bring forward suitable proposals on Report.

My final point is that I sense a joint determination to act, and that is welcome. We should act, but what does that mean in terms of both substance and timescale? We will not press the new clause to a vote but I invite the Minister to undertake that he will come back on Report to set out with some clarity the likely timescale and substance of what the Government might eventually do.

[John Glen]

I am grateful to the hon. Gentleman for his comments. There is broad agreement on how serious the issue is, but I would characterise the Government’s approach as wanting not to send a message but to secure an outcome. They want to secure an outcome when they understand exactly what the impact of the changes might be.

As I said in some of my earlier remarks, there is huge uncertainty about how a potential duty of care would impact on firms and consumers. That is why I am very pleased with the accelerated timetable. I acknowledge that there is no absolute clarity about what will flow from that, but that is because we do not know what the outcome of the discussion will be. However, I take on board the hon. Gentleman’s concerns and I acknowledge his sensitivity to what Macmillan has said—it is unacceptable that 11% of people who have cancer tell their financial service provider—but it is also true, as my hon. Friend the Member for Bexhill and Battle said, that not all banks are doing a poor job. I heard from Macmillan about the wonderful work that Nationwide has done, and I think it is for other banks to reflect on what they need to do to change their behaviours.

[John Glen]

I am grateful for the hon. Gentleman’s comments, but I do not share his characterisation of the FCA’s willingness to engage on this. As I set out, the FCA is engaged in dialogue with Macmillan and has now accelerated the timetable for dealing with the subject. I will reflect on the comments made and see what can be said to give more assurance further on, but I am convinced that the dialogue with the FCA will lead to a proportionate outcome that takes full account of the impact. I therefore reiterate my hope that the new clause will be withdrawn.

[Jack Dromey]

On the basis of what the Minister has said—that he will come back on Report—we will not be pressing new clause 7.

Amendment 3 agreed to.

Amendment made: 4, in clause 24, page 18, line 7, at end insert—

“( ) In section 137R (financial promotion rules)—

(a) in subsection (1), omit the “or” at the end of paragraph (a) and after that paragraph insert—

‘(aa) to engage in claims management activity, or’;

(b) in subsection (6), for ‘has’ substitute ‘and “engage in claims management activity” have’.”—(John Glen.)

The result of this amendment of the Financial Services and Markets Act 2000 would be that the FCA may make rules about the communication, or the approval of another person’s communications, by authorised persons of invitations or inducements to engage in claims management activity.

Clause 24, as amended, ordered to stand part of the Bill.

Schedule 4 agreed to.

Schedule 5

Regulation of claims management services: transitional provision

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[John Glen]

Amendments 20 to 22 are technical amendments that extend the FCA’s data-gathering powers to Scotland. They amend schedule 5, which contains transitional provisions to extend the FCA’s information-gathering powers; to enable it to take preparatory steps, such as to consult on rules; and to enable it to adopt rules made by the current regulator. That ensures that the FCA can obtain information and documents from claims management companies operating or previously operating in Scotland, if the FCA considers that it needs the information or documentation in preparation for its role as the regulator of claims management companies.

The amendments will help ensure that Scottish consumers are adequately protected when the regulation for financial services claims management companies is transferred to the FCA. I am sure that hon. Members would agree that it is right to ensure that the regulator is suitably prepared to regulate Scottish claims management companies, and will agree with the amendments.

[Jack Dromey]

It is a sensible move to give the FCA those extended powers. Therefore, we note the proposed amendments. Our colleague from the Scottish National party, the hon. Member for Paisley and Renfrewshire South, might wish to comment, but this seems to us a logical and sensible proposal.

[Mhairi Black (Paisley and Renfrewshire South) (SNP)]

I agree.

Amendment 20 agreed to.

Amendments made: 21, in schedule 5, page 41, line 23, leave out from “a” to end of line 24 and insert “person falling within paragraph 1B.”

This amendment and amendment 22 would enable the FCA to obtain reports from claims management companies operating in Scotland if the FCA considers that it needs the report in preparation for its role as the regulator of claims management companies.

Amendment 22, in schedule 5, page 41, line 24, at end insert—

“1A A person falls within this paragraph if the person—

(a) is or at any time was authorised under section 5(1)(a) of the Compensation Act 2006 (provision of regulated claims management services), or

(b) is, or at any time was, providing services in Scotland which the person would be, or would have been, prohibited from providing in England and Wales by section 4(1) of the Compensation Act 2006 unless authorised under section 5(1)(a) of that Act.

1B A person falls within this paragraph if the person—

(a) is authorised under section 5(1)(a) of the Compensation Act 2006 (provision of regulated claims management services), or

(b) is providing services in Scotland which the person would be prohibited from providing in England and Wales by section 4(1) of the Compensation Act 2006 unless authorised under section 5(1)(a) of that Act.”—(John Glen.)

See the explanation for amendments 20 and 21.

Schedule 5, as amended, agreed to.

Clause 25

Power of FCA to make rules restricting charges for claims management services

Question proposed, That the clause stand part of the Bill.

[John Glen]

Clause 25 inserts a new section into the Financial Services and Markets Act 2000 to give the FCA the power to cap the amount that firms can charge customers for the claims management services it regulates. The clause also places a duty on the FCA to make rules restricting charges for claims for financial services or products. The Government believe that placing a duty on the FCA to cap the amount that firms can charge consumers for services related to financial services claims is the only satisfactory way of ensuring that consumers receive good value for money. This is especially true given that consumers can, for example, take complaints about the mis-selling of payment protection insurance to the financial ombudsman for free. In addition, the general fee-capping power provided by the clause gives the FCA the necessary flexibility to respond to future changes in the claims management sector.

[Jack Dromey]

I would like to make two points. First, the proposed changes are unobjectionable and we note them. Secondly, I will, however, be speaking to amendments 47 and 48 in respect of allowing consumers to keep 100% of their PPI compensation, but we will come to those in due course.

Question put and agreed to.

Clause 25 accordingly ordered to stand part of the Bill.

Clause 26

PPI claims and charges for claims management services: general

[John Glen]

I beg to move amendment 5, in clause 26, page 21, line 17, leave out “and 28” and insert

“to (PPI claims: interim restriction on charges imposed by legal practitioners after transfer of regulation to FCA)”.

This amendment would apply the explanation of terms given in clause 26 to the new clause inserted by NC3.

[John Glen]

These amendments ensure that legal services regulators can continue to impose fee restrictions for PPI claims from the point at which the transfer of regulation of CMCs to the FCA takes place. This will be effective in the case of the Law Society of England and Wales until it implements its own rules on fee capping and, in the case of the General Council of the Bar and the Chartered Institute of Legal Executives, until 29 April 2020.

The interim fee cap will be set at 20% of the claim value, excluding VAT. It will apply to CMCs and legal services providers, and will be enforced by the relevant regulators from two months after the Bill receives Royal Assent. The interim fee cap will ensure fair and proportionate prices for consumers using claims management services for mis-sold PPI claims.

Government amendments 5 and 6 and new clause 3 ensure that the interim fee cap provisions introduced as a concessionary amendment in the House of Lords work together with the other Government amendments we are discussing today, and provide the legal services regulators with the power to restrict fees in relation to claim management services. The amendments will ensure that consumers are equally protected from excessive fees when using a legal services provider to make a claim for mis-sold PPI, and that there is continuity of coverage for the fee cap throughout the transfer of regulation. This is similar to the existing provisions in the Bill in relation to the FCA. I hope that all Members will agree that these are sensible and desirable amendments for the purposes of consumer protection.

[Jack Dromey]

Briefly, I have two related points. First, we agree that the legal services regulators should be given those powers. Secondly, and crucially, the objective is to protect consumers. I once again refer to amendments 47 and 48, which I will speak to shortly.

Amendment 5 agreed to.

Amendment made: 6, in clause 26, page 22, line 11, at end insert—

“, and

(c) so far as relevant for the purposes of section (PPI claims: interim restriction on charges imposed by legal practitioners after transfer of regulation to FCA), to be read as referring to any service which is a relevant claims management activity (within the meaning given by subsection (5) of that section).”—(John Glen.)

This amendment would define what references to “regulated services” in clause 26 mean when relevant for the purposes of the new clause inserted by NC3.

Clause 26, as amended, ordered to stand part of the Bill.

Clause 27

PPI claims: interim restriction on charges before transfer of regulation to FCA

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[Jack Dromey]

The amendment would allow consumers to keep 100% of the PPI compensation. The Government introduced an interim cap on the fees that claims management companies could charge consumers in relation to payment protection insurance claims. That was a welcome move in the right direction, but it does not go far enough to protect consumers from paying disproportionately high fees for what is often very little work. The Ministry of Justice estimates that the average amount of commission charged to consumers by CMCs is 28% plus VAT. The FCA estimates that the average payout for PPI mis-selling is around £1,700 which means that a CMC would, on average, charge a successful claimant £476 plus VAT.

Although the proposed fee cap will reduce the amount that consumers have to pay to CMCs, it would still mean an average charge of £340, with VAT on top. If the Government want to take meaningful action to protect consumers from high fees, they should propose a solution that allows consumers to keep 100% of their PPI compensation. They should require firms to pay CMC costs for PPI claims—capped at 20% and VAT—when they are at fault and the consumer has used a CMC rather than claiming directly.

This measure would apply only for the interim period until new FCA regulations come into force, or until August 2019, which is the deadline for making PPI claims, whichever is sooner. This would incentivise firms still paying compensation—and it is shameful that they still are; getting justice for the people concerned is like pulling teeth—to proactively reach out and encourage consumers to make claims directly to them, and I am bound to say that it is something that should and must happen. It would also fully protect consumers from paying high charges to CMCs.

In summary, the Government’s proposal is a welcome step in the right direction, but I would welcome an explanation from the Minister as to why he cannot take this further step that would see those that were wronged receive 100% of the compensation so that this wrong is put right.

[John Glen]

I am grateful to the hon. Gentleman for setting out amendments 47 and 48, which seek to make firms at fault pay the fees for claims management services used to pursue successful PPI claims. I understand that this approach is intended to incentivise firms to be more proactive in offering compensation when dealing with consumer complaints. However, it could encourage more speculative and unmeritorious claims, adding waste to the redress system, to the detriment of consumers and the industry. The amendment also has the potential to allow CMCs to charge consumers directly when they are unsuccessful in pursuing a PPI claim. This would serve only to add to the incentives for taking forward speculative claims, and I am not sure that that is the Opposition’s intention.

I also do not believe that the measure is necessary. The FCA is already taking direct action to ensure that firms do not make it difficult for consumers to claim compensation, and there have been significant improvements in the handling of PPI complaints by firms. By September 2017, firms were upholding around 80% of claims. Since January 2011, firms have handled over 20.8 million PPI complainants and paid over £29 billion in redress to consumers found to have been mis-sold a PPI policy, and rightly so.

In addition, as of March 2017 firms had sent over 5.5 million letters to customers they identified as being at high risk of having suffered a past mis-sale and who had not complained, inviting them to do so. The FCA also launched a two-year consumer awareness campaign in August 2017, paid for by the relevant firms, to raise awareness of the deadline and encourage consumers to decide whether to complain, as well as highlighting free routes for pursuing a claim.

Finally, it is important to note that consumers do not need to use the CMCs to make a claim. They can go directly to the relevant firm and subsequently to the Financial Ombudsman Service for free. Making a complaint is a simple process that many people will be able to do for themselves. A number of sources of information are available to help individuals to understand how to make a complaint, including websites and phone lines for the FCA and Financial Ombudsman Service. In the light of these arguments, I encourage the Opposition spokesman to withdraw the amendment.

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[John Glen]

New clauses 4 and 5 place a duty on the Law Society of England and Wales to cap fees in relation to financial service claims management activity, and give the Law Society of Scotland a power to restrict fees charges for that activity. The clauses also give some legal services regulators in England and Wales a power to restrict fees charged for broader claims management services, and give the Treasury a power to extend the Law Society of Scotland’s fee-capping power to broader activity in the future. As I am sure hon. Members are aware, claims management services are carried out not only by claims management companies, but sometimes by legal service providers as well. That is why the Government are introducing the new clauses. They will ensure that consumers are protected no matter which type of claims management service provider they use—whether regulated by the legal service regulators or by the Financial Conduct Authority.

As Members will know, fees charged for claims management services have attracted severe criticism. The Public Accounts Committee 2016 report on financial services mis-selling commented:

“It is a failure of the system of regulation and redress that claims management companies have been able to make up to £5 billion out of compensation to victims of mis-selling.”

The Bill already contains provisions to ensure that the FCA will cap fees in relation to financial product and services claims, and new clause 4 replicates that duty in relation to the Law Society of England and Wales. It also mirrors the FCA’s broader power to restrict fees for claims management activities by providing a similar power to the General Council of the Bar, the Chartered Institute of Legal Executives, and the Law Society of England and Wales. That power will enable them to make rules that cap the fees that legal service providers charge for claims management services. That will enable the legal services regulators to adapt to any future changes in the market, alongside the FCA.

New clause 4 also gives the Law Society of Scotland a power to restrict fees in relation to financial services claims management, and new clause 5 gives the Treasury a power to extend that provision to include wider claims management activity, should that be required in the future. That gives the flexibility required to respond to any future changes in the claims management sector. Although the Government are of the view that the regulation of claims management activity is reserved, we have worked in a spirit of co-operation with the Scottish Government to ensure that the provisions are fit for purpose in Scotland, and that Scottish consumers have the same high standards of protection when using claims management services as consumers in England and Wales. I hope Members agree that the new clauses collectively provide for the best protection of consumers across Great Britain.

[Jack Dromey]

The Minister was right to refer to the Public Accounts Committee report. It is nothing short of scandalous that there has been an immense industry, often on the back of misery. Consumers deserve to be properly protected in future. The clauses are sensible because they go beyond claims management companies, with the duty on the Law Society. Of course, it is about not only CMCs, but legal service providers.

Finally, with regard to new clause 5, it makes sense for there to be flexibility to extend the provision to restrict fees in the future, given potential changes in the nature of the industry.

Question put and agreed to.

New clause 4 accordingly read a Second time, and added to the Bill.

New Clause 5

Extension of power of the Law Society of Scotland to make rules

“(1) The Treasury may by regulations amend section (Legal services regulators’ rules: charges for claims management services) for the purpose of extending the power in subsection (3) of that section so as to apply to—

(a) all relevant claims management agreements;

(b) all relevant claims management activity;

(c) any description of relevant claims management agreement;

(d) any description of relevant claims management activity.

(2) The Treasury must obtain the consent of the Scottish Ministers before making regulations under subsection (1).

(3) Regulations under this section—

(a) are to be made by statutory instrument;

(b) may make incidental, supplemental or consequential provision.

(4) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”—(John Glen.)

This new clause would permit the Treasury, with the consent of the Scottish Ministers, to make regulations which extend the power given to the Law Society of Scotland to make rules by NC4.

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

New Clause 6

Cold calling about claims management services

“(1) The Privacy and Electronic Communications (EC Directive) Regulations 2003 (S.I. 2003/2426) are amended as follows.

(2) In regulation 21 (calls for direct marketing purposes), after paragraph (5) insert—

‘(6) Paragraph (1) does not apply to a case falling within regulation 21A.’

(3) After regulation 21 insert—

‘21A Calls for direct marketing of claims management services

(1) A person must not use, or instigate the use of, a public electronic communications service to make unsolicited calls for the purposes of direct marketing in relation to claims management services except in the circumstances referred to in paragraph (2).

(2) Those circumstances are where the called line is that of a subscriber who has previously notified the caller that for the time being the subscriber consents to such calls being made by, or at the instigation of, the caller on that line.

(3) A subscriber must not permit the subscriber’s line to be used in contravention of paragraph (1).

(4) In this regulation, “claims management services” means the following services in relation to the making of a claim—

(a) advice;

(b) financial services or assistance;

(c) acting on behalf of, or representing, a person;

(d) the referral or introduction of one person to another;

(e) the making of inquiries.

(5) In paragraph (4), “claim” means a claim for compensation, restitution, repayment or any other remedy or relief in respect of loss or damage or in respect of an obligation, whether the claim is made or could be made—

(a) by way of legal proceedings,

(b) in accordance with a scheme of regulation (whether voluntary or compulsory), or

(c) in pursuance of a voluntary undertaking.’

(4) In regulation 24 (information to be provided for the purposes of regulations 19 to 21)—

(a) in the heading, for ‘, 20 and 21’ substitute ‘to 21A’;

(b) in paragraph (1)(b), after ‘21’ insert ‘or 21A’.”—(John Glen.)

This amendment inserts a provision into the Privacy and Electronic Communications (EC Directive) Regulations which prohibits live unsolicited telephone calls for the purposes of direct marketing in relation to claims management services except where the person called has given prior consent to receiving such calls.

Brought up, and read the First time.

[John Glen]

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

--- Later in debate ---

[John Glen]

Opposition new clause 9 is identical to the Lords amendment and seeks to compel the FCA to ban unsolicited direct approaches by, on behalf of or for the benefit of companies providing claims management services. It also seeks to ban those companies from using data obtained through those methods. Unfortunately, it would give the FCA a duty it cannot enforce under its current regime.

I assure the hon. Member for Birmingham, Erdington and the hon. Member for Lewisham West and Penge that the Government are committed to tackling the issue properly and have consulted with the FCA, the claims management regulation unit and the Information Commissioner’s Office to ensure that Government new clause 6 does so in the most effective way—it will amend the Privacy and Electronic Communications (EC Directive) Regulations 2003 to prohibit direct marketing calls by claims management services unless an individual has given their consent. I was challenged on that matter, and I will clarify by letter.

The provision will be implemented by the ICO as the regulator responsible for the enforcement of the regulations. It has considerable powers and can issue fines of up £500,000. Under the incoming general data protection regulation, the unlawful use of personal data can attract fines of up to £17 million or 4% of annual turnover. The ICO is committed to enforcing the sanctions in the Privacy and Electronic Communications (EC Directive) Regulations 2003 and has issued nearly £3 million in monetary penalties for breaches of direct marketing since January last year. We have worked with the ICO in developing the new clause, and it is confident that it will be able to enforce it in conjunction with the FCA.

The FCA will of course have a role to play and will use all the tools available to take action where it discovers behaviour causing consumer harm. I acknowledge the cases that both Members raised, which are unacceptable. I am also confident that the FCA will work closely with the ICO where breaches are identified. I am sure members of the Committee will agree that it is better to include a new clause that will work—Government new clause 6—than to include new clause 9. As such, I encourage both Members not to press their new clause to a vote.

[Jack Dromey]

We are not convinced. It comes down fundamentally to the issue of principle. If it is right that all the evidence is that cold calling has been deeply damaging for the elderly, for the vulnerable, for those at a time of crisis in their lives, such as the Port Talbot workers and now, dare I say it, Carillion workers, and for business, then in those circumstances the practice has to end, full stop. The difference between the two new clauses is that we are saying precisely that with new clause 9. While the Government take some steps in that direction with new clause 6, the reality is that this unacceptable practice will continue and is likely to continue to grow.

The Minister talked about penalties handed out thus far of £3 million, but it is a billion-pound industry of abuse. We therefore believe it to be right to send that unmistakeable message so that never again will those people, particularly those at a time of crisis in their lives, fear that supposedly friendly phone call that time and again leads them to make disastrous decisions with disastrous consequences. Our intention is to press new clause 9 to a vote.

Question put and agreed to.

New clause 6 accordingly read a Second time.

Question put, That the clause be added to the Bill.

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

Debate between John Glen and Jack Dromey

Thursday 1st February 2018 Public Bill Committees

[Jack Dromey]

The Minister speaks with obvious sincerity, which is welcome. As has repeatedly come up in our proceedings today, whether our experience is from our constituency or otherwise, we have all seen the price that people pay as they sink ever more deeply into debt. I do not mind admitting that there was one particular case—it is not appropriate to go into the details—where, when my constituent walked out the room, I was in tears because of what had happened to her. Her life was in a downward spiral. There is common ground and obvious sincerity, so the Government should act.

We will not push the amendment to a vote, but I suggest that the Government reflect further and come back on Report with the best possible timescale for implementation. I agree with my hon. Friend the Member for Makerfield: we should not necessarily have to await the formation of the new body. The scheme is a related matter to the function of the body—of that there is no doubt—but we have seen experiences such as the arrangements in Scotland. We also have the collective wisdom of the discussions in the sector and in the House of Lords. Everyone is determined to get it right. We just do not think that the scheme should be introduced a year beyond the Bill coming into effect in three or four months’ time. We would be talking about it being a year and a half before we ultimately see this welcome mechanism introduced.

In not pushing the amendment to a vote at this stage, I ask the Government to reflect further and come back on Report on two things. First, we want clarity on what the Government think is necessary. The Minister has gone a long way towards that. We want clarity about how one goes about arriving at the default scheme. That relates to the mechanisms and who should be engaged. The Minister has referred to that already. Secondly, we want the quickest possible timescale to get the scheme introduced. If the Minister will respond accordingly on Report, I am prepared to withdraw the amendment.

[John Glen]

I am grateful for the hon. Gentleman indicating that he will withdraw the amendment. I observed closely what he said on clarity on the default scheme and having the quickest mechanism possible to bring it forward. I will reflect with my colleague the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Hexham and provide an update on Report.

[Jack Dromey]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 7 ordered to stand part of the Bill.

Clause 8 ordered to stand part of the Bill.

Clause 9

Guidance and directions from the Secretary of State

Question proposed, That the clause stand part of the Bill.