Financial Guidance and Claims Bill [HL]

Lord Holmes of Richmond Excerpts

Committee: 4th sitting (Hansard): House of Lords
Wednesday 13th September 2017 Lords Chamber

Moved by

[Lord Holmes of Richmond]

70: After Clause 16, insert the following new Clause—
“Regulatory principles to be applied in respect of claims management services
(1) In relation to the regulation of claims management services, the FCA must act according to the principles that—(a) where appropriate, authorised persons should act honestly, fairly and professionally in accordance with the best interests of consumers who are their clients; and(b) where appropriate, authorised persons should manage conflicts of interest fairly, both between themselves and their clients, and between clients.(2) In this section, “authorised person” has the same meaning as in the Financial Services and Markets Act 2000, and “authorised persons” shall be construed accordingly.”

[Lord Holmes of Richmond (Con)]

My Lords, I am pleased to bring forward this amendment, and in doing so I express thanks to all the organisations that have offered me advice and guidance on preparing it. Perhaps, in the light of the Bill we are discussing, I should not have used either term, advice or guidance, but just thanked them for the briefing in the spirit in which it was offered. Not least among those organisations was Macmillan Cancer Support, which demonstrates brilliantly how a charity can operate in 21st-century Britain not only by offering superb palliative care, nursing services and the like, as we would expect, but by fundamentally understanding just how important financial services are and how people are affected when they get a cancer diagnosis.

I am pleased to speak to Amendment 70 not least because we have gone over the ground of the SFGB at Second Reading—which takes me back to a previous life, when SFGB stood for the Swimming Federation of Great Britain. Bearing in mind my previous life, it seems only appropriate that I should dive straight in.

The purpose of Amendment 70 is to create a duty of care on claims management services to act for all customers, not least those who find themselves in a vulnerable situation. My desire in Committee was to bring forward an amendment that would impose a duty of care across the whole financial services sector but, sadly, that was deemed to be outside the scope of the Bill, so this amendment is far more limited and relates just to claims management services. However, I hope that, within that, noble Lords can see the potential and the need for wider application and an amendment at a future date that will address duty of care across the whole financial services sector, not least when we look at where financial services came from.

At one stage there was truly a sense of a relationship between customer and provider. In many ways we need to get back to that, not least because there is so much that financial institutions can do to assist people. Indeed, many financial institutions and claims management services may well do things to assist people, particularly when they find themselves in a vulnerable situation—not least if they have had that most awful news of a cancer diagnosis. But when we look at the evidence, only one in nine people who receive a cancer diagnosis reveals it to whichever financial institution they are dealing with. The reasons for that are pretty clear. But if that were not enough evidence, survey data illustrate that of the small number who did declare to their financial provider, 23% said that they had a wholly unsatisfactory experience. We can deduce from that that there is a really low level of declaration but, even within that small number, almost one-quarter have a negative experience after declaring.

I believe that Amendment 70 will go some way, in the specific claims management arena, to demonstrating the need for such an amendment and the benefit it can have on claims management services. There is a lot more for the Financial Conduct Authority to consider in terms of this duty and, indeed, the general duty of care. We know that the FCA is considering putting out a consultation paper on a duty of care across financial services, but we also know that it has stated that there will be no change at least until 2019. Consultation could last until 2019, then there would be a proposal, then pre-legislative scrutiny and then the process of implementation. I think we can all agree that there has been more than enough delay already in making sure that vulnerable consumers get the level of service that they should expect to receive from claims management services and the entire financial services industry.

I ask the Minister to support Amendment 70. Will he also say something about the Government’s view on placing a general duty of care on the FCA across the whole financial services sector? This would bring benefits not only to consumers but to financial institutions and the nation. Amendment 70 and a general duty would both in their own way clearly help to deliver a financial services sector and a nation that work for everybody. I beg to move.

[Baroness Meacher (CB)]

My Lords, I support Amendment 70 tabled by the noble Lord, Lord Holmes. As he indicated, what we really need is a wider power, but it is outside the scope of this Bill. I want to challenge that, at least for the moment. I refer to Clause 2(3), which makes it clear that:

“The single financial guidance body may do anything that is incidental or conducive to the exercise of its functions”.


This is an attempt to build on the powers that that subsection suggests.

The fact is that the prevention of debt is even more important than helping people once they fall into debt. In terms of preventing debts arising, the duty of care is particularly important to people with serious health conditions and disabilities, for whom financial problems can quickly become overwhelming, as the noble Lord, Lord Holmes, has indicated. I want to concentrate on the particular plight of sick and disabled people. For example, 400,000 people in the UK with cancer struggle to pay their household bills because of their diagnosis. Banks and building societies have a vital role to play in helping such people; it makes a huge difference if a bank or building society offers flexibility in mortgage and other payments or interest freezes on credit cards and other loans. Although the Bill highlights the importance of early help, there is a growing consensus that greater leadership is needed from the Government to make it clear that providing this support to vulnerable customers must be a priority for financial institutions.

--- Later in debate ---

[Lord Young of Cookham]

My Lords, this amendment, tabled by my noble friend Lord Holmes of Richmond and the noble Baronesses, Lady Meacher and Lady Greengross, seeks to include in the Bill a set of regulatory principles to be applied by the FCA in respect of claims management services. It has reopened one of the discussions which have run through the debates on the Bill about the interface between the SFGB and the FCA and the overall responsibilities of the FCA so far as the consumer is concerned.

I am grateful to my noble friend for the way he proposed his amendment, which would require that authorised persons act and manage conflicts of interests honestly, fairly and professionally. I do not think that anybody who has spoken in this debate—I am grateful to all noble Lords who have taken part—would disagree that these are worthy principles for the FCA to adhere to. I am sure that my noble friend is aware that the FCA already applies these principles in the way it regulates the conduct of business.

The FCA will give careful consideration to the appropriate design of the precise rules that apply to claims management services and how they fit together as an overall regime. Noble Lords may have looked up the FCA’s principles for businesses. They already include the requirements to act with integrity, to,

“pay due regard to the interests of its customers and treat them fairly”,

and to,

“manage conflicts of interests fairly”.

There is a degree of overlap between those and the principles set out in my noble friend’s proposed new clause. If one drills down and looks at the conduct of business rules, they say:

“A firm must act honestly, fairly and professionally in accordance with the best interests of its client”.


Those three adverbs are exactly the same as the ones in my noble friend’s proposed new clause.

When designing new rules for claims management companies, the FCA must take into account its statutory operational objectives, including its objective of securing an appropriate degree of protection for consumers. The FCA will consult publicly on the proposed rules for claims management companies. Here, I may get into trouble with air traffic control. I am not quite sure whether there was an implication that it was going to wait until after we had left the EU before consulting publicly on the rules for claims management companies. As far as I am concerned, there is no need to wait at all: it should get on with it—“Lights touchpaper and retires”.

I therefore hope that I have allayed concerns that there will be an unreasonable delay. The FCA will consult, and when it does, I am sure that it will take on board the points made in this debate. I noticed that the words “duty of care” do not appear in the proposed new clause, but I hope they can be embraced in some of the principles that we have been discussing.

We have every expectation that the FCA will create appropriate rules for claims management companies that will extend existing principles in FCA rules regarding integrity and the interests of customers to claims management companies. I touched on those principles a moment ago. Therefore, our debate this afternoon is not so much about the destination—on which we agree—but about the vehicle. The Government’s view is that there is an existing framework for the FCA to set out its principles—I referred to that. As there is an existing framework for conveying its objectives and its principles for businesses, the regulatory principles do not need to be enshrined in the Bill, which is what my noble friend suggested. The Government are sympathetic —they always are—but this is not a necessary way forward. For that reason, I hope that I can persuade my noble friend to withdraw his amendment.

[Lord Holmes of Richmond]

I thank my noble friend for that response. It would certainly be a courageous Back-Bencher who sought to push an amendment this afternoon when his Whip is on the Front Bench. But I thank all noble Lords who participated in the debate.

I am grateful to the Minister for taking us through some of the rules set out in the handbook. Indeed, much in there is worthy of note. I wish to put on the record in Hansard that I believe that the FCA does an extraordinary job in a number of ways, not least—departing slightly from this issue—in its regulation of fintech, which leads globally in London and the UK and is always worth a mention in your Lordships’ House.

Having said that, despite what was read from the handbook, it is pretty clear that there is a need to consider a duty of care. On the specific issue of claims management services, which we are discussing this afternoon, and indeed in general terms, I am grateful to my noble friend for, as he put it, lighting the blue touch paper. I hope that it does indeed burn bright and that there is action on a consultation on these points by the FCA sooner rather than later, in 2019.

The Minister says that it is not about the destination; we are merely discussing the vehicle. It seems clear that from his point of view, the vehicle would be an aeroplane. However, we are probably not just talking about the vehicle but discussing the timetable and having a timely duty of care in respect of claims management services and generally across all financial services. It would be excellent for the FCA to have that additional remit, which would sit alongside all its other services.

I am grateful to my noble friend the Minister but I will certainly look at what we can potentially bring back on Report. However, for the time being—certainly as he was formerly a Chief Whip in the other place and, even more significantly, as he is my Whip in this place—I beg leave to withdraw the amendment.

Amendment 70 withdrawn.