Financial Guidance and Claims Bill [HL]

Lord McKenzie of Luton Excerpts

Ping Pong (Hansard): House of Lords
Tuesday 1st May 2018 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, we are happy to support the Government on this group of amendments. Amendments 7 and 8 in particular are very important, relating as they do to pensions guidance. Amendment 7 relates to personal pension schemes, Amendment 8 is a parallel one relating to occupational schemes, and there is a further subset of provisions relating to occupational schemes in Northern Ireland.

Our earlier deliberations and those of the other place had a strong focus on consumer protection, recognised this afternoon, on pressing back against pension scams and on the risks that can arise from an imbalance in information. These issues have been heightened in significance since the advent of pensions freedom, and we are wholly supportive of the requirement on the FCA to make rules which require trustees, managers and stakeholders, when liquidating and transferring entitlements, to refer members to appropriate guidance provided by the SFGB or its delivery partners to ensure that effective explanations and/or opting-out processes are in place.

Amendments 1 and 35, which we support, enable transfer schemes under Schedule 2 to transfer staff rights properly from the Consumer Financial Education Body to SFGB and devolved authorities. It would be relevant if devolved authorities became responsible for provision of debt advice in their area. This facilitates the devolved authorities being responsible for the debt advice in their area. As the Minister explained on introducing the Bill into your Lordships’ House, the devolved authorities currently deliver a broad range of guidance services. By transferring responsibility for debt advice, there will be opportunities for joining up the commissioning of services—and we obviously support this.

As has been evidenced from the earlier discussion on this item, there has been discussion about whether the clauses are robust enough in enabling impartial advice. We know the view of the noble Baroness, Lady Altmann. It seemed to me that the Minister had dealt with this; a note provided by the Minister would appear to put that matter to rest—in particular, about the need to look at the interaction between Clauses 3 and 5. I think that my noble friend Lady Drake touched on that matter. New subsection (7) in Amendment 7 and new subsection (6) in Amendment 8 define the pensions guidance referred to in the amendments as the “information or guidance” provided in pursuance of Clause 5 of the Bill. That clause requires the new body, as part of its “free and impartial” pensions guidance functions in Clause 3, to deliver what we know as Pension Wise guidance. That seems to address the very real concern that the noble Baroness, Lady Altmann, raised.

We enter the final straight on this important Bill, and we might reflect just briefly on the journey that we have made and the changes that have occurred, with yet more to follow this afternoon. This is an important measure, encompassing as it does the creation of a single financial guidance body and its reach to cover pensions guidance, debt advice, money guidance and consumer protection functions. It is charged with developing a national strategy to improve financial capability. It further deals with the regulation of claims management services, in particular to challenge fraudulent practices and excessive charging.

Some important changes have been made to the Bill, especially in your Lordships’ House, and this can be attributed to the open-book approach of the Minister in particular, for which we thank her, as well as the engagement cross party of your Lordships around the House. Key matters now include the duty of care for the FCA, and the breathing space scheme—a very important provision. My noble friend Lord Stevenson was heavily involved in that, of course. Then there is the prohibition on cold-calling for pensions and CMCs, with enabling legislation to cover other financial products; the interim fee cap for PFI claims management; default guidance for pensions; the extension of CMC regulation to Scotland; and much more. I hope that we will have the opportunity finally to thank the Minister and her colleagues in due course, but is right that we reflect on the journey that we have made so far in the Bill.

[Lord Flight (Con)]

My Lords, I support these amendments. I put on record the fact that, in the largest area of pensions saving, occupational schemes, participants typically do not seek advice but allow their savings to go into the default fund, which typically may have taken up as much as 90% of the total savings. There is nothing wrong with that, and default funds are generally constructed very sensibly for long-term pension fund investment. However, it is the area where most money ends up and where individual beneficiaries do not really take decisions themselves.

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[Baroness Altmann]

My Lords, I support Amendment 10A and I hope that my noble friend will be able to accept it. Of course I welcome the Bill and the concept of a ban on cold calling but I fear, as we have expressed and the noble Lord, Lord Sharkey, in particular has pointed out, that unless we ban the use of any leads that have been obtained from cold calling we will not protect consumers.

What is cold calling? It is unsolicited, direct marketing. Companies try to approach potential customers to entice them into buying products that in most cases end up being scams and on which those customers often end up losing significant sums of money.

The legislation tends to focus on this issue from the perspective of protecting people’s information and data, but this issue of banning cold calling needs urgently to be considered from a customer perspective as one of business selling practices. That is very different from the concept of protecting someone’s data. Even if there were consent in some way to cold calling, the practice that is currently prevalent—whether from overseas or within the UK—tends not to be calling people whose numbers have been found by invading their data privacy. Very often, it is random number calling from an automated device or merely trawling through telephone directories. Even those people who sign up to the Telephone Preference Service receive cold calls.

Cold calling is effectively already banned, but what the Bill seeks to do, what noble Lords were trying to do and what this amendment would help to achieve would be more than that, because we will never effectively stop someone trying to call people. However, if we ban the business reasons for which they do so we will properly protect consumers. That leads on to my plea to my noble friend to consider this from the point of view of the selling process and the customer buying process. If we ensure that the regulators in charge of the sales process do not permit the use of data that has been obtained from an unsolicited call, in any form, as we have already done for mortgages, that would be much more likely to ensure the kind of protection that I know my noble friend and the Government wish to achieve.

I thank David Hickson from the Fair Telecoms Campaign. He has tirelessly attempted to help people understand why these things are so important. The ICO is of course responsible for enforcing compliance with data protection legislation but the regulation of business practices is undertaken by the specialist regulators. In the case of pensions, it is the FCA or the Pensions Regulator. Indeed, the FCA already prohibits unsolicited direct marketing of mortgage products. The SRA prohibits unsolicited direct marketing of claims management services by solicitors, so it is possible to stop. I urge my noble friend to consider and respond to these concerns when she makes her closing remarks.

[Lord McKenzie of Luton]

My Lords, I start by acknowledging the role played by the noble Lord, Lord Sharkey, in our deliberations—particularly on cold calling, which he has been focused on. I am not sure that we are meant to, under the rules, but I also welcome the Minister from the other place, who is with us and hoping not to get the Bill back for another round of ping-pong. We will see.

The consumer protection function of the single financial guidance body is part of the armoury to build a case for banning cold calling and unsolicited direct marketing for consumer financial products. It adds to the abolition of cold calling for pensions and CMCs that is now in the Bill. As sent back from the Commons, the Bill requires the SFGB to consider the impact of unsolicited direct marketing on consumers, publish from time to time an assessment of whether such activity has a detrimental effect on consumers and advise the Secretary of State whether to make regulations under the cold calling provisions of the Bill.

The amendment in the name of the noble Lord, Lord Sharkey, seeks to add a requirement for the SFGB to additionally publish an assessment,

“not less than once every two years”.

Given where we are in the process, I frankly doubt that this requirement would add value. Surely the key is to have flexible arrangements so that the body can respond to emerging issues and report expeditiously as and when evidence of detriment is available. If the noble Lord’s concern is that the SFGB will somehow let this function lie fallow, I am sure that the Minister can put something on the record in her response.

Amendment 10A—also in the name of the noble Lord, Lord Sharkey—seeks to ban,

“the use by any person of data obtained in contravention of the prohibition”,

of cold calling for pensions and,

“determine the penalties for any such contravention”.

A further amendment seeks a parallel prohibition on data from cold calling for claims management services. It is understood that through measures in this Bill—which will be complemented by existing and forthcoming data protection legislation—where personal data is obtained through an unlawful cold call, further use of that data would be contrary to the Data Protection Act 1998. I understand that fines for such abuse are about to be raised significantly. Through the general data protection regulation and the Data Protection Bill going through Parliament, these matters will be addressed and prohibited. The issue is important and it is certainly important that we hear from the Minister on the second amendment of the noble Lord, Lord Sharkey.

[Baroness Buscombe]

My Lords, I thank all noble Lords who have taken part in this brief debate. I thank the noble Lord, Lord Sharkey, for his amendments, which give us an opportunity to reiterate some of the assurances that I hope I have already made, both through the passage of the Bill and about where we go now. It is a pleasure to echo the words of the noble Lord, Lord McKenzie: although we appreciate the sentiments of the noble Lord, Lord Sharkey, and understand where he is coming from, the Government expect—I stress this—the body to be flexible and responsive to emerging issues. We expect it to report promptly as and when evidence of consumer detriment in relation to cold calling is available. Our concern is that as soon as one says, “It’s every year” or “It’s every two years”, the situation in departments and bodies such as the new one can so easily become a box-ticking exercise. We do not want it to be that. We want to be sure that the body will be able to respond as issues emerge, particularly real evidence of consumer detriment. Having been through the process of the Bill and talked to all those currently working in the three existing bodies that will be transferred shortly into the one single financial guidance body, I have great trust that the level of expertise and experience we will be able to transfer to the new body is such that they will have a strong eye on this. I assure noble Lords that there is strong feeling in support of what we seek to do both in your Lordships’ House and way beyond. We have listened to noble Lords on these issues and we will act firmly to protect consumers where appropriate.

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[Baroness Buscombe]

My Lords, Amendment 19 places a duty on the Law Society of England and Wales to cap fees in relation to financial services claims management activity, as well as giving a power to the Law Society of Scotland to restrict fees charged for this activity. It also gives a power for some legal services regulators in England and Wales to restrict fees charged for broader claims management services. Alongside this, Amendment 20 gives the Treasury a power to extend the Law Society of Scotland’s fee capping power to broader activity in future.

Amendments 16, 17 and 18 ensure that the interim fee cap provisions, introduced as a concessionary amendment in your Lordships’ House, work together with the fee capping powers for legal regulators. Taken alongside the fee restriction powers for the FCA that we have already agreed should form part of the Bill, these provisions will ensure that consumers are protected, no matter which type of claims management service provider they use, and whether it is regulated by the legal service regulators or by the FCA.

They will also ensure that the relevant regulators are able to adapt to any future changes in the market and that there is continuity of coverage for the interim fee cap throughout the transfer of regulation. Indeed, the honourable Member in another place Jack Dromey MP put it well when he said:

“The clauses are sensible because they go beyond claims management companies. … Of course it is about not only CMCs, but legal service providers”.—[Official Report, Commons, Financial Guidance and Claims Bill Committee, 6/2/18; col. 95.]


I hope that noble Lords will agree with this sentiment and will accept Amendments 16 to 20, as made in the other place. I beg to move.

[Lord McKenzie of Luton]

My Lords, if my honourable friend Jack Dromey is happy with these, I have to be as well.

Motion on Amendments 16 to 20 agreed.

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[Baroness Buscombe]

I once again thank very much all noble Lords who have taken part in the many debates in your Lordships’ House on the Bill. We have come a long way and there has been huge consensus. We have improved the Bill, along with our honourable friends in another place, and I hope that all noble Lords can wish it well. In particular, on the future of the new body, I hope that we will know its name soon so that we can start calling it something in our future debates on this subject.

[Lord McKenzie of Luton]

My Lords, if it is time to say our thank yous, I will add mine to those of all noble Lords who have participated in these debates. There have been robust exchanges on what was initially quite a narrow Bill, but its coverage has been expanded, quite appropriately. I certainly thank the Bill team. I know that, on our side, we have probably put them through some misery with our questions from time to time, but when we have had the opportunity to touch base in that way, it has been really helpful to the passage of the Bill in this place. I wish the Bill well on its passage into legislation.

[Lord Sharkey]

I associate myself with the comments of the noble Lord, Lord McKenzie, and the other noble Lords who have spoken. Not only has the Bill been significantly improved but, oddly, I think we have managed to enjoy the process as we have gone through it—perhaps it is not odd at all. I thank the Minister and her officials.