Financial Guidance and Claims Bill [HL]

Lord Sharkey Excerpts

Committee: 1st sitting (Hansard): House of Lords
Wednesday 19th July 2017 Lords Chamber

[Baroness Buscombe]

This turns on the question of what we mean by seamless. The point is that this body will be able to signpost people. The most important thing about the use of language, in a sense, is the ability of the advisers to clearly signpost and explain who can advise on what. It is a question of who has the advice, the skills and permissions to give debt advice and who can only give guidance.

I am not sure why there is an issue about this. It is more about the ability to signpost people in the right direction. Certainly, all the analysis has shown that changing the terminology makes no difference at all. What makes a difference is the ability of people to understand what it is they are able to receive and from whom.

[Lord Sharkey (LD)]

Is it not the case that, if you can give only debt advice, that advice will be defective if you cannot take into account the pension liabilities and pension assets?

[Baroness Buscombe]

There is clearly an issue here. This question is being looked at, at the moment. As I explained before the noble Baroness, Lady Kramer, intervened, there is a consultation which covers a range of things, including how best to deliver debt advice and money guidance in a blended fashion, in line with the needs of the individual. This consultation has come about in recognition of the fact that there is no magic bullet at the moment for this issue. However, surely that should not prevent or preclude the creation of a body that will, to the best of its ability, signpost people in the right direction to receive the right guidance and advice as is appropriate.

I note what the noble Baroness, Lady Kramer, said about the name. I hoped that we had made it clear at Second Reading that the reason why we do not want to put the name of the body in the Bill is, unfortunately, we have every good reason to suspect that it could lead to other individuals holding themselves out and mimicking the body. It could lead to all kinds of problems if it was set up online as a spurious website, and so on. Call us cynical, but we have to be particularly cautious about that.

I am not convinced that politicians in Parliament are best placed to decide what the name should be. A lot of the terminology used within your Lordships’ House and beyond in our political lives, by those of us who are of a political leaning, no one understands. For example, when we talk about political wards, and so on, it sounds as though we are in a hospital. It is best left to the people who will be brought on board to run the single body to make those decisions and that that is done, therefore, through delegated legislation. On that basis, I hope my noble friend will withdraw her amendment.

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[Baroness Buscombe]

I will certainly take the point away—it was well made. I assure the noble Baroness that this should be part of the whole development of the service, whereby there is very clear signposting on the part of the adviser when talking to any individual to make sure that they understand that it is about their personal finances; it is not about finances that are in any way connected with their business.

[Lord Sharkey]

Many of the jobs we have created since 2010 are sole-trader jobs. Is it not the case that there is no meaningful distinction in sole-trader jobs between personal finance and business finance?

[Baroness Buscombe]

As I just said, we will need to take back and clarify this point. My understanding is certainly that we should focus on an individual’s finances, as opposed to finances attached to their business.

Once again, I thank noble Lords for bringing forward these amendments. I hope they will agree that they are unnecessary in the context of the Bill. I am grateful to the noble Lords because we have had the opportunity to make it clear—it will be clear in Hansard—that it is unnecessary to put into the Bill additional terminology. I urge the noble Lords, Lord McKenzie and Lord Stevenson, and the noble Baroness, Lady Drake, not to press their amendments.

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Moved by

[Lord Sharkey]

7: Clause 2, page 2, line 16, at end insert—
“( ) In relation to the strategic function, such advice to the Secretary of State may include advocating for the introduction of a period of up to 12 months during which time interest and other charges on an individual’s debts may be frozen, and enforcement action halted, in order to allow them time to seek and act upon debt advice.”

[Lord Sharkey]

My Lords, in moving Amendment 7, I shall speak also to Amendment 23. These amendments, in my name and those of my noble friends Lady Kramer and Lord Kirkwood, concern debt moratoriums, and cold calling for the benefit of debt management services and pensions providers or advisers.

Both issues were discussed extensively at Second Reading. Along with other noble Lords, we asked why there was no provision in the Bill for a debt moratorium or a ban on cold calling. I made the point that much cold calling for fee-paying debt management services has been found by the FCA to be misleading and damaging and affected the most financially disadvantaged. I also noted that we do not allow cold calling for mortgages and we should not allow it for debt management, pensions or claims management.

The problem represented by cold calling is getting worse. Truecaller, a call-blocking service, produced research last week that shows Britain’s cold-calling nuisance to be the worst in Europe. The number of spam calls has risen by an astonishing 180% in the past 10 months. We are now bombarded with 2.6 million calls a month—more than 31 million calls per year—despite new rules intended to limit the problem. This is a completely unsatisfactory situation, as is the absence of a debt moratorium.

In her Second Reading response, the Minister acknowledged the merits of a debt moratorium. She said:

“A breathing space scheme could help people affected by serious debt by stopping creditor enforcement and freezing further interest and charges on unpaid debt”.


A stronger version of this statement appears as a commitment on page 60 of the 2017 Conservative manifesto. The Minister went on to say:

“However, breathing space legislation would be lengthy and complex. As such, any breathing space legislation would need to be properly prepared and consulted upon, and Treasury Ministers will outline further details in due course”.—[Official Report, 5/7/17; col. 943.]


This is not promising. The two-year legislative programme in the Queen’s Speech does not provide a suitable legislative vehicle for future action on breathing space. This is not at all surprising when you consider the complexity of the inevitable difficulties with the Brexit Bills that were in the Queen’s Speech, but it is bad news for those in serious debt.

The Minister said much the same things and gave the same reasons for not producing the already promised ban on cold calling for pensions. She said:

“It is a complex area that requires careful and detailed consultation with stakeholders during the year. In particular, there are questions of how to define existing relationships and how to deal with referrals and third parties. As such, we do not propose to include a cold-calling ban in the Bill at this time”.


Again, this is very disappointing. As the Minister noted, pension scams can cost people their life savings and leave them facing retirement with no opportunity to build up their pension savings again. That is a catastrophic risk. Surely it is the duty of government to act very quickly to protect people against that risk.

The Minister was equally discouraging about cold calling by CMCs. She said simply that,

“strengthening the regulation of claims management services should reduce the number of nuisance calls”.—[Official Report, 5/7/17; col. 944.]

She said “should” not “would”, and “reduce” not “stop”. This is entirely unsatisfactory, as the airline and holiday industries are currently and loudly pointing out. The huge and absurd rise in claims for food poisoning while on holiday abroad is a clear example of cold-calling abuse.

Our amendments address both the breathing space and the cold-calling issues. We would have preferred to amend the Bill to institute the former and ban the latter, but the scope of the Bill is narrow and to stay in scope our amendments stop short of that. Instead, Amendment 7 allows the SFGB to advocate to the Secretary of State that a breathing space be introduced. Amendment 23 requires the SFGB to publish an annual assessment of,

“the extent to which consumer detriment is caused”,

by the absence of a breathing space and a ban on cold calling for the benefit of debt management services and pension providers or advisers.

However, these are only approaches to a resolution. There is a better way. The Government could table, later in Committee or on Report, a simple amendment which gives the Secretary of State the power to bring forward secondary legislation to introduce a debt moratorium and to ban cold calling for DMCs, pension providers and advisers, and CMCs; with a corresponding and minor tweak to the Long Title. It is perhaps a little unusual for an opposition party to suggest a Henry VIII clause to the Government; the convention is normally that it is the other way round. But since it is clear that the Government agree in principle with these moves and the only barrier is one of time, we could use this legislative vehicle—the Bill before us—to achieve what the Government have already promised.

If the Government do not do this, we see no likelihood in the next two years of helping those seriously in debt or in danger of being fleeced by cold calling. That is much too long and quite unnecessary. We should use the Bill to give the Government the power to protect those at risk. This is in the Government’s hands. Might I suggest that we meet to discuss this unusual proposal as a matter of urgency? I beg to move.

[Viscount Trenchard]

My Lords, I have some sympathy with the amendment moved by the noble Lord, Lord Sharkey, to introduce a breathing space, and I have very much sympathy and agreement with his proposal that cold calling should be banned. He is right to say that cold calling has become a complete menace. It has, and it is getting worse by the month. I receive all kinds of spam texts and calls to my mobile, telling me I have debts and saying, “Would you not like us to help you repay them or have them written off?”. These people are a complete menace. The worst thing is that young people are taken in by them.

Of course, a lot of the problem is caused by lenders putting out offers of very cheap money to hard-up people, young and old, who are tempted to take advantage of 0% for 20 or 24 months. Then in very small type somewhere at the bottom it says that, after a relatively long period, the interest rate applicable to these loans will change from 1% or 0.8% to an APR of anything from 25% to 37%, or even higher. I would think it utterly reasonable that some kind of moratorium be put in place to protect people who have been tricked into taking out loans of the kind that I have just described.

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[Baroness Buscombe]

I hear what the noble Baroness is saying, but I stick to what I said before: there may be opportunities in the coming few sessions or so. The important thing is that we want to take this forward with care, and we are very committed to it in principle.

I should also refer to cold calling and the question the noble Lord, Lord Sharkey, raised. We are consulting on pensions cold calling, but the situation is different from mortgages cold calling. We have consulted on banning pensions cold calling through legislation, while a ban on mortgages cold calling has been put in place through FCA rules. Legislating to ban cold calling makes the activity illegal and therefore sends a stronger message to members of the public to put down the phone.

There are already measures in place to tackle unsolicited calls more broadly. The Information Commissioner’s Office enforces restrictions on unsolicited direct marketing, and the Digital Economy Act, passed earlier this year, required it to issue a statutory code of practice on direct marketing activities. The code will include guidance for direct marketing organisations on complying with the law, including the Privacy and Electronic Communications Regulations (EC Directive) 2003, and the upcoming data protection Bill. Unsolicited direct marketing calls to a person who has not agreed to be contacted are illegal.

[Lord Sharkey]

In view of what the Minister is saying about the measures in place to reduce cold calling, does she think that they are a success so far, with a 180% increase in the past 10 months and now 2.6 million calls a month? Where are the signs of success in reducing cold calling?

[Baroness Buscombe]

The Government take the threat of scams and the whole issue of cold calling very seriously. On the specific issue of pension scams, the Government launched a consultation in December 2016, looking at three potential interventions. These included a ban on cold calling to help stop fraudsters contacting individuals. The Government plan to publish the response to that consultation shortly, which will set out the intended next steps—but, throughout the consultation period and during engagement with stakeholders, it became clear that this is a complex area. For example, where the consultation said that the ban would not extend to existing relationships, respondents highlighted the potential difficulty in defining existing relationships and ensuring that legislation is appropriately worded.

It is clear that this policy requires careful and detailed consultation as we further develop plans. We do not propose to extend this ban to debt management cold calling. We have focused on pension scams because they can have such a detrimental impact on individuals. Pension scams can cost people their life savings and leave them facing retirement with limited income and little or no opportunity to build their pension savings back up. I should add that, at the same time, we have sought to increase standards in the debt management sector by requiring organisations to be authorised by the FCA.

I assure noble Lords again that the Government take the issue of problem debt and cold calling very seriously. Work is ongoing in these areas. I do not think that the amendments would add value to the new body’s functions—and, although I appreciate noble Lords’ intentions, this is not the right time or the right place to amend the Bill, so I ask the noble Lord to withdraw his amendment.

The noble Lord, Lord Stevenson, referred to officials in the Box. They are doing a brilliant job. I took to heart his reference to them as if they are just there to be difficult. They are doing a superb job.

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[Baroness Buscombe]

I thank the noble Earl. Of course, I take very seriously everything that noble Lords have said in this evening’s debate and will take it back to the department to think it through carefully between now and Report.

[Lord Sharkey]

I start by thanking all noble Lords who have spoken in this debate. I think it is true that all supported the general principles behind all three amendments. As I am sure the Minister will have expected, I am disappointed by her response. Both amendments are obviously entirely benign and useful, and I am disappointed that she has not taken up my suggestion of a meeting to discuss the Henry VIII proposal. I believe that the Government are seriously considering both a moratorium and how to deal with cold calling—I do not think that anyone in the Chamber would disagree with that. We believe that the Government are taking it seriously and are doing what they can. That is not the issue; the issue is timing.

I also agree that we need to proceed with care—as the Minister pointed out, these are complex issues—but, above all, we need to proceed. Giving the Secretary of State powers to institute by secondary legislation will significantly bring forward the point at which we can institute a debt moratorium and ban cold calling. The sooner we do that, the more people we protect and the more people we rescue from debt. The issue of timing is important.

I understand that it is difficult to answer the questions asked about legislative vehicles, but it would be immensely reassuring to the Committee to hear more specific answers to the questions, “Likely, when? Likely, how? Likely with what vehicle?”. In the absence of those answers, it is perfectly reasonable for us to say that we think we need more definite speed, which is what we propose.

I am sure that we will return to the issues on Report, when I hope that we can focus on producing a moratorium on debt and a ban on cold calling. In the meantime, I beg leave to withdraw the amendment.

Amendment 7 withdrawn.