Financial Guidance and Claims Bill [HL]

Lord Sharkey Excerpts

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

Moved by

[Lord Sharkey]

72: After Clause 17, insert the following new Clause—
“Ban on unsolicited direct approaches by, on behalf of, or for the benefit of, companies carrying out claims management services
The FCA must, within the period of six months beginning with the day on which this Act comes into force, introduce a ban on unsolicited direct approaches to members of the public carried out by whatever means, including digital, by, on behalf of, or for the benefit of, companies carrying out claims management services.”

[Lord Sharkey (LD)]

My Lords, as I mentioned on day 2 of Committee, there has been an enormous increase in the number of cold calls—180% in the last 10 months. There are now 2.6 million cold calls every month, which is an absolutely enormous number. No noble Lord disagreed when I described cold calling as an “omnipresent menace”. It turns out that the menace is even more omnipresent than I had thought. It has even reached the Bank of England. I have the transcript of a cold call received by one of the Bank’s regional offices. The bank official answers the phone and says, “Bank of England, hello”, the cold caller says, “Hello, can I speak to the business owner?”. The official asks, “Of the Bank of England?”, the cold caller says, “Yes”. The official says, “No”. The cold caller says, “Well, do you want to sell the business?”. The official says, “What, the Bank of England?”, the cold caller says, “Yes”. The official says, “No”. The cold caller then says, “Oh all right, bye bye”. Not all cold calls are as harmless as that turned out to be.

The Bill acknowledges and tries to remedy some of the problems with the claims management companies and the associated cold calling. We believe that the transfer of regulatory authority to the FCA is a very desirable move, as is the transfer of the complaints procedure from the Legal Ombudsman to the Financial Ombudsman Service. The impact assessment to the Bill lists some of the problems with the CMCs that will be addressed by these regulatory changes. It notes that, in 2014-15:

“23% … of all CMCs faced some sort of regulatory intervention”.


In addition to what were rule breaches, an independent review identified poor practices among many CMCs. One example of poor practice was poor value for money services offered by the CMCs. The impact assessment noted that evidence from the FOS showed that CMCs do not in practice achieve higher-value redress settlements than consumers complaining directly. The second example was the misrepresentation of services offered to consumers and a reliance on nuisance tactics, such as unsolicited calls or texts. A third example was the progression of speculative and/or fraudulent claims by CMCs. That last point is developed in the report of the Insurance Fraud Taskforce of January last year. The report says that,

“unscrupulous CMCs … play a role in encouraging fraudulent claims. As well as causing a social nuisance through their reliance on cold calls, also known as ‘claims farming’, CMCs have been reported to pressurise otherwise honest people to exaggerate or make up claims”.

This is all pretty unsavoury and the Government are to be congratulated on doing something about CMC practices in this Bill.

The impact assessment also lists the expected benefits brought by the measures in the Bill to consumers. It notes about cold calling that:

“Consumers are expected to benefit from reduced demand from CMCs for leads sourced through nuisance calls and text messages”,


but it does not estimate the reduction and clearly does not expect the cold calling problem to vanish. The question is whether this expected reduction will be significant and whether third-party claims farmers will really be affected by the regulatory changes.

But there is a better question than that: why should we tolerate CMC cold calling at all? After all, we do not allow it for mortgages, and the Government have promised to ban it for pensions. Banning cold calling has been debated many times in this House. On every occasion there has been universal dissatisfaction with the practice and, I believe, a universal desire to put an end to it. Cold calling not only is a profound social nuisance but also does real damage. Whiplash claims are an obvious case in point—I have lost count of the number of times that I have been called by someone saying that I was entitled to recompense because I may have been in a car accident. But speculative and fraudulent whiplash claims are reducing, largely because of the welcome provisions in the civil liabilities Bill. It looks as though one consequence of this is that CMC activity has moved in bulk to holiday sickness claims. The UK travel industry has seen a huge and dramatic increase in claims for food poisoning, essentially. As the noble Lord, Lord Hunt, has already explained, these claims have risen 500% since 2013 and they show a 600% increase year-on-year for 2016 alone. Such claims now represent over 90% of all personal injury claims.

ABTA is aware of the dubious marketing tactics used by CMCs. As we have already been told, they include UK holidaymakers being approached by CMC reps in their resorts and at ports of arrival back in the United Kingdom. Then, of course, there is cold calling. All this adds up to a major problem. This is not just damaging the travel industry, although it is doing that; it is also persuading people to commit fraud on a massive scale. As I have mentioned, we have reached the point where more than 90% of all personal injury claims are for alleged food poisoning. ABTA is campaigning for a ban on cold calling on behalf of, or for the eventual benefit of, CMCs. That is no wonder. The situation is clearly out of control. It again raises the question of why on earth we allow cold calling to go on. Here is our opportunity to ban it for CMCs. That is what our amendment sets out to do. It simply says that the FCA must, within six months of this Act coming into force,

“introduce a ban on unsolicited direct approaches to members of the public carried out by whatever means, including digital, by, on behalf of, or for the benefit of, companies carrying out claims management services”.

--- Later in debate ---

[The Earl of Lytton (CB)]

My Lords, I would not normally deign to interpose in this debate but, having listened to a number of the arguments that have been put forward, I feel compelled to voice my support, but with a word of warning.

I was looking at my private emails and found that since half-past two this afternoon I have had four spurious emails from an outfit called Metro Bank, with which I have no business, telling me about the suspicious activity on my account and suggesting that I might like to click on a link. The fact that such messages usually contain spelling mistakes and start off “Dear Customer” without any other personal identifying information, and the fact of the sheer number of these repeated emails, probably tells its own story, but never mind. The reason I raise that is because in my experience—along with that of probably everybody in this House who has received on their mobile phone something to do with PPI or a personal accident—I frequently get messages that tell me my claim has been settled in the sum of £4,275.80, or something like that, and ask me to click on a link so they can process the claim. I have had no such incident and made no such claim; the process is led by a completely bogus and fraudulent promise of something for nothing.

In my experience, these things are increasingly moving from a posse of anonymous, but still identifiable, 0800 telephone numbers of one sort or another to people’s mobile numbers and landlines. In particular, the mobile numbers may well be a pay-as-you-go account: completely anonymous and possibly passed on in a pub, complete with its ticket. Nobody can track down where these things are coming from. So, if somebody makes a cold call from a pay-as-you-go mobile phone, and having made contact then pass that live contact back to a claims management company of perhaps no great repute and even less good intent, is that still a cold call? If not, then straightaway the whole process of what these amendments are designed to deal with is bypassed. I would like to make sure it is not.

[Lord Sharkey]

Could I try to provide a little clarity, perhaps even a partial answer? The amendment is worded so that cold calls, or the result of them, cannot be used for the benefit of claims management companies. It is not just about the cold call itself—information cannot be passed on in a way that benefits CMCs.

[The Earl of Lytton]

My Lords, I am grateful for that. The nub of what I am getting at is whether we have a problem with enforcing that. These people are clever and devious and will basically stop at nothing because it is a free bet—they seem to be able to weave their way in and out of our virtual world of technology to con people and mislead them. I would be absolutely in favour of anything that can reliably prevent that happening. That was the only point I really wished to make.

--- Later in debate ---

[Baroness Buscombe]

I thank my noble friend for his further response.

To respond to my noble friend Lord Trenchard’s question about whether SMS, email and letters are all cold calling, this is an important point and I confirm that we differentiate between them. Cold calling is the solicitation of business from potential customers who have had no prior contact with the salesperson conducting the call, while unsolicited direct marketing is communication by any means, including email and text, of marketing and advertising material. We genuinely believe that the existing measures I have set out, alongside the new FCA regime, should help tackle CMCs conducting unsolicited direct marketing. I know there is a very strong feeling across the Committee, and we take this on board, but, for the reasons I have set out, the Government do not believe that the amendment is necessary. I hope that the noble Lord will withdraw his amendment.

[Lord Sharkey]

I am extremely grateful for the support of all noble Lords who have spoken. I am especially grateful to the noble Lord, Lord Deben, for his forceful reminder—several times—that this kind of cold calling activity should have no place in our society. It is not necessary, it is damaging, it lures otherwise honest people into crime and it is morally repugnant. Thinking about what the Minister said, I feel that she was right at the beginning: she did disappoint the House.