Financial Guidance and Claims Bill [HL]

Lord Sharkey Excerpts

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

Moved by

[Lord Sharkey]

That this House do agree with Amendment 2A.

2A: Line 10, after second “time” insert “, and not less than once every two years,”

[Lord Sharkey (LD)]

My Lords, my amendment to Commons Amendment 2 deals with the issue of cold calling spoken to by the Minister a moment ago. Your Lordships will recall that as the Bill has progressed, we have discussed cold calling extensively. There was almost universal acknowledgement of widespread abuse, of invitation to commit fraud and of an unwarranted and all too frequent intrusion into people’s lives. I will not rehearse at this late stage all the details of the evils inflicted on us all, and particularly on the elderly and the vulnerable, by unscrupulous cold calling. The House clearly recognised an omnipresent when it saw one: we voted decisively to address the problem via this Bill.

In the Bill we sent to the Commons, we included, as the Minister has said, a provision to oblige the SFGB to,

“have regard to the effect of cold-calling on consumer protection”,

and to,

“make and publish an annual assessment of any consumer detriment”.

We also required the SFGB, where it found consumer detriment, to advise the Secretary of State,

“to institute bans on … cold-calling and the commercial use of any data obtained by … cold-calling”.

The Bill now comes back to us slightly modified and in many ways improved, but in one critical way, significantly weakened. Amendment 2(7)(b) requires the SFGB,

“to consider the effect of unsolicited direct marketing on consumers of financial products and services, and … from time to time to publish an assessment of whether unsolicited direct marketing is, or may be, having a detrimental effect on consumers”.

The final part of the Government’s amendment obliges the SFGB to advise the Secretary of State to “make regulations” to remedy any defect.

There are two very significant differences between this and the original formulation. The latter cut off the revenue chain for cold callers operating from outside the UK by banning the use of data obtained unlawfully. This is absent from Amendment 2. I will return to this issue later when I discuss Government Amendment 10 and, in passing, Amendment 21. Here, I want only to deal with the Government’s use of the words “from time to time”—words which the Minister herself has highlighted. The full text states that the SFGB,

“from time to time … publish an assessment of whether unsolicited direct marketing is, or may be, having a detrimental effect on consumers”.

The question here is: what is the force of the phrase “from time to time”? What obligation does it really put upon the SFGB? What would count as “from time to time”? For example, would once in five years satisfy? Would once every 10 years satisfy? This is an extremely weak requirement, so vague as to have no force at all. The phrase “from time to time” does not in practice place any definable obligation on the SFGB. This is not only unsatisfactory; it is also not what this House voted for. We voted for an annual assessment.

There may of course be arguments—the Minister has deployed some of them—against annual assessments: for example, that, in its first year of existence, the SFGB may well have other very urgent priorities. I understand that, and that is why my proposed amendment simply adds the words,

“and not less than once every two years”.

This seems to me a moderate response that is necessary to prevent a vital part of our agreed curbs on cold calling being rendered ineffective by Amendment 2. I very much look forward to the Minister’s response.

The Minister told us several times during the Bill’s progress through our House—with real passion—that she abhorred cold calling. I hope that she can find a way to reassure us that the Government’s proposed amendment does in fact have meaning and force. Of course, she could do that by accepting Amendment 2A.

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I hope I have been able to reassure noble Lords that we have taken the measures as far as we feel expedient, sensible and flexible, allowing the body and the considerable degree and body of expertise within it to proceed, working with the Bill as amended thus far. On that basis, I hope that the noble Lord, Lord Sharkey, will feel able not to press his Amendments 2A and 10A. I will also address the questions raised relating to Amendment 21A under group 5.

[Lord Sharkey]

I thank the Minister for that response. I should say at this point that it has been a pleasure to work with her and her team throughout the lifetime of the Bill. I agree with her assessment and that of the noble Lord, Lord McKenzie, that we have made significant progress on improving the Bill as it has been before this House and the other place.

I am reassured by what the Minister said. I remain slightly sceptical about whether “from time to time” has the kind of force that she suggests—but she suggested it so forcefully that I feel able to be reassured. I am slightly—but only slightly—less reassured about the prohibition on international cold calling. I was worried when I heard Nigeria listed as one of the co-operating countries in the new universal ban on cold calling. It does not appear to be working quite as well as we might have expected. However, I take the Minister’s point about the new regulations that will enable us to clamp down.

I will finish by emphasising a point made by the noble Baroness, Lady Altmann. We need a kind of sales approach to this. We need to make certain that the regulator focuses on the people selling products to examine whether they have legitimately got their leads. That seems to be the key thing that the regulator needs to do. I wonder whether the ICO is equipped to do that; it certainly has no history of doing it and it needs to proceed on a rather fast learning curve. I beg leave to withdraw the amendment.

Motion on Amendment 2A (as an amendment to Amendment 2) withdrawn.

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[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.

Amendment 21A (as an amendment to Amendment 21) not moved.

Financial Guidance and Claims Bill [HL]

Lord Sharkey Excerpts

Report: 2nd sitting (Hansard): House of Lords
Tuesday 31st October 2017 Lords Chamber

The advantage with our amendment, in contrast to where the Government are, is that the breathing space, whose time has come, will happen within 12 months. Even though the Government have moved with what some people would call spectacular speed in the last few weeks, with this they will be able to say they have satisfied the commitment in their manifesto and done something that the country wants. I beg to move.

[Lord Sharkey (LD)]

My Lords, we on these Benches very strongly support the amendment, for which the noble Lord, Lord Stevenson, has made such a detailed, eloquent and powerful case. The notion of a breathing space or debt respite scheme has attracted a lot of support both in this Chamber and outside.

The Minister herself has acknowledged the merits of such a scheme. She said at Second Reading:

“A breathing space scheme could help people affected by serious debt by stopping creditor enforcement and freezing further interest and charges on unpaid debt”.—[Official Report, 5/7/17; col. 943.]


There is really no need for the conditional “could” in that assessment. The evidence from the existing scheme in Scotland makes it clear that such a scheme does help people affected by serious debt—and help is very definitely needed.

Last week, the FCA published its detailed study of the financial lives of UK adults. This is a truly remarkable and detailed study and an exceptionally useful piece of work, and I congratulate the FCA on producing it. But it is also a truly worrying piece of work. Among its many findings was the fact that in the case of 400,000 adults who were behind on payments and had contacted their provider, their provider did not encourage seeking free debt advice. Another 300,000 adults in the same position reported that their provider did not allow time to pay. Worst of all, for 100,000 adults in arrears, their providers were unsympathetic, did not encourage seeking free debt advice and did not allow more time to pay.

A debt respite scheme would certainly help the debtor, but Scotland shows that it would also help the creditor, who would recover more of the debt. This is a win-win situation. Both sides gain. The case for a debt respite scheme is clear and compelling. That is why, no doubt, the commitment to such a scheme was contained in the Conservatives’ 2017 general election manifesto. But the Minister seemed to feel, when we discussed this at earlier stages, that the issue was so complex that delay was necessary. She said in Committee:

“The Government’s manifesto … proposed the introduction of a statutory breathing space scheme and statutory debt repayment plan. This is an important and complex issue. It requires thorough preparation and consultation on details, such as who could be eligible, which debts could be in scope and how someone could enter into a breathing space”.—[Official Report, 19/7/17; col. 1683.]


All this is quite right, of course, and includes the important and unresolved question of whether rent and utilities arrears should be included in any such scheme. In that context, it is worth repeating what the noble Lord, Lord Stevenson, mentioned a few moments ago: a debt respite scheme already has the backing of at least part of the utilities sector, Water UK.

But focusing on these undoubtedly important questions avoids the simple question of when. It ignores the fact that primary legislation can establish the framework and leave the details to secondary legislation. However, the noble Lord, Lord Young, said last Friday in this Chamber:

“The legislative programme for this Session is already at full capacity and there is no scope for additional measures”.—[Official Report, 27/10/17; col. 1148.]


So, if the question is when there will be a legislative vehicle that will allow the construction of a breathing space, the noble Lord, Lord Stevenson, has provided the answer. The answer is this Bill and this amendment. I hope that the Minister will see its obvious merit and be able to accept it as an obvious way of making progress without further delay.

[Baroness Altmann (Con)]

My Lords, I too have added my name to the amendment, which I hope my noble friend will be minded seriously to consider and, if necessary, bring back at a later stage still. There is clearly widespread support across the House and indeed the country for such a scheme. There is also rising concern about the level of consumer debt within the economy as a whole. We know that more and more people are falling into debt, having perhaps been enticed into borrowing at teaser loan rates that have then risen. We also know that the trend in interest rates may well start to go up, which again would cause significant difficulties for those who have taken on perhaps unwise levels of debt. In practical terms, just giving this breathing space, which I know the Government support, could help to manage a situation that has gone beyond manageable for many vulnerable people. I hope that noble Lords across the House will support this, and indeed that my noble friends on the Front Bench will be able to as well.

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Moved by

[Lord Sharkey]

24: Clause 3, page 3, line 15, at end insert—
“( ) In Schedule 3 to the Pensions Schemes Act 2015 (pensions guidance), after paragraph 6(3) insert—“(3A) In determining what provision to include in the rules, the FCA must include a requirement for the trustees or managers of a relevant pension scheme to ask members of the scheme or survivors of members of the scheme at the point at which they require access to or individual transfer of their pension assets, if they have received the information and guidance available under section 3 of the Financial Guidance and Claims Act 2017 (specific requirements as to the pensions guidance function); and if they have not received such information and guidance the FCA may require the relevant trustee or manager to provide access to such information and guidance before proceeding.””

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[Lord Sharkey]

My Lords, I am grateful to the noble Baroness, Lady Altmann, the noble Lord, Lord McKenzie of Luton, and the noble Earl, Lord Kinnoull, for adding their names to Amendment 24. It may look rather complicated, but it addresses a simple problem and proposes a simple partial remedy. When it comes to pension pot access or transfer, the problem with our current financial information and guidance system is not the quality of the information or advice, but the very low level of take-up. In Committee, we spoke about the quality of the information and guidance and noted the exceptionally high levels of user satisfaction with the Pension Wise service, recorded in the first wave of the service evaluation survey published in October 2016. It was very pleasing to see the same exceptionally high levels recorded again in the second wave of evaluation data published last week. It is clear that the information and guidance provided is of real help to pension holders. That is not the issue: what is the issue are the exceptionally low levels of take-up. The FCA reports that, of those over the age of 55 planning to retire in the next two years, only 10% had used TPAS and only 7% had used Pension Wise. I know that these figures are contested, but even if they were out by an unthinkable 50%—as I am sure they are not—then take-up would still be dangerously and unacceptably low. The simple fact is that too many people will be making decisions about their pension assets without information or guidance.

The amendment is aimed at doing something about that. It is designed to be a nudge, rather than any kind of probably unenforceable or counterproductive compulsion. It amends the Pension Scheme Act 2015 in order to amend FSMA 2000. One way or the other, almost every financial amendment ends up amending that Act. The amendment would require the FCA to change its rules to make possible the provision of last-minute information and guidance to those who have not already had it and who are about to access or transfer their pension assets. The FCA would be required to write into its rule book a requirement for trustees or pension managers to ask members, or their survivors, at the point at which they require access to or transfer of their pension assets, if they have received the information and guidance mentioned in Section 3 of this Act. If they say no, the FCA may require the trustee or manager to provide access to such information and guidance before proceeding.

This is a “may”, not a “must”, because the universal application of this requirement would obviously be unduly burdensome and, anyway, unnecessary. The FCA knows very well which categories of consumer are most at risk and can restrict the requirement to take action to those cases. Adopting the amendment would mean that people accessing their pension funds could be given a final nudge. There is no compulsion; simply the provision of a last-minute opportunity to see for the first time—for those who have not seen it already—the excellent information and advice available to them, if the FCA judges them to belong to a category that is particularly at risk. There is no compulsion, just a chance to look at valuable information and guidance before making an important and irrevocable decision.

We know that levels of financial education and financial self-confidence in this country are very low indeed and that levels of ignorance and misunderstanding are very high. We know that the take-up of the services provided by TPAS and Pension Wise is far too low. It is entirely right that we take every opportunity to rectify that situation and that we should have a go at doing this when people are at the point of making a critically important decision about their pension assets. This amendment would provide a last chance for reassessment for those who need it most, when they need it most. I beg to move.

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[Baroness Buscombe]

My Lords, the amendment relates to the specific pensions guidance requirements set out in Clause 3 that the single financial guidance body must provide as part of its general pensions guidance function. The amendment seeks to increase the take-up of this particular guidance by members of the public when they wish to access or transfer their pension.

I am grateful for the opportunity to reference the Pension Wise service, which is currently delivering the guidance described in Clause 3. The Pension Wise service evaluation, published last week, shows that the service is incredibly well regarded by its customers, with customer satisfaction at 94%—a figure referred to by several noble Lords.

The amendment is driven in part by figures that suggest that Pension Wise is not reaching enough people. However, our contention, as my noble friend Lord Young set out in Committee, is that assessing take-up volumes is far from straightforward and that the picture is much better than the figures published by the FCA would suggest. In fact, I recently met with Pension Wise and it was very clear to me that a huge number of people are accessing guidance just on the website.

As noble Lords said, the amendment is driven also by the FCA’s recent interim report on the retirement outcomes review. The report raised some issues, which noble Lords have referred to, and the FCA has proposed a number of remedies. These include additional protections and measures to promote competition for consumers who buy draw-down without taking advice.

The FCA is actively engaging with government, regulators, industry and consumer bodies before it delivers its final report in the first half of 2018. We should take decisions about how to proceed in the light of the fullest information possible. This will ensure that we make interventions that go to the heart of addressing any weakness in the system and ensure people make informed choices for their circumstances.

The amendment would oblige the FCA to make rules requiring pension providers to ask individuals with personal or stakeholder pensions whether they have had the specific pensions guidance set out in Clause 3 when they require access to, or individual transfer of, their pension assets. Beginning with individuals requiring access, it would be helpful if I take a moment to remind noble Lords about the retirement risk warning rules, which are in force today and will continue to be in force when the new body is established.

The FCA already requires that when a person has decided in principle to access their personal or stakeholder pension pot, and before the action is concluded, the pension provider must ask the individual whether they have received pensions guidance or regulated advice. If the person says that they have not or if they are unsure, the FCA requires that the firm must explain that the decision is an important one and encourage the individual to use pensions guidance or to take regulated advice. If the person says that they have had their pensions guidance or regulated advice, or if they insist on proceeding, the FCA requires the firm to give the individual appropriate risk warnings.

These warnings must be relevant to the chosen method of access and, where the pot is over £10,000, the provider must ascertain information about the individual’s circumstances to tailor the warnings. Risk factors that should be covered where relevant are: the individual’s health; loss of guarantees; whether the person has a partner or dependants; inflation; whether the person has shopped around; sustainability of income in retirement; tax implications; charges, if a person intends to invest their pension savings; impact on means-tested benefits; debt; and investment scams.

These retirement risk warnings are in addition to other FCA rules that require pension providers to tell people with personal or stakeholder pensions: first, that free and impartial guidance is available from Pension Wise to help them understand their pension options; secondly, how to access the guidance through the internet, over the phone or face to face; and, thirdly, that they should seek guidance and consider taking independent advice to help them decide which option is most suitable for them.

Pension providers must include this information with the wake-up packs that people are sent when they approach retirement or, importantly, when they contact them about accessing their pension—I always smile when I reference the fact that the packs are called “wake-up” when they are for those approaching retirement.

It may also be helpful to remind the House that the FCA also requires pension providers to include the Money Advice Service booklet, Your Pension: It’s Time to Choose, or materially the same information in wake-up packs sent to members with personal or stakeholder pensions. This provides information and guidance on pension options and where to go for more help, including Pension Wise and the Pensions Advisory Service. Again, I say to noble Lords that I was amazed and hugely encouraged by the extraordinary expertise and experience that exists within those organisations, particularly when I visited the Pensions Advisory Service, where there are people with 30 or 40 years’ experience in the financial services industry giving advice to people over the phone—over the counter, as it were—and on their websites and by email. The booklet also covers essential information about tax, the importance of shopping around and avoiding scams. I hope that noble Lords will agree that this existing regime already provides individuals with important information and strong encouragement to take advantage of guidance and advice before accessing a pension pot.

I now turn to individuals requiring a transfer of their pension. Noble Lords will be aware that many transfers have the express aim of accessing the pension freedoms, and they are protected by the measures I have just spoken about. A large proportion of other transfers from one registered scheme to another can be a routine decision to consolidate pension pots to keep financial affairs simple. This can often deliver better value for members, and adding friction to what is essentially an administrative process could directly inhibit member engagement with their pension.

It is also the case that there are existing requirements in relation to transfers from one registered pension scheme to another. In a transfer situation, the Government are keen that members with valuable guarantees are aware that they have them and of the implications of giving them up. Where an individual has safeguarded benefits—for example, a guaranteed annuity rate—the current provider would need to determine the value of those benefits. If that value is more than £30,000, the individual must have received regulated advice from an authorised financial adviser before the transfer can go ahead.

From April 2018, pension providers must give members with guaranteed annuity rates and similar guarantees more personalised information. This should detail the guarantees they hold and their value, and must be sent at the point they risk giving them up, when they seek a transfer or request access to their pension. There is also a legal obligation for trustees to act in members’ best interests, and the FCA requires that providers treat customers fairly. As well as highlighting guarantees, many pension providers encourage members to think about the implications of transferring, particularly in relation to exit fees and charges.

To sum up, pension providers are consistently cited by around half of the people who contact Pension Wise as the place they first heard of the service. Pension Wise is working with pension providers to ensure that signposting is as effective as possible and with employers locally and nationally to encourage take-up of the service. This includes a major pilot project with Tesco, where Pension Wise appointments are delivered in the workplace. This is in addition to national advertising of the Pension Wise service through a variety of media channels, which has been used since the service was launched in 2015. That has clearly contributed to increased awareness of the service, borne out by the significant increase in the number of people using it.

I appreciate the sentiment behind the amendment and agree that more people should take advantage of the excellent service that Pension Wise provides. However, I do not agree that the amendment is the way to achieve it. It is essentially a reimagining of existing obligations that the FCA already places on providers. As I have explained, the FCA has already made rules, in force now, which place strict requirements on providers when engaging with an individual about accessing their pension.

My noble friend Lady Altmann said that this would be a major step forward, but the rules are already in place. There is no problem with the Treasury—this was referenced by the noble Viscount, Lord Thurso. We already have the rules in place. Take-up of Pension Wise guidance is increasing and bringing together all the offers in this area under one roof. The single financial guidance body will make it easier for people to take advantage of the excellent services available.

For the benefit of noble Lords who have just joined us in the Chamber, this is supposed to be a framework Bill to set up the single financial guidance body—without too many additional powers or burdens placed upon it over and above those which are necessary to take this forward. I trust that, with this reassurance, the noble Lord will feel able to withdraw his amendment.

[Lord Sharkey]

I thank all noble Lords who have spoken in the debate. I note the support for the amendment from all sides of the House. I note also that the Government seem to rely in their argument on essentially unsubstantiated claims for the performance of Pension Wise in reaching people. The low level of take-up is the problem we are addressing. No matter what current and elaborate arrangements the Minister may tell us are in place, they are not working.

The amendment sets out at no cost—no downside—a simple proposal. It intervenes at an absolutely critical point in the pension process, as people begin to access or transfer their pension assets. We do not claim that it will prevent all bad or suboptimal decisions but we believe that giving people this last chance for information and advice is sensible, prudent and fair-minded, particularly for the most vulnerable people and those most at risk. It is clear—again, given the low take-up figures for the information and advice services—that this is needed. I do see the point of doing all we can to help people make good decisions about their future financial well-being, especially at this critical point in their lives. I would like to test the opinion of the House.

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Moved by

[Lord Sharkey]

29A: After Clause 12, after subsection (2) insert—
“( ) The FCA must make general rules requiring specified authorised persons to refer persons of a specified description for financial guidance.( ) The rules must specify the manner and circumstances in which the duty to refer applies.”

[Lord Sharkey]

I will speak very briefly to Amendment 29A in this group. I am very grateful for the support of the noble Baroness, Lady Altmann, the noble Lord, Lord McKenzie of Luton, and the noble Earl, Lord Kinnoull, who have added their names to it.

As the Minister said, the amendment would add to government Amendment 29, the case for which she put eloquently and convincingly. If I may paraphrase, Amendment 29 deals essentially with the provision of information about the availability of financial guidance. It is an amendment about signposting, as I think the Minister said. Subsection (1) requires the FCA to,

“make general rules requiring specified authorised persons to provide information about the availability of financial guidance”,

to persons whose descriptions are “specified in the rules”. Actually, the wording says that such information must be provided to the,

“descriptions of persons specified in the rules”.

I am not sure that you can provide information to a description of a person—but the intent is clear even if the wording is rather odd.

Subsection (2) allows the FCA to decide when a duty to provide the information set out in subsection (1) actually applies. We agree with those provisions, but we believe that they should be extended beyond simple signposting. They should be extended to allow the FCA to require persons of a specified description to be referred for financial guidance and so that the FCA has the power to decide in what circumstances and how this duty of referral should apply.

The government amendment deals only with information about the availability of guidance; our amendment has the power to refer for guidance. In both cases the powers are given to the FCA, which has unfettered discretion in deciding how, when and to whom these powers are to be applied, both as to providers and as to customers of these providers. There is no requirement in either case that the FCA acts universally across providers and across customers. Both Amendments 29 and 29A, taken together, require the FCA to make rules requiring the provision of information about the availability of financial guidance and rules requiring specified providers to refer specified customers for financial guidance. How all this might happen is left to the FCA to decide.

The first part—the government part—is a requirement to signpost. The second part—our part—is a requirement to refer. It seems sensible to have both weapons in the armoury. Signposting is a good idea in principle, even if it has a somewhat chequered and contested success rate or even effective compliance rate. Successful reference for guidance is, we know, likely to produce an effect. All the Pension Wise service evaluation data, which we have discussed several times in this House, shows that to be the case. In both cases—signposting and referral—the FCA may, at its discretion, decide which providers and which customers should signpost or refer, or be signposted or be referred.

It has been a constant theme in our debates on the Bill that in this country people are not financially well educated and do not have confidence in their own ability to handle financial matters, and that dangerous financial ignorance and misunderstandings are widespread. Amendments 29 and 29A, taken together, will allow the FCA to make decisive interventions about signposting and referral among groups it sees as most needing this kind of help. I had hoped that the Minister would see that her amendment was complemented and strengthened by ours and would be able to accept it in the spirit in which it was offered. Having listened carefully to the Minister, I now sense that that may be unlikely.

[Baroness Drake]

My Lords, obviously, I welcomed government Amendment 29, because it addresses an issue that I raised in Committee. However, I am also persuaded by the arguments used in Amendment 29A, which gives to the FCA the discretion to define the circumstances in which providers would be required to refer people to the impartial single financial guidance body—a reference probably driven by the characteristics of a vulnerable group at risk of making a poor decision. The FCA would define those circumstances. Because under this amendment it can and does, it would not create a blizzard effect of referrals for financial guidance which overreaches the function of the new body, nor need it undermine the new body’s ability to focus on those most in need of guidance. This amendment clearly gives the FCA the duty and the statutory authority to nudge or default people into impartial financial guidance in those circumstances which the FCA specifies. In specifying the circumstances, it will have consulted with the single financial guidance body.

The recent FCA Financial Lives Survey identified that 50% of adults—25.6 million people—are financially vulnerable on one or more characteristics. The single financial guidance body cannot possibly solve a systemic problem of that scale, nor should we take the risk of trying to overload it so that it cannot effectively discharge its key remit. But it can make a material difference by improving the financial capability of those most in need of support. However, to do that, those most in need of support need to use the guidance, and this amendment would give the FCA the complementary authority to enable those most in need of the guidance to be referred to it.

I know that it is possible to list a whole series of regulatory requirements on information and disclosure but the ever-increasing evidence is that they simply do not work when it comes to protecting vulnerable consumers. They need more—they need guidance or other levels of protection.

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[Baroness Buscombe]

I have already spoken in detail on Amendment 29A, so I am possibly at risk of repeating everything that I have said. However, I would ask the noble Lord, Lord Hunt of Chesterton, to refer to Hansard, where he will see that since 19 July we have been discussing the very issue about which he is concerned.

The truth is that we are setting up a single financial guidance body which we hope will be even better than the bodies that already exist when it comes to improving people’s financial capability and giving them regulated advice and guidance. That is the purpose of the Bill. I hope that I have persuaded noble Lords that Amendment 29A is not necessary and that the noble Lord will be happy to withdraw it.

[Lord Sharkey]

My Lords, I entirely agree with the noble Lord, Lord McKenzie of Luton, that it would be better to have Amendment 29A on the face of the Bill. I think that it is a perfect complement to the elegantly crafted Amendment 29. However, I hear what the Minister says and I beg leave to withdraw.

Amendment 29A withdrawn.

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Moved by

[Lord Sharkey]

42: After Clause 17, insert the following new Clause—
“Ban on unsolicited real-time direct approaches by, on behalf of, or for the benefit of companies carrying out claims management services and a ban on the use by claims management companies of data obtained by such methods
(1) The FCA must, within the period of six months beginning with the day on which this Act comes into force, introduce bans on—(a) unsolicited real-time direct approaches to members of the public carried out by whatever means, digital or otherwise, by, on behalf of, or for the benefit of companies carrying out claims management services or their agents or representatives, (b) the use for any purpose of any data by companies carrying out claims management services, their agents or representatives where they cannot demonstrate to the satisfaction of the FCA that this data does not arise from any unsolicited real-time direct approach to members of the public carried out by whatever means, digital or otherwise.(2) The FCA must fix the appropriate penalties for breaches of subsection (1)(a) and (b) above.”

[Lord Sharkey]

My Lords, Amendment 42 is in my name and those of the noble Baroness, Lady Altmann, and the noble Earl, Lord Kinnoull. Given our extensive discussions of cold calling at every stage of the Bill, I can be brief.

This amendment would require the FCA to ban cold calling for claims management companies. Critically, it would also ban the use by these companies of any data obtained by cold calling. Together, these provisions would make cold calling for CMCs illegal and cut off the revenue stream to cold callers, by preventing CMCs using their data. The amendment would also allow the FCA to set the appropriate penalties for any breach of either of these bans. The bans would come into effect with the passing of this Bill—in other words, fairly soon. I will not rehearse here the manifest evils and dangers of cold calling, either in general or for CMCs in particular, but I will just mention that the disgraceful whiplash and holiday sickness scams are a prime and continuing example of why cold calling for CMCs remains an active and current problem. There will inevitably be another scam along any time soon.

We discussed all this at some length last Tuesday, when the House showed the strength of its dislike and disapproval of cold calling, not for the first time and from all sides. The House voted by a large majority last Tuesday to enable a ban on all types of cold calling where consumer detriment could be shown. During the debate that led up to that vote, the Minister pointed out that our proposed mechanism for banning cold calling involved quite a lengthy process. She went on to make a generous offer to do something about cold calling for CMCs faster than our amendments would allow. The Minister said:

“I have asked officials to consider the evidence for implementing a cold-calling ban in relation to claims management activities, and I am pleased to say that the Government are working through the detail of a ban on cold calling by claims management companies”.


She also proposed to bring forward a government amendment in the other place to meet the concerns of the House. Towards the end of her speech on the issue, the Minister said:

“To reiterate, the Government agree with the spirit of these amendments and will bring forward legislation in this Bill, in the other place, in relation to cold calling for claims management activities”.—[Official Report, 24/10/17; cols. 861-63.]

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[Baroness Buscombe]

That is quite an interesting one: any gun should be locked in a cabinet. The amendment tabled by the noble Lord, Lord Sharkey, my noble friend Lady Altmann and the noble Earl, Lord Kinnoull, seeks to ban “unsolicited direct approaches” such as phone calls,

“by, on behalf of, or for the benefit of companies”,

providing claims management services. It also seeks to prevent these companies using data obtained through the use of such methods.

I have spoken previously about the significant steps taken by the Government to address these issues. We have increased the amount that regulators can fine those breaching direct-marketing rules. We have forced companies to display their number when calling you. As we have previously discussed in your Lordships’ House, cold calling is already illegal in certain circumstances, such as where a person has registered with the Telephone Preference Service or has already withdrawn consent.

The Information Commissioner’s Office enforces restrictions on unsolicited direct marketing. The Data Protection Act 1998 requires organisations to process data fairly and lawfully. Organisations must: first, have legitimate grounds for collecting and using personal data; secondly, not use the data in ways that have unjustified adverse effects on the individuals concerned; and, thirdly, handle people’s personal data only in ways they would reasonably expect. A serious contravention of the data protection principles could result in a monetary penalty notice being issued by the Information Commissioner. Depending on the circumstances, this could include a CMC which sought to use data that it had originally obtained through unlawful means.

However, we have listened carefully to the views of your Lordships’ House and fully agree that more needs to be done to tackle the prevalence of nuisance calls across the UK. As I previously explained, there are complex issues to work through, including those relating to EU directives. But I can reassure your Lordships’ House that the Government are working through the details of a cold-calling ban in relation to the claims management industry. To that end, I am pleased to say that I revisit the offer made in your Lordships’ House last week and repeat that the Government intend to bring forward an amendment in the other place to meet the concerns of this House. This amendment will look to ensure that the onus is no longer on the consumer to opt out of marketing calls.

Unfortunately, the amendment tabled by noble Lords would give the FCA a duty it cannot enforce under its current regime. I assure noble Lords that the Government are committed to tackling this issue properly and will consult with the FCA, the CMRU and the ICO to ensure that the government amendment addresses these issues in the most effective way. But if Amendment 42 were accepted, it would not achieve its aim. For these reasons, I urge the noble Lord to withdraw the amendment.

[Lord Sharkey]

My Lords, I thank all noble Lords who have spoken in this brief debate, but especially the Minister for what she has just said to the House. There is only one possible response to what she said, which is to say thank you and to withdraw the amendment.

Amendment 42 withdrawn.

Financial Guidance and Claims Bill [HL]

Lord Sharkey Excerpts

Report: 1st sitting: House of Lords
Tuesday 24th October 2017 Lords Chamber

Moved by

[Lord Sharkey]

1: Clause 2, page 2, line 12, at end insert—
“( ) the consumer protection function;”

[Lord Sharkey (LD)]

My Lords, in moving Amendment 1 I will also speak—eventually—to Amendments 2 and 7. They form a linked package of consumer protection measures enabled by, and consequential upon, Amendment 1. I am grateful to the noble Lord, Lord McKenzie of Luton, the noble Baroness, Lady Altmann, and the noble Earl, Lord Kinnoull, for adding their names to the amendments and for their support for them. Amendment 1 simply adds consumer protection to the functions of the SFGB. The notion of consumer protection is implicit in the other functions set out in the Bill, but the amendment gives it statutory life. In doing this, it allows a broader definition of the reach of the SFGB. It widens its remit to something closer to the real-world situation for consumers and enables it to deal more comprehensively with the dangers and risks that consumers face.

Pensions guidance, debt advice and money guidance are all aimed at doing this, of course, but there are related areas where intervention would be of direct benefit: cold calling is one. One effect of Amendment 1 would be to allow cold calling to be dealt with in the Bill. We have discussed cold calling many times during the passage of the Bill and on many other occasions in this House. On several occasions I have described it as an omnipresent menace—and no one has disagreed. It is clear that there is a firm and widely held dislike of and dissatisfaction with cold calling, extending well beyond this Chamber. It is not only a thoroughgoing social nuisance; it is often a threat, directly and comprehensively, to consumers’ financial well-being. It is often an invitation—or more exactly, an inducement —to criminal activity.

The figures are remarkable and very alarming. There are now 2.6 million cold calls every month; that number has increased by 180% in the last 10 months. I noted that the Minister, when presented with these figures—and even larger ones—at an earlier stage in the debate, prayed in aid the ICO and the FCA. I am afraid that whatever the ICO is doing, and whatever the noble Baroness hopes the FCA might do at some unspecified time in the future, the problem is not only terrifyingly large but continuing to grow very rapidly.

On the fourth day of Committee, the noble Earl, Lord Kinnoull, made a very telling intervention; I am sure he will not mind me repeating it here. He quoted a Which? report from November 2016, which he described as detailing,

“the full horror of nuisance calls in the UK”.—[Official Report, 13/9/17; col. 2491.]

The report found that in 17 of the 18 cities surveyed, more than a third of all private phone calls were nuisance calls, and four in 10 people in the Scottish sample were intimidated by these calls. It is not easy to intimidate people in Scotland. In the same debate, the noble Earl, Lord Listowel, pointed out and emphasised the fact that many old people are particularly vulnerable to cold callers.

Then there is the successor to the whiplash scandal: the absolutely huge, and rising, number of claims for alleged holiday sickness. In July and August 2016 alone, one operator took 750,000 British, 800,000 German and 375,000 Scandinavian customers to Spain. The Scandinavians lodged 39 claims; the Germans lodged 114; but the British lodged around 4,000 claims for holiday sickness—essentially, food poisoning. That kind of thing not only costs our travel industry a huge amount and raises prices for everyone but directly encourages criminal acts on a large scale. As the noble Lord, Lord Deben, said in Committee, this a huge industry which,

“encourages fraud and leads people to do things which they would never have done without this pressure”.—[Official Report, 13/9/17; col. 2489.]

--- Later in debate ---

[Lord Mackay of Clashfern (Con)]

I would like to ask whether the “direct approaches” referred to in proposed subsection (3E) need to relate to financial matters.

[Lord Sharkey]

That would fall within the ambit of the consumer protection function of the SFGB.

--- Later in debate ---

[Baroness Buscombe]

I am very grateful to my noble friend for clarifying that point.

[Lord Sharkey]

My Lords, I am grateful to all noble Lords who have spoken in this debate. I am particularly grateful to the Minister for her close engagement with the matters in these amendments and for her willingness to discuss the issues involved both inside and outside the Chamber. However, I am afraid that the Minister’s objections to Amendment 1 did not have much conviction or force at all, not even when supported by the noble Lord, Lord Faulks. The simple fact is that the SFGB should obviously be in the business of consumer protection. Its remit should allow it to consider, for example, the effect on consumers’ financial well-being of cold calling for financial services. That is what Amendment 1 does, thereby allowing the consequential Amendment 2 to tackle financial harm caused by cold calling. I was grateful for the Minister’s proposals to ban cold calling for CMCs via a Commons amendment, which clearly could be done. However, Amendment 42, which is only a week away, would do exactly the same thing. Why do we have to go round to the other place to do what this Bill would do if Amendment 42 were accepted? I look forward to the Government’s support for Amendment 42 as a means of saving time in the Commons.

I was also grateful for the commitment to publish—I think I heard it correctly—draft legislation on a pensions cold-calling ban. I am sorry that the train of the noble Baroness, Lady Altmann, is due to arrive in only two minutes. However, I think I heard the Minister say that she would publish this in early 2018, which is government-speak for probably June. But I note that there was no indication at all of the timetable for such a Bill, and I refer the House again to the remarks made by my noble friend Lord Kirkwood when it comes to the probability of such a Bill. I am afraid that I did not feel the objections aimed at Amendment 7, though extremely extensive in length, were at all compelling. They were full of “shoulds”, “expects” and “mays”, when in fact “must” is better, which is what the amendment does.

With these amendments we have an opportunity to increase significantly the financial protection of consumers —particularly vulnerable and financially stretched consumers. We can, with this Bill and these amendments, bring about bans on cold calling—not just for pensions, but also for CMCs and DMCs if there is evidence of consumer detriment, as there clearly is. We have argued about preventing cold calling for a very long time, during which the problem has become significantly worse. These amendments would finally address the problem and would address it for whatever creative cold-calling scam comes next off the cold-calling scam production line. These are simple, effective and linked measures which will reduce nuisance, reduce harm and significantly increase the protection of consumers. I would like to test the opinion of the House.

--- Later in debate ---

Moved by

[Lord Sharkey]

2: Clause 2, page 2, line 18, at end insert—
“(3A) In exercising its functions the single financial guidance body must have regard to the effect of cold-calling on consumer protection and must make and publish an annual assessment of any consumer detriment.(3B) If the single financial guidance body considers that there are products or services where a ban on cold-calling would be conducive to its functions it must advise the Secretary of State to institute bans on such cold-calling and the commercial use of any data obtained by such cold-calling.(3C) On receipt of advice from the single financial guidance body under subsection (3B), the Secretary of State may by regulations made by statutory instrument introduce a ban on cold-calling and the commercial use of any data obtained by such cold-calling as recommended by the single financial guidance body.(3D) 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.(3E) For the purposes of this section “cold-calling” refers to unsolicited real-time direct approaches to members of the public carried out by whatever means, digital or otherwise.”

[Lord Sharkey]

I wish to test the opinion of the House.

Financial Guidance and Claims Bill [HL]

Lord Sharkey Excerpts

Committee: 3rd sitting (Hansard): House of Lords
Monday 11th September 2017 Lords Chamber

[Lord Stevenson of Balmacara]

My Lords, this amendment is really the second half of the debate that we have just been having so I think we can skip quite a lot of the introductory part and get straight to the main point. The focus in the amendment in my name—I think other issues will be raised by the noble Baroness, Lady Kramer, and the noble Lord, Lord Sharkey, regarding their amendments, as they bear on the matter in a slightly different way—is Clause 7(2)(b), which states:

“The FCA must, at least once in every three years, carry out a review of … how the single financial guidance body is monitoring and enforcing the standards”.


I have searched reasonably hard through the documentation and I cannot find out what that enforcement is. At the heart of my amendment is a probe—actually, a direct question—to find out what the enforcement would be. Is this in relation to commissioned services being given some sort of penalty? Are fines to be involved? Is it going to involve reporting them to the FCA for a rap on the wrist or worse by some disciplinary body that the FCA might have? We do not know about that and I do not think we understand it. The sensibility is right—there is no point in having standards and asking that they be informed if you cannot do something if they are not informed—but we need a bit more detail before we can take what is in the Bill as being the right approach to this.

In Amendment 59, which I am speaking to but not moving at this stage, the assumption is made that some movement has taken place on earlier amendments and that the SFGB is doing the process of commissioning through a set of standards and a framework. That amendment has been withdrawn so it does not apply, but I still think the sensibility is right. If we are going to ask for reviews, they should be in relation to a specific issue. As it stands, Amendment 59 would give a slightly more flexible framework for that than every three years because it would relate to the success or otherwise of a judgment made by the SFGB on whether or not the work it is doing was going well, and therefore it would have a bit more teeth. I beg to move.

[Lord Sharkey (LD)]

My Lords, I will speak very briefly to Amendments 58, 60 and 61, tabled by my noble friend Lady Kramer and me. We agree with the Bill’s requirement in Clause 7(1) that the SFGB must monitor its own compliance with standards and that of its delivery partners. However, we feel that the results of this monitoring should be in the public domain; in fact, it would be extraordinary if they were not. Our Amendment 58 would rectify what seems to be an omission. It says simply that the SFGB must produce and place in the public domain an annual report of its assessment of its own, and its delivery partners’, compliance with the standards. We hope that this is completely uncontroversial and the Minister will feel able to accept the amendment.

Amendment 60 is equally simple and straightforward. In Clause 7, dealing with the monitoring and enforcement of standards, and in subsection (3), the Bill lists those to whom the FCA must provide a report on its review of whether the standards continue to be appropriate and how the SFGB is monitoring and enforcing those standards.

The Bill specifies that the FCA must provide its report to the SFGB and to the Secretary of State, but there is no mention of Parliament and we think there should be. Parliament will have set up the SFGB. It is a matter of transparency and accountability that Parliament should also have sight of the FCA’s report. Our amendment simply adds Parliament to the list of those to whom the FCA must provide its report.

In Clause 7(4), the Bill provides that the FCA’s report may contain recommendations to the SFGB. But that is it—the Bill does not say what should happen when the SFGB is in receipt of these recommendations. Clearly, something should happen and it should happen in public. Our Amendment 61 provides for this. It simply says that when the SFGB is in receipt of recommendations in an FCA report on its review, the SFGB must then publish a substantive response within three months to any recommendations made by the FCA.

The changes proposed, I hope, in all three amendments are completely uncontroversial. They are nothing more than an application of the principles of transparency and accountability to this new public body. We hope that the Minister will see their merits and feel able to accept them.

[Viscount Trenchard (Con)]

My Lords, I have some sympathy with the amendment moved by the noble Lord, Lord Stevenson, which reflects the concerns expressed by StepChange. I understand that the SFGB is to carry out its commissioning function by setting standards for advice, whereas I think the Bill casts the body in the role of a kind of second regulator. That is also made clear by the amendments of the noble Lord, Lord Sharkey, which deal with the same thing. I worry whether the SFGB will become too like the FCA in terms of its culture. I had understood that it would set the standards which would enable the right partners to be commissioned, but if it has too many powers to act as a regulator, I am concerned that it will become more like the FCA and less sympathetic to consumer concerns.

--- Later in debate ---

[Lord McKenzie of Luton]

Clause 14 enables the Secretary of State by affirmative resolution to dissolve the SFGB. The background to this, including the Henry VIII power that it includes, is set out in the Government’s memorandum to the Delegated Powers and Regulatory Reform Committee. That memorandum points out:

“This power will allow the Secretary of State to dissolve the single financial guidance body. The Bill does not provide for a fixed lifetime for the new single financial guidance body. This clause is therefore in line with the Cabinet Office guidance relating to setting up new arm’s-length bodies, which states that:


‘The legislation setting up a new Public Body should contain powers to permit winding up at a later date and for finalising and auditing the closing accounts, if a fixed lifetime is not established at the outset. Departmental legal advisers would need to be involved in this process. Difficulties have occurred in past cases where sponsor Departments have not been able to wind up statutory bodies when their work has been completed due to problems in securing a Parliamentary slot to amend the primary founding legislation. The bodies therefore continue to exist as legal entities even though there is no longer a requirement for them’.


If there is ever a need to dissolve this body, it will be essential to have a range of options and sufficient flexibility to be able to transfer functions, property rights and assets without recourse to primary legislation. This is the point made by the Cabinet Office’s guidance”.


That is all well and good but, as the Delegated Powers and Regulatory Reform Committee points out:

“Although the new single financial guidance body will be created by Parliament, clause 14 allows Ministers by affirmative-procedure regulations to abolish the body and transfer its functions to any other person. The normal principle is that what Parliament has created, Parliament alone should dissolve. In this case, the Minister: does not have to be satisfied as to anything before deciding to abolish the body, does not have to consult, does not have to conduct a formal review, and does not have to wait a certain time before seeing whether the new body works well.


Where Parliament has previously legislated to abolish public bodies it has provided procedural safeguards. Under the Public Bodies Act 2011, a Minister proposing to abolish a public body must consult the body concerned and others affected by the proposal; he then has to allow 12 weeks for responses. The Minister has to lay before Parliament a detailed explanatory document. A committee of either House of Parliament may require an enhanced affirmative procedure and the power to abolish is time-limited. None of these procedural safeguards is included in the current Bill.


The power to abolish the body and transfer its functions to any other person is a very broad power. For example, it is important that the guidance is independent of any commercial interests. However the power to transfer functions to another body is, on its face, unlimited.


The Committee raised similar concerns in its report on the Enterprise Bill, 9th Report of Session 2015-16, where the power was to abolish the Small Business Commissioner by statutory instrument. In response, the Government acknowledged the Committee’s concerns and tabled amendments that made the abolition of the Commissioner dependent on a 12-week consultation, the laying before Parliament of an explanatory document in addition to draft regulations”.


We support the recommendations of the Delegated Powers and Regulatory Reform Committee, which is what this amendment does. We take the view that it is inappropriate for the Bill to confer on Ministers a power to abolish the single financial guidance body. It is all the more unsatisfactory because the power is unaccompanied by the sorts of procedural safeguards found in the Public Bodies Act 2011 and the Enterprise Act 2016. This is exactly what this amendment is about and it seems to me pretty straightforward. Should the Government set their face against this, the noble Lord, Lord Sharkey, has an alternative proposition that the clause do not stand part of the Bill. We would be minded to support that as an alternative. I beg to move.

[Lord Sharkey]

My Lords, Clause 14 is pretty surprising. It runs entirely counter to normal practice and to the provisions of other Acts of Parliament and is careless of the need for proper scrutiny by Parliament. I entirely support the amendment of the noble Lord, Lord McKenzie. Your Lordships’ Delegated Powers and Regulatory Reform Committee commented on Clause 14 in some detail in its first report of the current Session.

As Clause 14 stands and as the DPRR Committee and the noble Lord, Lord McKenzie, have explained, the Minister does not have to be satisfied as to anything at all before abolishing it, consult anyone at all, have to conduct a formal review or have to wait a certain time to see if the new body is working well or at all. This is all at odds with the provisions of the Public Bodies Act 2011, as well as smacking of hubris and a cavalier disregard for parliamentary authority.

Financial Guidance and Claims Bill [HL]

Lord Sharkey Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Wednesday 6th September 2017 Lords Chamber

[Lord Sharkey (LD)]

I have a small additional question arising from Amendment 26. As things stand, I understand that the kind of research that it calls for is already undertaken by the MAS and forms the basis of the budget requests made by the MAS and of the distribution of funds coming through the MAS. If this research is not to be done I am curious about how budget requests will be made and how funds will be distributed across the regions.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, I thank the noble Lord, Lord McKenzie, for tabling these amendments. Amendment 26 relates to the strategic function of the body and would add a requirement for the new body to conduct research on levels of unmanageable debt across England, Wales, Scotland and Northern Ireland, the causes of unmanageable debt and ways to prevent it. Amendment 40 then seeks to provide a definition of unmanageable debt. It is right that this House takes great interest in seeking to understand the causes of debt and how the Government can best help those who are struggling. I thank noble Lords again for their important contributions on this matter at Second Reading, in the meetings we have conducted since and in their amendments. I have given them a great deal of thought. I assure noble Lords that the Government take problem debt very seriously.

We understand, as the noble Lord, Lord McKenzie, has said, that the cost of living can sometimes become too great and that problem debt can be hard to escape and can compound family breakdown, worklessness, stress and mental health issues. The Government are committed to supporting those who are struggling with their finances and, as we have previously outlined, work is ongoing on this area. Indeed, during the Recess I paid a visit to the Money Advice Service to see for myself some of the work that it is doing in this regard, particularly the different areas of research it is carrying out. I also take this opportunity to acknowledge the work that Citizens Advice is doing in this area, and particularly the report they published last week, Stuck in Debt, which highlights the problems faced by many. The report highlights the risk of people taking on debt that they cannot repay and clearly shows the impact of unaffordable debt.

The strategic function of the single financial guidance body will be critical. It will give the new body the ability to work with others in the financial services industry, the devolved authorities and the public and voluntary sectors to identify the most pressing issues and possible interventions in financial capability, personal debt management and financial education for children and young people. I understand the very worthwhile aims of this amendment; however we do not believe that it is necessary to specifically reference one area of research in legislation. Clause 2(3) enables the body to conduct research on,

“anything that is conducive or incidental to the exercise of its functions”,

so it could conduct research into anything that noble Lords have raised this afternoon, for example. Furthermore, the body will, under its strategic function, be expected to work with stakeholders across the financial services industry, the devolved Administrations and the public and voluntary sectors to share and pool research evidence and knowledge among each other to inform the national strategy on financial capability.

Let us not forget that the whole purpose of this new body is to improve the financial capability of the public, through both its delivery and strategic functions. In order to deliver its objectives and functions effectively, this body, like any other delivery organisation, will need to conduct research to understand the issues it is addressing, test and learn new approaches to determine what works and continuously improve the services it is providing. I would find it hard to believe that this body would not conduct research on the very issues that the noble Lord has raised. The question here is not whether the body should conduct research on this and other matters—the Government are clear that, of course, it should. The question is, is it necessary to have it defined in primary legislation?

There are several topics that the body may wish to look into, but I am concerned that specifying just one could risk limiting its ability to look widely and strategically at issues across the whole sector. It must also have regard to emerging issues in the future. Amendment 40 seeks to provide a definition of the unmanageable debt levels that the body would be tasked with researching under Amendment 26. The noble Lord’s amendment undoubtedly highlights some of the key characteristics displayed by those who are struggling with their finances, such as being able to make only minimum repayments on outstanding credit commitments, difficulty in paying for essentials and a reliance on credit. The question here is not whether the Government agree with this definition; it is about whether this should be defined in legislation. As I have already explained, the Government believe that the new body should have the ability to choose the specific topics it researches in relation to its functions, and that these should not be specified in legislation.

Should the new body choose to research the causes and effect of unmanageable debt, it should also have the ability to define what it is researching. Although I understand the intention behind the definition suggested in the noble Lord’s amendment, defining unmanageable debt in legislation could unintentionally limit the scope of the body’s research. It is envisaged that the body will continue to support the aim of reducing problem debt, and this is clear in Clause 2(7)(b), which states that part of the strategic function is to improve,

“the ability of members of the public to manage debt”.

As I have said, the Money Advice Service and others already conduct significant amounts of research into the causes of overindebtedness. They are doing a great deal of work at the moment on how to support the aim of reducing problem debt in the first place. Indeed, I had an extensive discussion about how to do this in a much more strategic way; I think it was the chair of MAS who said that if someone falls off their horse, it is not just a case of looking at how they get back on it; it is how they learn to ride. It is about people’s whole approach, from an early age, to managing their finances. We envisage that the fantastic work the organisation is carrying out in research will be transferred and will extend and continue through to the new body, so I cannot quite accept the premise of the question asked by the noble Lord, Lord Sharkey, that if the money is not spent on research, how is the budget assessed. If that were the case, it would go to the core issue of whether the body is functioning: a crucial part of its function is to ensure that the body is looking at and thinking about how to improve people’s ability to manage their finances through life.

I know that a particular focus of research at the moment is to do with people’s attitudes; not just how they manage their debt in the short term, but their whole attitude to money and how they manage it going forward. I have various pamphlets here and I found it incredibly encouraging to learn about what we are doing for young children, going through to the elderly. Of course, as always there is lots more to do but the whole tenor of my response is that we should not restrain or constrain this body by tying it down, by listing or being too prescriptive in primary legislation. I hope that, after considering the points I have raised, the noble Lord will withdraw the amendment.

--- Later in debate ---

The new body should engage with the need to plan for such shocks and signpost products, services, information and tools to help the public understand the risk, how to plan for it and how to cope with it when it happens. It could identify the ways in which financial services markets could make a greater contribution to assisting households to manage income shocks, an issue which the FCA has recently highlighted as a problem. As the noble Lord, Lord Holmes, explained so clearly at Second Reading, the market can show little engagement or duty of care when people are at their most vulnerable. Improving the ability of people to plan for and address income shocks is an important part of building financial resilience. The new guidance body can assist in improving the ability of members of the public to plan for and address such variations in income. I beg to move.

[Lord Sharkey]

My Lords, I shall speak to Amendment 27A in this group. This amendment makes a very small change to Clause 2(8)(b), which sets out the objectives of the SFGB. The second objective currently reads,

“to support the provision of information, guidance and advice in areas where it is lacking”.


We agree with this objective, but we feel that it does not go far enough. It is good to support the provision of information, guidance and advice, but it is surely better also to support the use of this information, guidance and advice. Provision is necessary, but it is not sufficient. Provision without use risks wasting time, money, effort and opportunity. This amendment reworks that paragraph by adding “and use”, so that it would read: “to support the provision and use of information, guidance and advice in areas where it is lacking”.

I can illustrate the point by talking briefly about Pension Wise. The service provided by Pension Wise is excellent: 94% of users said they were likely to recommend the service to others; 91% were either very or fairly satisfied by their experience; and 85% said that Pension Wise helped to improve their understanding a great deal or a fair amount. But the problem is that the level of take-up of this excellent service is very low. Research published in June by the Treasury and the FCA suggested that just 7% of eligible pension savers planning to retire in the next two years received guidance from Pension Wise.

Low take-up, both of public and private advice and guidance, would not necessarily be a cause for concern if UK pension savers were generally engaged and well-informed, but they are not—the opposite is the case. Financial capability in the UK, as we have been hearing this afternoon and this evening, is poor. The Financial Advice Market Review baseline report found that just 27% described themselves as capable of sorting out their own finances, and 34% of those who had purchased a financial product later regretted the decision.

Specifically, there is a problem with the levels of knowledge and awareness about pensions and retirement. The International Longevity Centre UK, under the aegis of the noble Baroness, Lady Greengross, who is not in her place at the moment, has published extensive research on consumers’ understanding of retirement planning. In 2015, only half of those with a DC pension said that they understood, either quite well or very well, what an annuity is. Only 3% said they understood what income draw-down was.

There is not just a lack of understanding; there are also dangerous misunderstandings. July’s PLSA survey found that over half of DC pension savers incorrectly believed draw-down products offered a guaranteed income in retirement. Perhaps worse, 25% believed draw-down carried no investment risk at all. This illustrates that the need for guidance and advice is clear. More accurately, the need for people actually to use guidance and advice is clear and pressing.

This is the problem that Amendment 27A sets out to address. The amendment requires the SFGB to have the objective of promoting the use of guidance and advice, not just the provision of guidance and advice. This is a simple but vital change, and I hope the Minister will be able to agree to it.

[Lord Stevenson of Balmacara]

My Lords, I support the amendments in the names of my noble friend Lady Drake and the noble Lord, Lord Sharkey. The noble Lord’s rather graphic descriptions make it very clear that there is a bit of a problem here in terms of how one ensures that any body—not just the new body we are talking about today—is able to get someone to do something which they clearly are not willing to do, and how to engage with, and learn from, the experience of taking out the loans, or preparing for the retirements which they are going to encounter later in their lives. I suspect that the Government will come back and say that, while the wording is admirable and something that they could support, they are not quite sure how it could ever be measured, or whether “use” is in fact the right term here, because getting people to the point where they recognise that they have a problem is not the same as getting them to do anything about it.

When I was working at the StepChange Debt Charity, one theme that we developed in my time there was that there was a sense in which those who had responsibility for activity in this area relied on generic, rather than specific, advertising or advocacy of another form. We took the view that was not where action was likely to be most profitable. What worked was this: when you had someone going through a really serious incident, sad and difficult though that was, the learning that took place as a result of that process was so incredible and so obvious that it was almost worth going through the process. We all have similar experiences with our own friends and family. It is only when reality sinks in, that the credit card bills do not get magically paid by themselves and that the bank is not going to continue to provide the money-tree support that it has done in the past, that you have to learn how the world actually works and what you are going to do about it. I wish the noble Lord, Lord Sharkey, well with his amendment, but I think it probably needs a bit more work before we have got the right balance between knowledge and understanding, in terms of information, guidance and advice, and the practical learning that can come from actually operating in that world.

On my noble friend Lady Drake’s amendment, which we definitely support, in some senses our debates this evening have run the slight danger of demonising debt as a feature of our society today, whereas most of us need to borrow money at some points in our lives. For many people, it is an affordable way to make large purchases or to balance competing financial priorities. The problem is when one does not plan for or anticipate, but then experiences, unexpected events. We have had examples given, and the numbers or statistics are incredible. A recent report published a month or so ago gave two headline figures, which I will focus on rather than go into the detail. In Britain today, almost 2 million people a year suffer an illness of such length that they are absent from work such that, as a result, their income is reduced. That is a very large number of people. Another 2 million people experience job losses or loss of overtime or condition pay in other ways. In terms of the overall working population of about 23 million or 24 million, nearly 4 million—almost one-sixth—are affected by that. In a sense, it is not surprising that we are having problems in this area, and it is something that we need to think about.

On the question whether income shocks are sufficiently important to require changes to the Bill as currently drafted, it will be interesting to get a response. I think that this issue has had less attention than it needs, and the amendment plays back into the points made by my noble friend Lady Drake about the impact on other persons who would otherwise not be affected, such as young people, those in care and those who are dependent on those who are affected. The amendment also brings back all the points that we have been hearing about in terms of mental health, those who suffer from disability and vulnerability in other ways, and those who are preyed on by others who wish to make them do things that they do not want to do. It brings together a number of the issues we have been talking about this evening and focuses on the need to have some sort of balance and arrangement.

Finally, the amendment also picks up the point about whether the market could provide, if left on its own and not subject to any exert or constraint. With respect to the noble Lord the Minister—our aviator for this evening—I think he is being incredibly naive about this. The noble Baroness, Lady Kramer, is absolutely right. The competition imperative imposed on the FCA drives out the possibility that there is any agency around, not in central government, which could provide the changes that are necessary in order to provide these services. Left to their own, financial services will never come up with that. Financial services, without any imperative to take into account a duty of care, or fiduciary duty as we call it, will never see it as their responsibility to bring forward the insurance, the payment protection and other issues that are so necessary to try and underpin not just the income shock issue but the broader issue as well. Therefore, to rely on a simple transparency and information flow as being the way to do that is just naive.

Take the example—I have used this before, but I make no apologies for doing so again—of the payday loans scandal that this House had so much to do with, with notable contributions from all sides of the House, including the most reverend Primate the Archbishop of Canterbury. We took the view that the existence of those who were offering payday loans was on such a scale that action needed to be taken. The Government initially resisted that completely, saying that what we needed was more transparency, but the final result was that action was taken. That action was based on what the FCA could do, and it is defective. What the FCA said to us, in essence, was that its vision of cleaning up the payday loans scandal was to create a fairer market in which there were fewer operators, but that they would operate efficiently at a reasonable profit margin and be well capitalised. At its best effort, at the end of the day that did not stop loans of more than 1,000% APR from populating this market. Recent research from the StepChange Debt Charity, which I had the honour to chair until a few years ago, shows that nearly 20% of people still rely on high-cost credit, including payday loans, to pay their basic end-of-month bills. This is outrageous, and I do not think that the market works to the benefit of consumers.

We will need to come back to a lot of the issues raised today by my noble friend Lady Drake and others, but it is really important that the Government get a grip on this.

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.

--- Later in debate ---

[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.

--- Later in debate ---

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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

Financial Guidance and Claims Bill [HL]

Lord Sharkey Excerpts

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

[Baroness Altmann (Con)]

My Lords, given the hour I shall speak briefly to my Amendment 17 in this group. The single financial guidance body is being asked to develop a national strategy to improve financial education. At the moment the Bill specifies only that this needs to be delivered to children and young people. However, we need to educate everyone about finances, not just young people. We are auto-enrolling everyone in the workplace into pension schemes. We know that workers will not have been given any financial education at school, so why are we focusing only on children and young people? I would like to replace the phrase “young people” with the word “adults”. By the way, I accept completely the point that care leavers are extremely important. But as a complement to auto-enrolment, making sure that financial education is delivered, perhaps in the workplace alongside auto-enrolment, seems to be an important potential function of the single financial guidance body.

[Lord Sharkey (LD)]

My Lords, I shall speak to Amendment 18 in this group which is tabled in my name and that of my noble friend Lady Kramer. I agree with everything that has been said so far except perhaps for one thing. If the Government accept the amendment tabled by the noble Baroness, Lady Altmann, we will have a universal obligation as regards financial education. I can see the appeal of that in theory, but in practice I wonder how it would work out. Children and adults constitute the whole of the population, but I think that the intention of the Government in Clause 2(7)(c) is to identify groups where particular emphasis on the provision of financial education is needed. That is probably why they specifically mention “children and young people”. I agree with the approach of putting an emphasis on the groups that most need or will most benefit from financial education.

However, there are other critical target groups in need of special attention, and the noble Earl, Lord Listowel, has identified such a group. That is what our amendment is aimed at. It seeks to extend the group of special targets beyond a couple of age demographics to major financial events in the course of people’s lives. It would extend the group of special targets to those who are about to make major financial commitments. It specifies the obvious ones such as mortgages and pensions, and nowadays vehicle finance plans, but leaves it open to the SFGB to decide what other major financial commitments it may want to include in its overall strategy.

The Bill is drawn a little too narrowly on this issue and would benefit from our proposed changes and those proposed by the noble Earl, Lord Listowel. I hope that the Minister will feel able on this last amendment of the first day to break the habit of the day and accept a modest and uncontroversial amendment.

[Lord McKenzie of Luton]

My Lords, we would support a proposition which broadens as widely as possible the provision of financial education, but the issue that arises is how it will be delivered. I say to the noble Viscount, Lord Brookeborough, who was the leading voice on the committee in favour of financial education and led the charge on it, that if he is around September he will see that we have tabled a couple of amendments which deal specifically with two of the recommendations in the report about making it part of the curriculum in the primary sector, because we are behind the devolved Administrations in that regard. Latching on to the Ofsted framework is a means of getting some leverage, but, even with that, we know that it will be a challenging task. However, it is hugely important.

The data show that by getting to young people at school you can embed those ideas early, and they stick. Of course, a framework is there within which it can be delivered. Notwithstanding that it has been a requirement of the secondary sector for a number of years, as the noble Viscount said, we know of its patchy delivery—and there are clearly funding issues. I have pre-empted a little the amendment which we will come back to in September. We will perhaps pick up this important issue again then. Certainly, making sure that such education is available to the most vulnerable is important, and we support it.

Financial Guidance and Claims Bill [HL]

Lord Sharkey Excerpts

2nd reading (Hansard): House of Lords
Wednesday 5th July 2017 Lords Chamber

[Lord Sharkey (LD)]

My Lords, this Bill contains some welcome and timely provisions. It also contains some surprising gaps and some rather vague and ambiguous drafting.

We on these Benches support the idea of a single financial guidance body to replace the three existing bodies: the Money Advice Service, the Pensions Advisory Service and Pension Wise. There is a clear need to improve the provision of debt advice, improve the likelihood of informed choice in pension provision and usage and eradicate unsavoury practices and rip-off charges in the claims sector. There is a clear need simply to improve the take-up of government guidance services. Last week’s statistics from the FCA make shocking reading. For instance, of those over 55 planning to retire in the next two years, only 10% had used TPAS and only 7% had used Pension Wise. The new SFGB will have to do much better than that.

As the Minister has said, there is a clear need for complete clarity over what is guidance and what is advice, the difference between them and which is being offered in what circumstances. It is very easy to confuse the two and thereby accidentally to mislead. Even Secretaries of State get this wrong. The FT reports that yesterday, when David Gauke, a former regulatory lawyer, addressed the ABI conference, he twice confused guidance and advice and called the new SFGB an “advice body”. If the Secretary of State can make that confusion, how easy it is for lots of other people to make the same mistake.

Eight million people in the UK are overindebted, according to a Money Advice Service report of March this year. Fewer than one in five of these overindebted individuals currently seeks advice. When people do seek advice, they have typically waited a year to do that. By that time, they have on average six debts to deal with. Many of these people are amongst the most vulnerable. Over half the clients seen by MAS-funded debt advice projects had a diagnosed mental health condition.

Fortunately, debt advice, properly tailored and delivered, does seem to work—not always and not from every provider, but three to six months after getting advice, 65% of those with debts are currently repaying them or have already repaid them in full. This is a tribute to the effectiveness of MAS-funded providers, such as Citizens Advice, and to reputable—I emphasise that—debt management companies, of which there are some. But debt advice, and in particular that sometimes provided by debt management companies, has not always been robust or successful, and sometimes has involved commercial sharp practice. I know that the FCA has been rigorous in applying the authorisation process to debt management companies, that client account problems have been largely resolved and that companies have been deauthorised. But the problem of cold calling remains.

I have spoken about this frequently before in this Chamber. The FCA acknowledges that many of the 30 million cold calls selling fee-paying debt management services were misleading and damaging and affected the most financially disadvantaged in our society. We do not allow cold calling for mortgages; we should not allow cold calling for pensions, we should not allow cold calling for debt management companies or claims management companies, and we should not allow these companies to use contacts generated by third-party or arm’s-length cold calling. The Bill is silent on this. There are regrettable omissions, particularly in the case of the ban on pensions cold calling. Can the Minister explain why there are these omissions in the Bill? We will, in any event, try to put all this right as it makes progress.

Another regrettable omission from the Bill is the introduction of a pause or breathing space before debt recovery takes place—already mentioned by the noble Lord, Lord McKenzie. The idea has long been championed by StepChange and is strongly supported by other interested parties, such as R3, the insolvency practitioners. R3 has pointed out in its briefing to Peers that the moratorium or breathing space was proposed in both the Conservative and Labour 2017 manifestos. But it is not in this Bill and it should be. We will want to put that right, too.

The Bill is also silent or vague about the funding landscape for debt advice. It looks as though funding of free-to-consumer debt advice may be failing, just as demand can be expected to rise, given the overborrowed state of UK households and the decline in real incomes. Currently, 400,000 consumers are repaying £6 billion of debt via a debt management plan. Half do so via a free-to-consumer model and half through a fee-payment model. Quite why anyone with burdensome debt problems would choose to pay fees rather than use a free service is a very good question. The answer probably has to do with selling pressures and financial ignorance or naivety, and it raises urgent questions about the effectiveness, for example, of signposting.

But the free-to-consumer model is now itself under stress. Under this model, creditors—typically banks—pay for the debt advice to be delivered and administered. However, the nature of modern debt is changing. It has moved significantly away from banks towards store cards, rent arrears and utility and council bills, and these creditors do not in general pay for debt advice to their debtors. This reduces the scope of the free-to-consumer debt management plan option. We will want to look carefully at this at later stages.

There are other issues with the funding of debt advice. The Bill proposes delegation of funding decisions to Scotland, Wales and Northern Ireland. At the moment, funding and allocation of funding is based on measures of need. These measures are determined across the United Kingdom by research done centrally by the Money Advice Service. Will the SFGB continue to provide this service across the union, or will the devolved authorities devise and conduct their own research, perhaps on a quite different basis? The Bill—rather feebly, I think—says:

“In exercising its functions, the single financial guidance body must have regard to its objectives … to work closely with the devolved authorities as regards the provision of information, guidance and advice to members of the public in Scotland, Wales and Northern Ireland”.


The combination of the two phrases “have regard to” and “work closely with” does not sound much like a meaningful directive. In particular, can the Minister explain how the funding process will work under the new regime?

The current MAS business plan, which forms the present basis for funding requests, is already in the public domain. Can the Minister say whether applications to the FCA for funding and the FCA’s rationale for arriving at an amount, and for its allocation, will in future all be in the public domain? I would be grateful for the Minister’s thoughts on those matters.

The Bill sets out the strategic function of the SFGB as being,

“to support and co-ordinate the development of a national strategy to improve”,

among other things,

“the provision of financial education to children and young people”.

That is very important, as many Members of your Lordships’ House have pointed out over the years. Proper financial awareness and education is the best defence against the making of bad financial decisions. However, I am puzzled at the exclusion of older people from this objective. Surely financial education, like health education, should not end at school or college. Surely it should continue to cover the major financial decisions arising at every stage in life—mortgages and pensions, and now, increasingly, car purchase schemes.

I now turn briefly to pensions and CMCs. We welcome the provisions in the Bill but those on pensions guidance seem rather narrow. The Bill seems to focus on guidance to members of pension schemes or their survivors. Can the Minister confirm that guidance will also be available for those choosing a pension provider?

I have already mentioned that the Bill will need to include a ban on cold calling, by whatever digital means, and I have already mentioned the absence of any provision to ban cold calling from CMCs. That, too, needs to be addressed. However, apart from that, we welcome the transfer of regulation from the MoJ to the FCA and from the Legal Ombudsman to the FOS, and we particularly welcome the new power to cap charges.

Finally, some questions arise from Clauses 7 and 8. In Clause 7, “Monitoring and enforcement of standards”, the Bill says that the SFGB must monitor its own delivery and compliance with the standards. It does not say how, how often or how transparently this should be done, but I think it would help if it did. The Bill also says that as soon as possible after the FCA has completed its review,

“it must provide a report on the review to … the single financial guidance body, and … the Secretary of State”.

It does not say whether this report should be in the public domain. We think it should. The Bill also notes that this report may contain recommendations to the SFGB. It does not say what the SFGB must do with these recommendations. We would like to see, at the very least, a duty imposed upon the SFGB to make a substantive response within a specified time and for that response to be in the public domain.

As the Minister said, this is a comparatively short and certainly well-intentioned Bill. There is much in it to agree with, but there are also quite a few questions that we will need to discuss. We look forward to working with the Minister and her team in the two weeks before the first day in Committee and thereafter to discuss some of these questions. We look forward to being able to help in improving a promising Bill.