Draft Financial Services and Markets Act 2000 (Claims Management Activity) Order 2018

Maria Eagle Excerpts

Monday 19th November 2018 General Committees

[Maria Eagle (Garston and Halewood) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Bailey. I, too, think that claims management companies are intensely interesting for various reasons.

I wonder whether the Minister can give some assurances about how he expects the regulation to improve over the next period. I concur, as I am sure we all do, that regulation of these companies ought to be much improved to enforce standards, and to increase consumer protection and consumer confidence. The Minister read out the statistics in his opening remarks. One hears about a lot of industries, but not often ones where 76% of their consumers do not believe a word they say. That is extremely poor.

My constituents’ experience of many of these companies is that they set out to rip people off. There is no more careful way of putting it. They are interested in making money by drumming up claims, some of which are dubious in the extreme and some of which should never be brought. In other cases, the consumers who ought to be getting the damages end up with far less than they were led to believe they would get, and most of the money goes to the claims management company.

I concur that better regulation is a good policy aim. Obviously, following the review it has been decided that this is a better way of doing the regulation, but will the Minister set out why he believes the Financial Conduct Authority will be so much better than the legal services ombudsman at dealing with such matters? Can he indicate what he expects to see in terms of compliance and consumer confidence?

I concur with the points made by hon. Members on both sides that a situation such as current one, five years is far too long to leave it before checking whether the intended improvements are working. There is no point in shifting the regulation from one place to another if it is not going to be significantly better and if enforcement is not going to be significantly increased. If the fees that are charged and the permissions that need to be obtained by the companies are not to be used to make a real difference in enforcement, what is the point? It shifts around the arrangements without making much of a difference.

Although there is, I think, agreement across the Committee that the measure is generally good—I was not involved in the legislation, so I did not hear all of the debates—what is it about regulation by the FCA instead of the legal services ombudsman that will be so much better? The industry certainly has conduct issues, including non-compliance with the existing rules, misleading advertising, information asymmetries, large volumes of speculative and unnecessary claims, and phoenixing of unscrupulous companies, which I assume means the resurrection of dodgy companies after they have taken themselves out of the way to avoid their obligations, and they suddenly reappear with a similar name. That is a pretty large charge sheet of what is going wrong in the industry. Why should we think that the move to the FCA under the regime set out in the order will make an enormous difference? Over what period of time does the Minister expect it to do so?