The Finance Guidance and Claims Bill update

Banning cold calling, giving debtors ‘breathing space’ and capping fees

You may have seen the proposals for the Finance Guidance and Claims Bill which is currently being debated in the House of Lords before passing to the House of Commons. The Law, if passed, looks set to affect the way Claims Management Companies (CMCs) and Debt Management Companies operate their businesses. In particular, that the Bill plans for regulation of CMCs to be transferred to the Financial Conduct Authority and complaints in those firms will be eligible for consideration by the Financial Ombudsman Service. The Bill has been proposed by the Department of Work and Pensions in order to ensure that various services including the Money Advice Service, Pension Advisory Service and Pension Wise are more efficient and to give better services to the public than the bodies currently achieve separately.

Focus on consumer protection from an ‘omnipresent social menace’

Importantly, this is seen as an opportunity to protect consumers from bad practice from the claims management sector, including tackling nuisance calling and encouraging what is considered by some as encouragement by CMCs to induce individual members of the public to make ‘bogus’ claims.

In the debate in the House of Lords this week, Lord Sharkey stated:

“… there is a widespread conviction in Parliament and in the country that cold calling in general is an unacceptable and omnipresent social menace. There is a widespread and entirely justified belief that cold calling can and does have dangerous and damaging consequences, especially for the vulnerable. I believe that there is general agreement that, when it comes to whiplash and holiday sickness, cold calling draws otherwise law-abiding people into committing fraud“.

This highlights the worst cases such as Deborah Briton and Paul Roberts who were recently jailed for making false insurance claims in excess of £20,000 for falsely claiming holiday sickness.

It is notable that in calls for a cessation of texts and cold calls, PPI claims were not mentioned in the debate, however there was considerable debate related to the banning of cold calling in relation to pensions.

Lord Sharkey went on to say:

“The Government have promised to ban cold calling for pensions eventually. We can ban cold calling for claims management companies later in the [?]… but we should also be able to ban cold calling, if we choose, for debt management companies… the Secretary of State could ban cold calling for pensions, for CMCs, for DMCs and for any other activity the Single Financial Guidance Body considered warranted a ban.”

Lord Sharkey’s amendment to the Bill, in respect of cold calling, was successfully passed.

What effect could the new Law have for CMCs?

• The new statutory body will be accountable to Parliament and will have responsibility for providing debt advice, money guidance and pension guidance.
• A ban on cold calling by CMCs, Debt Management Company and in respect of Pension claims.
• A six week break for any consumer facing debt known as a ‘breathing space for debtors’, so that interest charges will not apply, and enforcement action is stayed while debtors take debt advice.
• Finally, as well as the ban on cold calling, it is proposed that the FCA will also have the power to cap the fees charged by CMCs; although as yet no recommendations have been made about how much or when this would be and it will likely be at the discretion of the FCA. The Bill as drafted states:

“rules must be made with a view to securing an appropriate degree  of protection against excessive charges for the provision of a service which is, or which is provided in connection with, a regulated claims management activity.”

The Bill will now proceed to a third reading in the House of Lords, before passing to the House of Commons for further debate.

We will keep a close eye on developments.