It is a pleasure to serve under your chairmanship, Sir Alan. I am pleased to have secured this debate, which is particularly timely given the Government’s recent consultation on reforms to the regulatory system affecting claims management companies.
As we all know, the Ministry of Justice has been regulating claims management companies since 2007, but the industry has grown significantly during the intervening years, and many firms have become much more aggressive in chasing up new business leads and opportunities, to the detriment of consumer interests and the insurance industry more generally.
Since securing this debate, I have been contacted by numerous organisations. Claims management companies have achieved a unique feat in uniting the consumer lobby and the financial services industry lobby. I have heard from the British Bankers Association, Which?, the Association of British Insurers, the Building Societies Association and the Finance and Leasing Association, all of which endorse the call for stronger regulation of the sector. There is general support for the measures in the Government’s consultation, but the consensus view is that those proposals do not go far enough.
We are witnessing practices that cause considerable consumer detriment. The cost to the insurance industry, often from questionable claims, is inflating insurance premiums considerably. We have debated the increasing volume of whiplash claims and the disproportionate legal costs they generate. Those costs will inevitably be passed on to the consumer.
In the case of payment protection insurance claims, consumers are often charged high fees by the claims manager, who has done absolutely nothing for them. As we all know, following the High Court judgment, banks are required to pay refunds and have set aside billions of pounds for that purpose. All the consumer needs to do is fill in a form; they do not need the intervention of a claims management company. I believe that many consumers have been misled into entering into contracts with claims management companies, as they have been falsely led to believe that they need such companies to do it for them or that they will receive a higher refund by doing so. That appears to be a breach of existing rules, which state that claims management companies should advise clients to pursue a case only if it is in the client’s best interests. Clearly, in the case of PPI refunds, that is not the case. In addition to implementing the recent proposals for regulatory reform, the MOJ could also consider whether it is properly enforcing existing
rules when claims managers have clearly been overly aggressive in securing a consumer contract, in contravention of the rule that they should act in clients’ best interests.
I should acknowledge that there is a role for claims management companies in securing appropriate settlement for consumers. However, as I said, the industry has grown significantly, and we must ensure that the regulatory firm that takes action against wrongdoers is fit for purpose. Good, responsible claims managers have nothing to fear from tighter regulation. In the last 48 hours, I have received a number of representations from reasonable and well-behaved claims managers supporting the proposals for regulation and drawing attention to rogue operators. They all have much to gain from a tighter system of regulation, which will improve the industry’s current ambulance-chasing reputation.
I broadly welcome the Government’s proposals, but they were modest in sneaking out the consultation over the summer. Hitherto, the Ministry has done a reasonably good job, although I qualify that by saying that the industry has grown more quickly than the regulatory team can reasonably manage. I am not arguing for a bigger regulator, but for tighter rules and for the regulator to have the tools to do the job expected of it.
Currently, approximately 3,000 claims management companies are authorised by the Ministry, which has been active in trying to weed out rogue operators. This year, 50 have had their authorisation cancelled; last year it was 96, and the year before that it was 115. It is evidence that the Ministry is taking appropriate action. None the less, the scale of the problem is bigger than the current team can reasonably manage. I draw attention particularly to the PPI claims industry, which will be the focus of my remarks. Other colleagues might wish to refer to other types of claim, but PPI highlights most of all where the real consumer detriment is taking place.
I would like to set the scene by describing what the Ministry is up against before addressing whether the Government’s proposals go far enough and what other actions I would like them to take. The Sunday Times reports that the industry is earning £1 billion from PPI claims alone. That estimate actually appears rather conservative to me when the issue is examined in detail. We are also witnessing a period of much more aggressive business-seeking. I am aware of an exchange in the other place during which Justice Minister Lord McNally revealed that he received five or six such texts a day. If the Minister responsible is being chased in that way, it shows what a challenge less able and more vulnerable consumers face in keeping such people at bay.
I congratulate my hon. Friend on drawing attention to this important issue. On her £1 billion estimate of the income from PPI claims management companies, she will be aware that the latest indications from the banks are that some £15 billion may have been set aside for PPI, yet some claims management companies charge more than 25% of compensation in fees. Does that not make her point about the £1 billion being a severe underestimate of the industry’s likely income?
My hon. Friend has articulated the point far better than I have. The evidence shows that the average cost of a claim through a company is 30% of the refund plus VAT. That is a significant bill. His other
point is that the banks have set aside a particular figure to settle PPI claims. Able and savvy consumers who realise their rights have already filed their claims directly, but a significant pot of money remains. The companies know that it is sitting there, and they will go out and get as big a share of that income as they can. I completely endorse his view that £1 billion in fees is a considerable underestimate.
As I said, PPI claims management companies are totally superfluous. Consumers are simply being ripped off. Citizens Advice has also highlighted the detriment caused by such companies; in fact, it goes out of its way to say that such companies deliberately prey on the elderly and those out of work. I do not know whether hon. Members have much opportunity to watch daytime television, but if they do, they will see the advertising behaviour in which such companies engage. During a typical morning TV show, the commercial breaks generally consist of ads for debt consolidation companies, personal injury claims companies and one or two PPI claims companies. Clearly, consumers watching TV at that time will often be the very vulnerable, including the elderly and those out of work. They provide easy prey. They are being sold a product on the premise, “You don’t have to do anything; we’ll just send you a cheque.”
In pursuit of such easy money, claims management companies are engaging in very aggressive marketing practices based on misleading consumers. I am afraid I have a rogues’ gallery. Gladstone Brookes took £25 million in fees during the first half of this year. Gladstone Brookes has been reprimanded by the Advertising Standards Authority on more than one occasion for misleading advertising on PPI claims.
A complaint was made about a TV ad which stated:
“Reclaiming PPI takes up your time—Fact”,
next to a ticking clock. The Advertising Standards Authority ruled that, while the ad did not state that reclaiming PPI takes a lot of time, the ticking clock was designed to imply that that was the case, so it ruled that the ad could no longer be used. Gladstone Brookes, however, did not let the subject drop there, and it continues to use advertising that leads consumers to believe that they have only a limited amount of time in which to submit their claim. Frankly, that is misleading. Another company, Mitchell Farrar has earned £50 million so far this year and is currently spending £1 million a month on advertising, which shows how lucrative the business is to such companies, because they are prepared to spend that amount of money chasing up such opportunities.
People are being hounded daily by text and e-mail. Which? has found that a staggering 74% of people in this country have been contacted directly by claims management companies. I am sure that everyone in the Chamber has received at least one tiresome text message. In the past week I have received two, one of which read:
“We have been trying to contact you regarding your PPI claim, we now have details of how much you are due, just reply POST and we will post you a pack out”.
That statement is clearly untrue. The second text read:
“Records passed to us show you’re entitled to a refund of approximately £2,130 in compensation from mis-selling of PPI on your credit card or loan”.
Such a tactic is common among those companies. They use a four-figure sum in a text message that is clearly designed to seduce the recipient into replying, because who would not reply to the offer of free money? [ Interruption. ] I see that Mr Brown has just received one—good evidence that the firms are being aggressive in chasing business leads. In fact, the ability to use text messages is a cheap and risk-free way of doing it, particularly if intermediaries are used to dispense the texts. The Government need to look at the whole area, which I am aware goes beyond the narrow scope of the Ministry’s interest and involves regulators such as Ofcom and the Information Commissioner. We need to join up their activity to ensure that consumers are protected.
That is the marketing, but those practices are nothing compared with what happens to consumers who actually jump at the bait and engage with a claims manager. Which? tells me that it is regularly contacted by consumers who have had negative experiences when dealing with claims management companies to retrieve mis-sold PPI. One case involved a company called We Fight Any Claim, which approached a consumer about claiming back mis-sold PPI on his credit cards, and asked for £420 as an up-front fee. He agreed to the payment, but it then proceeded to take up to £10,000 from his credit cards. It later transpired that he had never had PPI in the first place, but We Fight Any Claim retained his money. Only when the Ministry of Justice intervened was most of his money refunded, although We Fight Any Claim still retained a £735 admin fee, which he has been unable to get refunded, and he had never been compensated for the financial difficulty caused by the removal of £10,000 from his cards. It is shocking that companies have the audacity to behave in such a way, and we need to ensure that we have the regulatory system to prevent it from happening.
The industry is less than transparent about fees and charges when engaging with clients, so consumers are approached aggressively, told that they can get hold of some money and left in ignorance about the potential costs they are incurring. I have a constituent who was approached about PPI, and that led her to initiate a claim with the Halifax, netting her a refund of approximately £2,000. She was staggered to receive an invoice for more than £700, when all the company had done was send her the form, while she had engaged with the Halifax directly. That is not unusual, as I said, and the fees are typically 30% of the refund plus VAT.
The time is certainly right to revise the rules. The existing rules predate the PPI claims industry and have been shown by it to be deficient. I am pleased that the Ministry has now proposed that all contracts need to be signed physically by the consumer, which hopefully will deal with the issue of consumers suddenly being faced with massive, unanticipated bills. I encourage the Government to enact that provision without delay. Also, claims management companies need to be clearer about their fees, so that people are not faced with a bill they were not expecting. The Government should go further and ban up-front fees across the board. Which? and some industry bodies have called for that. I referred earlier to a consumer who was cold-called and then charged £8,000 up front. In no way could a regulated system that protects consumers allow that to happen.
As I said, the industry preys on the vulnerable. Which? told me of the case of an elderly gentleman who is 87 years old, deaf, housebound, frail, on the telephone preference register and with no PPI or debts. He was cold-called by a claims management company and persuaded to give his credit card details; it then proceeded to take £250. I call that theft, and I hope the Government will consider banning up-front fees across the board.
The Government have also proposed to improve consumers’ ability to get redress and have their complaints managed effectively by passing responsibility to the legal services ombudsman—a move that I understand was intended to take effect next April, although there is concern that the timetable might have slipped. Can the Minister give us some clarity and a firm reassurance as to when that will occur, so that the ombudsman can prepare to take on such complaints? Clearly, the volume of such cases, which we have all witnessed, has resource implications for the ombudsman. At present, the ombudsman expects to investigate 4,000 claims a year, of which 95% are likely to be PPI-related, as well as a spike in claims at the beginning of its responsibility as consumers become aware that there is somewhere to go with a complaint. The ombudsman needs to make plans so that the right resources are in place. I am told that it needs to know this month, for planning and recruitment purposes, if it is to take responsibility from April. I therefore invite the Minister to confirm whether that will be the case.
It is also important that claims management companies make consumers aware of their debt recovery procedures before entering into a contract. Obviously, they are dealing with people who are taking on substantial volumes of credit and have debt issues. We have seen examples of lenders that have refunded customers’ PPI but, rather than send a cheque, have offset the amount against outstanding debt liabilities. That is sensible and in the interests of the consumer, but then, the management company still sends an invoice to the customer demanding a significant refund, which can add to debt problems. We encourage the Government to oblige claims management companies to fall under the terms of Office of Fair Trading debt collection guidance, so that such aggressive behaviour towards consumers is not tolerated by the regulatory regime.
Other agencies have an interest in the better regulation of claims management companies. The key responsibility falls to the Ministry of Justice, but Ofcom and the Information Commissioner have an interest in how the companies are marketing, while the financial ombudsman service is challenged by the often vexatious claims. I am told that of the more than 5,500 groundless claims brought to the FOS—only 2.5% of the total complaints it deals with, but nevertheless generating resource implications for the industry as well as the FOS—the majority were from claims management companies and 99% were about PPI policies that had never been sold. The companies have a risk-free opportunity to seek a refund. All they need to do is to submit a form to the FOS, for which the industry bears the cost, and if they get lucky they earn some commission, and if they do not there is no cost.
I want the Government to consider whether the companies should be faced with a bill for pursuing vexatious claims. The normal fee for a case handled by the FOS is £500. If it was clear that the companies
would bear the cost of submitting those claims, they might try a little harder to ascertain whether customers had PPI in the first place. That is important, not least to ensure that all the agencies involved in regulating the sector have recourse to funds from the industry to deal with the malpractice that it is causing.
I encourage the Minister to join up with other agencies to ensure that everything is covered when regulation is tightened. I also encourage her to look more closely at what more can be done to tackle the problem of unsolicited text messages and uninvited phone calls. The companies’ actions are risk free, and they often use intermediaries so they can distance themselves from activities falling outside the scope of their regulators. We must make them more responsible for the partner organisations they deal with and the detrimental behaviour they undertake.
I am pleased to have had the opportunity to raise this matter now. I know the Government are considering action shortly, and I hope this debate will encourage them in the right direction, and to do more. I look forward to hon. Members’ contributions.
I congratulate Jackie Doyle-Price on bringing this matter to the attention of the House. Yes, she saw me with my BlackBerry. Like most hon. Members here, I receive three or four text messages a month stating that I can claim PPI back. My good lady keeps me in check, so I know fine well that I am entitled to nothing and I have never had any claim for PPI.
I want to draw attention to a different element of claim management companies. I will not beat about the bush: I want to expose a company that is, thankfully, now defunct. It was licensed through the Ministry of Justice and used that licensing as a selling point to commit fraud and rip people off. The company Kerobo Claims, was initially based in Sale, Cheshire, and rented office space through Ravenstone UK. It advertised in local newspapers and on radio programmes and, unfortunately, one morning a constituent of mine heard an advertisement on local radio asking people if they had a loan of any description, and were they sure it would be enforceable in a magistrates court, because if not, Kerobo Claims were the people to deal with it—they could cancel that loan.
That is how my constituent was hooked. He approached the company, and said that he had a loan from Barclays. However, because it was not taken out prior to April 2007, the company could not handle it. He engaged in discussion with it and revealed that he had another loan, which was taken out prior to April 2007, and the company said that it thought it could help. Unfortunately for my constituent and his brother-in-law, as I will divulge, he did not have a credit card that predated April 2007 either, so his brother-in-law offered to help. He did that because the company said that when it had sorted the matter out, instead of sending out a cheque and asking my constituent for reimbursement, that would deal with it more quickly. Alarm bells should have rung, but they did not.
My constituent engaged his brother-in-law, who granted permission for my constituent to use his credit card. Kerobo then contacted the owner of the credit card,
and said, “By the way, we think we could help you with any balance on your credit card.” He said that he had a balance of only £20, and asked what help the company could offer. Within 72 hours of the contact and the credit card details being given, Kerobo put a charge of £2,200 against the credit card for my constituent who had originally contacted it. Then, because the balance on the credit card had crept up to over £2,200, so it put a charge against the credit card owner. All in all, within 72 or 96 hours, it had a charge of some £3,000. Hon. Members will understand that such a situation is embarrassing for people, so I will not divulge my constituent’s name, but I wonder how many people out there have suffered the same problem, accepted it as a bad experience, and said nothing.
I tried to contact the company by phone and e-mail, but nothing came back. I then saw a copy of the credit card statement and, surprisingly, the amount that had been taken out had gone to an account in the name of Ravenstone UK, the company renting the office accommodation to Kerobo Claims. That was somewhat strange. Some months later, I discovered that the money was being transacted through that account. The credit card company, MBNA, wanted nothing to do with it. I became suspicious, because soon afterwards the company moved to another address—Atlantic street, Altrincham. I was incensed by that and when I happened to be in the area three or four months after I had first been contacted, I went to the company’s so-called premises, which were nothing more than a mailing address. The lady there was helpful to the extent that she was apologetic, but I was only one of probably several hundred people who had called. I explained who I was and what was happening but although she was apologetic, she could do nothing.
I made further inquiries at other locations, and it became more and more obvious that the chances of getting the money back for my constituent and his brother-in-law were extremely limited. I had the names of a number of people, but they had not responded to my telephone calls and e-mails. I also had the name of Kevin Rogers-Davison, and his address and telephone number. I telephoned him and, strangely, during the whole conversation lasting seven or eight minutes he never once asked who I was. I merely said that I phoning on behalf of the owner of the credit card. He said that he no longer had anything to do with the company and that it no longer existed. I had taken the opportunity to check his address on Google Earth, which showed a splendid, brand new, three-storey townhouse with a superb blue, two-seater Porsche outside the door. I congratulated Mr Rogers-Davison on his house and his car, and he immediately asked me whether I was threatening him. I told him that if he could see who was on the other end of the phone, he would realise that I am of no size to threaten anyone.
People like that should not get away with such activities, but I know that Kevin Rogers-Davison has gone on to other things. The hon. Lady has a given clear indication of some of those who have been caught up—all sorts of people—and the tragedy is that those who ripped people off have gone on to PPI claims, and will move from that to something else. All I want to do today is draw attention to the sort of activity that has been going on.
I do not blame the Minister or the Ministry of Justice, but it needs to be recognised that all this has gone on in the name of the Ministry. The wider public out there see that as some kind of guarantee and think, “If this goes badly wrong, there is a Government Department there to back me up,” but that is not the case. When I first became involved in the case, the company had already been suspended and it had been given a period of time to put its house in order. It did not do so, and eventually it lost its licence. I will say to the Minister that the Ministry was as helpful as it possibly could be. I was in touch with the monitoring and compliance unit in Burton upon Trent. People there tried to help, but they were as frustrated as I was, and probably not half as frustrated as my constituents.
The hon. Gentleman is giving a powerful example of how some of these companies are deliberately set up to get rich quick and move in and out of the industry swiftly. We have a regulatory regime that allows them to set up something that is nothing more than profiteering. Would he, as I would, like to see more powers for the Ministry to suspend and de-authorise firms more quickly, because the difference is blatant when somebody is legitimate and when someone is preying on consumers?
Absolutely, and I thank the hon. Lady for that intervention. If it were at all possible, when such companies need a licence, I would give them one for a short time in order to test the water and see how good they are. I would ask them to supply details to the Ministry of Justice of some of their customers and whether those people have been satisfied with the contact they have had. It is, however, undoubtedly a get-rich-quick system and unfortunately it has left distraught families in its wake.
On this occasion, the two brothers-in-law involved had to go to another member of the family and borrow the money to pay off the credit card balance. It is a salutary tail of sheer exploitation and people who have no conscience, no mercy and who are not interested in what they do to others. I suspect that people out there will have got into such a state that they have done something untoward—perhaps a crime to get the situation dealt with and get the money back. I even suspect that, in some cases, a person may have taken their own life. I have heard of examples of that without being able to verify whether it was true. It is a sad situation, and one that I hope the Government can do something about.
Thank you for calling me to speak, Sir Alan. I thank my hon. Friend Jackie Doyle-Price for securing this debate on the activities and regulation of claims management companies, and I apologise that I cannot stay until the end. I have students from Pingle school coming to see me at 4 o’clock, so I must leave, although perhaps we will have finished before then—I certainly hope so. This subject is of particular interest to me, as an officer of the all-party group on insurance and financial services. Our group has held many meetings with people involved in such issues, and I am delighted that my hon. Friend has secured the debate.
Claims management companies have grown considerably over the last five years. As we heard, in 2007, it was estimated that there were 400 CMCs, and today, there are over 3,000 subject to Ministry of Justice regulation. Such companies serve a purpose: people who have little time and have a claim can pay CMCs to work on their behalf to pursue claims for them. The huge number of PPI claims has been interesting, as PPI clearly has been one of the biggest financial mis-selling scandals ever. CMCs can now be used for personal injury claims, too. If people are time-poor, they should absolutely use a good claims management company. However, it is the hard sell, the rogue traders, and the targeting of the vulnerable by some companies that makes both our debate and reform in this area so necessary.
Citizens advice bureaux in my constituency do excellent work to support constituents who have been targeted by claims management companies, and to raise awareness of fraudulent and rogue traders. It is clear, however, that the Government need to do more to stamp out such practices altogether. Who here has not received one of those messages reading, “There is £2,167 waiting to be claimed in your name for the mis-selling of PPI on your loans and credit cards. To get this as soon as possible, reply to this message quickly.”? Three in four people continue to receive unsolicited texts or phone calls from claims management companies offering them the chance to claim compensation, and nine in 10 people who receive such a message say that it is not relevant to them at all. Although that issue was addressed in the House of Lords on Monday, it is also worth mentioning today in Westminster Hall. Some of the companies pursue a range of communications such as cold-calls, text messages and even e-mails to encourage individuals to make a claim. The Government need to look at what can be done to stop the selling of personal information to be used by such companies.
However annoying those text messages are, they are only part of the problem. I was recently contacted by a constituent, Mr Prince, who has given me permission to use his story. He was a victim of an unscrupulous claims management company called Lifestyle Money from Swansea, a little down the road from my hon. Friend Jonathan Evans. Lifestyle Money called Mr Prince emphasising that they were acting on behalf of ordinary folk like him who may have been mis-sold PPI by the banks. They kept plugging the fact that they were registered by the Ministry of Justice and the Financial Services Authority to act on their behalf in collecting money owed to individuals that were mis-sold PPI. They told him that no money was to be paid up front to them, but that they required credit card details to hold on file, so that once a claim was successful, they could take a percentage, but would forward the rest to him. They also promised to send him an information pack with further details about how to proceed with making a claim.
That all seemed very fair to my constituent. No money was required up front. If the company was successful in winning him back compensation for his mis-sold PPI claim, only then would money be taken from his account. Some 10 days later, his information pack duly arrived. Lifestyle Money had gone to the trouble to mark pages to be signed and returned if he wanted to continue with the claim. However, Mr Prince decided not to proceed, and he thought that that would
be the end of it. A phone call, an information pack received but not signed, and no money passed on—case closed.
Unfortunately, that was not the case. Several weeks later, Mr Prince received his credit card statement, which showed that Lifestyle Money had taken £359.98 from his account. He was completely shocked and confused about why that money had been taken out. On the phone, the company said that no money would be taken, and in the information pack, £359.89 was not mentioned at all. Following further investigation, he found that the sum was taken as an admin fee, but he was told that it would be returned in full should his claim prove unsuccessful.
Mr Prince was rightly annoyed and angered by that. To add to his anger, by the time he received his credit card statement, he was, of course, outside the 14-day cooling-off period, and he was told by Lifestyle Money that it would not return his money until he had made a claim. How was Mr Prince to act within the 14-day cooling-off period when the first he knew about the money being taken out was upon receiving his monthly statement, a good three weeks after that had happened? That money had, in fact, been taken on the day of the cold-call, even before he had received the information pack and before he could decide whether he wanted to pursue a claim with the company.
Luckily for Mr Prince, he was able to get the money back, after the intervention of the previous Minister, my hon. Friend Mr Djanogly, who kindly got his officials in the claims management regulation unit to conduct an investigation on behalf of Mr Prince into the specific complaint. They proved successful in getting Lifestyle Money to pay Mr Prince back his money. Burton upon Trent is next door to my constituency, and I praise the hard work of the officials who work in the unit there, as well as the previous Minister, of course.
All that shows that greater regulation is needed. How can it be that a company can take over £300 based on one cold-call and on sending out one information pack, which was not signed? Even if Mr Prince had decided to go ahead and make the claim, the chances are that Lifestyle Money would not have been successful in winning him compensation. A recent web-based public survey undertaken by Citizens Advice showed that only 5% of respondents reported that the claims management company that had engaged them had managed to obtain any compensation for them. Rogue traders pursue everyone, regardless of whether they have a legitimate claim or not, taking fees up front to ensure payment even if they do little or no work, as in the case of Mr Prince.
In 2010-11, the MOJ received 12,504 complaints about companies offering financial products and services. Most of them did so by cold-calling and taking up-front fees. It is a pleasure to welcome my hon. Friend the Minister to her position. I ask her to continue work on strengthening the regulation in this industry. In particular, we need to consider banning up-front fees, so that there is no longer an incentive to pursue individuals who do not have a legitimate claim. We need a more effective cooling-off period, so that clients do not have to pay anything up front until after that period has ended, and in no circumstances should a company be able to take money from someone’s account without explicit consent
to do so. More should be done to ensure that people know that they do not have to go through a claims management company to make a claim; they can do it themselves and for free. Perhaps the Minister will consider imposing a levy on companies that use unsolicited calls and text messages in order to discourage them from doing so. I am sure that if we tighten up the regulation, the Minister will find that many of the rogue traders will be stamped out, leaving genuine claims management companies to go on providing a legitimate service that helps many people who do not want to pursue a claim on their own to do so.
I again thank my hon. Friend the Member for Thurrock for initiating the debate and I thank you, Sir Alan, for the way in which it has been conducted. I hope that I might be able to hear the Minister’s words at the end.
It is a pleasure to speak under your chairmanship, Sir Alan. I, too, congratulate Jackie Doyle-Price on securing the debate. Ironically, it was a super-complaint by Citizens Advice that partly led to the establishment of a whole new industry and an industry in which the practices are almost as bad as those that the complaint was intended to redress—claims management companies.
Which?, the consumer organisation, has found widespread rule breaches by claims management companies and the use of misleading statements and unfair contract terms by a significant number of companies. Initially, however, I want to deal with an issue that I now know has affected all of us in this room—I am pleased that noble Lords are not exempt from it, either. I am referring to the aggressive marketing techniques of claims management companies. I myself have received a number of calls and texts promising me large sums of money. Actually, I was promised £3,251—more than most people here—by one company that phoned me. I found that very strange, for two reasons. First, I had never had payment protection insurance, and secondly, I am registered with the Telephone Preference Service and have been for a very long time—I was one of the first people to register with it.
However, on investigating, I was horrified to find out that the Telephone Preference Service has no enforcement powers. They are the responsibility of the Information Commissioner, and only recently has the Information Commissioner acquired the power to impose fines of up to £500,000. Therefore, consumers have not only to opt in to the Telephone Preference Service, but to complain to a different body. Although the Telephone Preference Service will pass on the complaints and has been doing so in ever-increasing numbers, the situation is still confusing for consumers. I and quite a number of other consumers would prefer an opt-out rather than an opt-in service in this regard, but I believe that there is sufficient evidence of abuse for the regulator to consider banning claims management companies from cold-calling. The consumer can find them if they want them. There are plenty of adverts on daytime television, as we have heard. I believe that those people who need them will know where to go.
I come now to my other pet hate—unsolicited texts. That form of communication is not covered by the Telephone Preference Service. I wonder whether we should consider widening the scope of the service to cover it. The Information Commissioner’s Office surveyed the public in 201, and out of more than 1,000 respondents, 681 said that receiving a text caused them concern; 205 said that it was inconvenient; and 61 said that it had caused them substantial damage or distress. That is a huge majority who dislike unsolicited texts even without including me—I get into an irrational rage over them at times. I would also like to see an opt-in for that form of communication and a single point of complaint. I do not want to forward spam texts to my mobile provider.
One difficulty with unsolicited texts is that they come from an anonymous source and if people try to ring the number that they have come from, it rings off. Surely we need to find a way of regulating that, so that someone can be held responsible for sending the text.
I agree. Quite often, the texts are from abroad from what is almost a harvesting service. Although companies should not be sending unsolicited texts and making unsolicited phone calls, they will go back years and years and say, “Well, you gave us your details. You didn’t tick the box years ago to say that you didn’t want to receive marketing texts.” It is very hard to disprove that. There is a system whereby people can forward spam texts to their mobile provider to get them blocked, but there are different numbers for different mobile providers, and people have to remember the code to forward them and actually take action to do that. I do not want to do that; I just do not want to get the texts in the first place.
Analogous to unsolicited texts are unsolicited e-mails. One can see that many such e-mails come from abroad—in my case, from New York, curiously enough. Surely, though, what we should look for in terms of regulation is where those introductions end up. In other words, if anyone takes up cases that have been harvested in that way, should there not be some regulation to try to tackle the people who are then accepting the reference?
I agree. In this new world of electronic communications, there need to be new regulations to stop people being bombarded with texts, phone calls and e-mails that they spend their time deleting.
Let me move on. The consumer has contacted the claims management company; they have had the text and believe that they might get some money. As we have heard, some companies immediately demand an up-front fee in addition to a win fee. I have spoken many times in other debates of the detriment that up-front fees cause in the area of debt management plans. That applies equally in the claims management area. People are being persuaded—I hesitate to use the word “conned”, but it could well be appropriate—to give their credit and debit card details, as we have heard, and deductions are being made before any agreement has been signed and before people even know what they are signing up for. Indeed, the agreement is often vague to the point of misrepresentation.
Citizens Advice has seen clients who signed documents stating unequivocally that the service was free, but when they queried a service charge of 25% plus VAT on the award, they were sent a second, unsigned document that set out the service charge, which they had never seen before. The claims management company has then started court action to recover the service charge of about £300 from the award of approximately £1,000. The person in question believed, according to the document that they had seen, that it was a free service. I repeat that they had never seen the document that said that there was a service charge. It is obvious that all contracts should be written in clear English, be displayed on any websites and be valid only if signed by the consumer. I agree with the 81% of consumers in the Which? survey who say that up-front fees should be banned.
Some people do choose to use the services of a claims management company rather than claim themselves, despite the fact that it is an easy process. At this point, I would like to put in a plug for the MoneySavingExpert website, which has a very clear guide to claiming. It is completely free and very quick to do.
However, people should not be bullied and harassed into signing up. They should understand the terms of the contract that they are signing and be happy to accept them. They should not be subject to up-front fees and they should be able to complain if the service that they receive is not satisfactory, which it is not in a number of cases. I hope that the legal ombudsman will be able to take such complaints very soon.
Those of us who do not wish to take out a payday loan, a debt management plan or a claim against mis-sold PPI, and hopefully never will wish to, and those who have not had an accident should not be harassed by unsolicited phone calls and texts and should not need to take action to avoid them. We should simply be able to opt in to receive texts and calls if we want them. The default position should be the status quo: no call, unless requested.
The claims management industry is out of control. It preys on vulnerable people by promising large sums of money and often failing to deliver. At the moment, it is operating to the detriment of the consumer by charging up-front fees and unwarranted service charges for providing very little service. Claims management companies are getting money for old rope, as my mother would have said. It is our job to ensure that they are strictly bound and tied up in regulation.
I draw hon. Members’ attention to the Register of Members’ Financial Interests. I am chairman of a large life insurance consolidator. It is not open to new business, so is not directly involved in the claims management sphere, because much of its business comes from many years ago. Hon. Member’s should be aware of my position, because it sets some context for the remarks I will make. I am also chair of the all-party group on insurance and financial services, and, as my hon. Friend Heather Wheeler said, the group has been heavily engaged in looking at claims management companies. Over the past year or so, we have heard from representatives from the Ministry of Justice, the legal ombudsman and claims management companies. It is important that hon. Members are aware that I speak from that perspective.
When we engage in a debate about such issues, it is important to remember the context. We heard a great deal about the actions of claims management companies in pursuit of payment protection insurance claims. In my remarks, I will add to those criticisms and suggest ways that practice can be improved. Let us not lose sight of the fact that bankers engaged in selling PPI to a lot of people who did not need it. Yvonne Fovargue, who had a long career in Citizens Advice, drew attention to the fact that people’s rights needed to be identified. That is the context. The banking industry did not respond quickly or adequately enough. Too often, it dismissed the claims made by wronged consumers, and we must focus on the impact on consumers.
I say to the Claims Standards Council and those who represent claims management companies that we are on the side of consumers and we want people to have access to justice. We are not protecting the insurance or banking industries from having to compensate properly. If people have been wronged, it is surely unacceptable that they should be wronged a second time and that people who want to get rich quick can siphon off up to 30% of their compensation.
My hon. Friend will be aware that widespread mis-selling of PPI was identified as far back as 2004, but it took until 2010 for a regulatory intervention, which provided redress to consumers, to be enforced. Does that not make the case for being much fleeter of foot in dealing with such wrongdoing and underline the case for dealing with claims management companies now?
That is absolutely right, but my hon. Friend’s point also endorses what I have said, because if the banks had been quick enough post-2004, the problems with claims management companies would not have developed. In a sense, the companies are taking advantage of the banks’ recognition of the liability, and the recognition more generally, to siphon away as much of the money as they possibly can.
Hon. Members have already drawn attention to some misgivings. Mr Kevin Rousell from the Ministry of Justice, who has responsibility for the relevant portfolio, addressed our all-party group. He said that the Government intended to change the rules on advertising on television because they recognised that many of these companies used the label “Regulated by the Ministry of Justice”, as though it were some sort of Government endorsement. Many companies that have had complaints raised against them, including some that my hon. Friend the Member for Thurrock referred to, use the fact that they are regulated by the Ministry of Justice as a badge of honour. The Ministry of Justice recognises that it is used misleadingly: people think that the Ministry of Justice in a sense endorses the activities of such companies, whereas the reality is that it is in the process of getting a grip on their activities.
The hon. Member for Makerfield referred to the Which? survey, which I was also going to draw attention to, primarily because it was undertaken more than a year ago, so we have known for 13 months that up to 60% of claims management companies were probably completely ignoring the rules. I reiterate that this is not an attack on claims management companies. I wish that
the 40% who obeyed the rules had been the example for the whole industry. It is not good enough for the Claims Standards Council to say that debating the problems would withdraw access to justice, because it places itself in the position of excusing the failure of 60% of its members to comply with the rules.
Does the hon. Gentleman agree that the fact that 60% of companies are failing demonstrates that there should be powers to suspend companies that act to severe consumer detriment? We should not allow them to have a business plan predicated on being able to carry on for a couple of years, then drop and start up again with another name.
I not only agree with that point but think that it makes the case for taking much more severe action. The flow of PPI cases will undoubtedly work its way through the system and people will look for other sources of revenue, so by the time we catch up, I fear that the horse will have bolted. For that reason, we must have firm regulation.
The problem is that there is confusion about who regulates this field. We have a claims management regulator within the Ministry of Justice, but that was set up to approve, as it were, or otherwise, people engaged in the business. It has been responsible for the industry increasing from 40 companies to 3,007, according to its last annual report. As my hon. Friend the Member for Thurrock indicated, the regulator’s powers are limited, which is why the Government have been rightly looking at how they can firm up the process, including introducing an independent complaints process and placing the responsibility for it with the legal ombudsman. The chief ombudsman, Adam Sampson, also appeared before the all-party group. Hon. Members who were present will know that he is enthusiastically looking forward to looking at such complaints.
My hon. Friend is making good points about regulatory failure and the Ministry of Justice “kitemark”. A large part of this shoddy industry is in effect administered by solicitors, who are supposed to be regulated by the Law Society. The Government have given it particular powers, including monopoly powers, so it should be in a good position. Does he agree that the Law Society has failed to manage its people effectively in respect of this shoddy industry?
My hon. Friend puts me in a difficult position. Although I am no longer a member of the Law Society, I am a solicitor of the Supreme Court, albeit no longer in practice. As I will go on to say, people in this area should be regulated. His complaint about the effectiveness of the regulation in relation to the legal profession is one thing; the difficulty about claims management companies is that, for the most part, many people introducing the business are not regulated at all.
I move on to the point that I raised with the hon. Member for Makerfield, whose support I am grateful for.
I did not realise that my hon. Friend was a member of the Law Society. I apologise for putting him on the spot.
My hon. Friend makes the point that some regulation is better than none whatever, but I am not sure that that is true: if regulation is so weak and ineffective and the public think that responsible, professional people are acting in this shoddy way, I simply do not think that that is good enough.
I am not sure that the legal profession figures as highly in the activities of claims management companies as it might in other cases. For instance, in the context of the position of solicitors in injury claims and such things, he and I may well have a more productive exchange, but I am not aware that they figure so heavily in the context of claims management companies.
I return to my earlier point, which I intend to develop. For cases to come through and claims to be made, a body of introductions has to be generated, which is done through texts and e-mails. The Minister in the Lords said that he had received a number of texts, and our e-mail accounts are full of such unregulated approaches from outside the United Kingdom. It is very difficult to know how on earth people can try to stem that flow of unsolicited approaches, without the removal of the financial incentive. The all-party group heard from a representative of the claims management companies, and I challenged him on that by suggesting that those companies accept batches of introductions that may well come through illegal routes. His response was, “Well, we are in a market. If we do not buy those introductions, somebody else will.”
This is an area in which I, as a Conservative, might favour regulation. Claims management companies putting forward such claims must not only be regulated by the Ministry of Justice, but should not take on claims introduced by those who are not regulated, for instance by a professional body or the Ministry of Justice. I am absolutely sure that the outcome of that would be no more need for the Information Commissioner. The texts would dry up, because people would not send them if there was no financial return. The reason why we have all the texts is, of course, because there is a return.
Consumers’ heads must be spinning with all this: we have the Ministry of Justice, the legal ombudsman, the Information Commissioner—we have talked about his responsibilities—and the Financial Ombudsman Service, to which all PPI claims have to go, as we know. I have looked at the various representations: The Government have now proposed a process whereby complaints go the Legal Ombudsman, while the Association of British Insurers has suggested that they should go to the Financial Conduct Authority of the Financial Services Authority. I know that the hon. Member for Makerfield understands that wealth of complication. I will only say that if we are looking for effective regulation, I have much more faith in the FCA, which is being set up under Martin Wheatley. That would send a certain message, if I may use that expression, to the industry.
Let me turn to some areas where we need to see progress. The first is that, as has been mentioned by nearly every speaker, we should not have up-front fees.
The Government are in a position to regulate on that, which would very swiftly remove one of the serious concerns raised by several colleagues. My hon. Friend the Member for Thurrock, whom I again congratulate on raising this important issue, gave a clear constituency example. The second is the introduction of a cooling-off period. That would clearly be helpful in the case that Mr Brown talked about—he spoke earlier, but has now had to go elsewhere—and in others that have been cited in this debate.
One area that has not been mentioned, but which I believe would be appropriate, is the introduction of a sector-wide compensation scheme. Something that is not widely understood in the world of financial services is that a whole range of financial companies that are regulated within the United Kingdom maintain funds for paying to the Financial Services Compensation Scheme. In the past, I have criticised the scheme because the people who administer it like to suggest that the money it pays out is somehow provided by the Government. A former Chancellor of the Exchequer boasted about funds being made available through the scheme, which he had ensured were paid, as though that was central Government spending.
In reality, whether they are insurance companies, insurance brokers, bankers or financial intermediaries, all such companies, as a condition of their being regulated, have to take their place in the Financial Services Compensation Scheme, so that if someone goes bust, they can stand behind the liabilities of that individual and ensure that a fund of money is available in the scheme to meet such liabilities. One can imagine, in the context of what has happened in financial services in the past few years, that that is a real liability, to which people must give a lot of attention.
Yet an industry of claims management companies has developed. My hon. Friend the Member for Thurrock rightly indicated that, at £1 billion, its income is a massive understatement. She is right because, annually, it is likely to be two or three times that figure. Surely, we have the opportunity at the moment to ensure a sector-wide compensation scheme, so that people who want to get rich quick and disappear tomorrow are not in a position to do so, because a fund will have been created to meet the liabilities that they leave behind.
To return to the sourcing of introductions, which I mentioned earlier, it would be very simple to impose a requirement not only that all claims management companies must be regulated, but that they can accept introductions only from those that are similarly regulated.
Finally, we must see claims management companies conform to regulatory requirements. I return to the point made by the hon. Member for Makerfield about the Which? report, which I referred to earlier. We already have very clear rules in place, but 12 or 14 months ago, 60% of claims management companies were clearly ignoring them. On that basis, there must be a consequence—that is not only my view—about seeking redress: we should put such people out of business and, at the same time, ensure that they have the funds to meet any liabilities they may have to wronged individuals. My view is that it is quite right that those who have failed in financial services, be they bankers, insurers or insurance intermediaries, must compensate consumers. Here we have a real scandal, in which our constituents
are today seeing up to 30% of their compensation being sliced away. In my view, action is urgently necessary by the Government, and I have great confidence in the Minister’s ability to tell us what that action will be.
It is a great pleasure to be here under your chairmanship this afternoon, Sir Alan. It has been an interesting and well informed debate, and I thank Jackie Doyle-Price for securing it. We have heard some eloquent speeches on this substantial problem that have called on both professional expertise and personal experience—either directly or through constituents. The hon. Lady was right to concentrate her comments on payment protection insurance because the legal ombudsman brief for this debate says that when it takes over responsibility for dealing with consumer complaints, it expects 95% of them to be related to PPI. I was alarmed to hear that that transfer may be delayed, and I hope the Minister will deal with that and tell us when it will take place.
PPI is not the only area of concern, and I will go on to mention some other worrying aspects of CMCs and their operations. There have been other abuses in the financial services sector, such as endowment mis-selling and bank charges. My hon. Friend Yvonne Fovargue, who has huge experience in this area and in consumer protection through her role with the Citizens Advice service, alluded to the fact that CMCs have been let in thanks to the appalling performance of the financial services sector in this country over the past few years. If the banks had not mis-sold PPI and overcharged, and if insurance companies had not mis-sold endowment policies, there would have been no opportunities for the CMCs.
In the informative briefing that we had this afternoon, the building societies pointed out that they were responsible for a mere £200 million of mis-selling, whereas the banks have set aside £12 billion for mis-selling one financial product. That fact alone shows the extraordinary depth to which this country’s banking industry has sunk over the past few years. Effectively, the opportunity for CMCs was created by the poor regulation—and, more importantly, by the poor performance—of the financial services sector. Furthermore, the problem was also encouraged by the poor performance of the Ministry of Justice, which has not taken these matters seriously.
At the back of the debate pack are a whole series of questions that I asked in 2011 and earlier this year. In reply to one, the Minister’s predecessor, Mr Djanogly, said:
“At the end of July 2011, eight employees and 39 contracted staff work in the Department's claims management regulation unit. Three employees and seven contracted staff handle consumer advice matters, including complaints.”—[Hansard, 5 September 2011; Vol. 532, c. 273W.]
That is not an adequate provision for the degree of mis-selling and abuse that has taken place. That position has now changed, and the Minister will update us on current staffing and operational levels. None the less, those previous levels reflected, at the very least, complacency on the part of all those involved.
Two consultations are under way—only one is still open—on claims management companies. The second one relates to fees, and the Government are quite properly
consulting on whether regulation fees should be raised, so that the costs of regulation are better covered by the CMCs, which theoretically make substantial profits. I am also pleased that the legal ombudsman will be taking over responsibility for the matter, and I hope it will do a good job.
We have an interesting brief from the legal ombudsman laying out the various considerations and concerns. The common theme among the concerned parties who lobbied Members before today’s debate is that the Government’s consultation on the regulation of CMCs is not going far enough. It is right, as the August consultation asked, that contracts should be in writing and that CMCs should be required to inform clients of any supervisional variation to the business authorisation once in effect. It is also right that when CMCs refer to their regulatory status, they should say that they are regulated by the Claims Management Regulation unit rather than the Ministry of Justice; many have been suggesting that they have Ministry of Justice endorsement.
Although all those points are welcome, they do not, however, deal with fraudulent claims or the recycling of claims. I should like to see a requirement that claimants must disclose whether they have previously interacted with other law firms or CMCs. More importantly, the whole area of cold-calling, SMS texting and so on, is not dealt with. The main problems that have been raised this afternoon, such as the 25% to 30% that CMCs are raking off from claims—the no-sale claims—have not been addressed. In any other walk of life, it would be extraordinary for a major industry to establish itself on the back of pursuing non-existent claims. In many cases, the parties who receive the texts or respond to the adverts are not fully aware of all the issues. Part of the problem with mis-selling to people who are vulnerable—both in an orthodox and a financial sense—is that they do not have the financial education or skills to deal with the hard sell in the first place, or indeed the hard sell of the CMCs in the second place.
Lest it be thought that one is against those people who are unsure whether they have PPI, the Financial Ombudsman Service has made it clear that there is an obligation on all financial services companies to respond to a request to find out whether someone had a PPI contract. Therefore, all those CMCs could easily make that inquiry first before submitting a claim.
They could, but they clearly do not. CMCs see a lucrative industry, because there is relatively little cost to them. I am not quite sure what they hope to get out of it in the end, other than perhaps nuisance payments both to make the claim and to make the reference to the financial ombudsman. Given the sharp practice that is clearly involved in the sector, I am not sure whether the Ministry of Justice’s proposals are up to the mark in dealing with it. We have heard some good examples of companies that simply disappear overnight and reappear in another guise. I am not sure whether enforcement is dealt with sufficiently in the current proposals.
That goes to the crux of the matter. What we have before us is a tighter system of rules, but the problem is the behaviour of firms which are just going out of their way to profiteer. What does
the hon. Gentleman think about the view expressed by some in the industry that responsibility should pass to the Financial Conduct Authority, which will be empowered to tackle firms’ behaviour?
I am certainly happy to look at that. It is a constructive proposal that combats the sharp practice and cleverness of such firms on their own level, and that is not happening at the moment. I am afraid that those firms will always be one step ahead of the regulation unit. I hope the legal ombudsman will address that point. We need to look at these companies’ approach to advertisements, text messages and such things. I am somewhat at a loss as to why the Government have been reluctant to tackle this area more cogently. Again, I refer to a question that I asked in February, which is in the debate pack:
“How many claims management companies have had their authorisations revoked as a consequence of telephone or text message spamming since May 2010?”—[Hansard, 27 February 2012; Vol. 541, c. 75W.]
The answer is none, and yet we know that telephone or text message spamming is not only one of the most irritating ways of hooking clients in the first place but one of the most productive; clearly it is productive, or the companies would not use it.
The legal ombudsman makes the point that they should have a significant role to play in unsolicited contacts, whether it is cold-calling or text messaging, but it is not quite clear to me at the moment what that role will be. The legal ombudsman also raises another issue. Once a client is hooked and then effectively milked by the claims management company, how does one deal with enforcement if the company is to be brought to account but simply changes its name and directors, then disappears before appearing under a new guise? I ask the Minister to address those points and consider whether a more comprehensive legislative regime to counter abuses by claims management companies should be introduced.
My right hon. Friend Mr Straw has done an extraordinary amount of work in this area and introduced a private Member’s Bill on it. When we were discussing the Legal Aid, Sentencing and Punishment of Offenders Act 2012 last year and earlier this year, both in the main Chamber and in the other place we tabled a comprehensive series of amendments to deal with the type of abuses I have been describing. I understand that the Minister was not in her current role then, but I know she took an interest in the Act. I was at a loss to see why the Government were not happy to adopt—other than that they came from us—what were very stringent restrictions on unsolicited cold-calling and SMS texting, the regulation of claims management companies and other areas to do with data selling. They were primarily restrictions on the abuse of road traffic claims, but they equally apply to the mis-selling of financial products. It does not matter whose legislation it is: again, I advise the Government to go back and look at those restrictions.
There is a myth around that there is a whole industry, including lawyers and other practitioners, that is somehow encouraging the abuses of the system, but nothing could be further from the truth. I should say that I have had representations from the Association of Personal Injury Lawyers, the Bar Council, the Law Society, as
well as from major solicitors’ firms dealing with claims on this subject. I urge the Minister, having recently taken on her new role, to listen to the voices in the claimant sector belonging to some of the best informed and most knowledgeable people, who are also very angry about the abuses that take place. Perhaps she should listen to those voices more and listen a little less to the Association of British Insurers and the rest of the insurance industry, whose fingers are all over the claims management industry. Many insurance companies own or co-own claims management companies, and many indulge in practices that are just as suspect in terms of third-party capture, and which manipulate the claimant market in that way. What I hope all Members wish to see is something that protects the consumer and allows genuine and honest claims to be made.
I was grateful to receive the various briefings for today’s debate—except possibly that from the ABI. After a nod towards claims management companies, it suddenly got on to the idea of the compensation culture again. I fear that, in their legislation so far, the Government have been seduced by that argument, despite all the evidence in their own reports and reports by the Better Regulation Task Force, Lord Young of Graffham and Professor Löfstedt. All those reports found that there may be a perception of a “compensation culture” in this country, but there is no reality, and what is needed is the regulation of abuse, not of honest claims.
The Government have pushed forward very enthusiastically in LASPO with a restriction on the ability of claimants with meritorious claims to bring their cases before the courts, across the whole area of civil litigation.
That is a good point. We have not spent a lot of time discussing whiplash today; I had thought that we might spend a little more. The situation is exactly the same: there is fraud in the area of whiplash claims, particularly soft tissue injury claims. The figures compiled by APIL show that 80% of sufferers of such injuries either report their symptoms accurately or underplay them. That means that 20% are perhaps not reporting their symptoms accurately or are exaggerating them. That puts things into perspective. I do not believe that a massive amount of fraud is going on, but a significant amount is going on and it needs to be tackled.
The hon. Gentleman gives the view of APIL, but its briefing also says that 80% of these victims have an accurate medical diagnosis. Yet the all-party group on insurance and financial services, which I chair, heard evidence from doctors saying, “You can’t diagnose whiplash. It’s actually impossible.”
Some of us may have qualifications in some areas, but I have to say that I have no medical qualification and I do not know whether the hon. Gentleman has one to add to his other distinguished qualifications. We will not resolve the issue of whiplash
this afternoon, but to write off soft tissue injury and say that there is no such thing is taking matters too far the other way.
I will quote one other statistic. As we know, almost 30% of claims are encouraged by insurers. I have one or two examples here from constituents of mine who had minor road traffic accidents, and who then had their details sold on by their insurers. So we have insurance companies that—presumably to make a profit—either own or co-own claims management companies, and that are selling on details and engaging in third-party capture, which of course means they are paying out money without any medical evidence whatsoever.
I am not saying this is a black and white issue. I am saying, “Let us identify who the rogues are, crack down on them and not be distracted by them from our other purposes.”
We got into this discussion because of the point the shadow Minister was making about compensation culture. Of course nobody is minimising soft tissue injuries—that would be awful—but we seem to have five times as many of them as other countries in Europe. Surely that statistic should at least have given him pause for thought before he read out the brief from the APIL.
As I always do, I read out briefs from everybody, even from the ABI; I have very catholic tastes in the sources I use. Also, I think I said that fraud in relation to road traffic is an area that we need to crack down on. I am always a little suspicious when the ABI and others say, “Well, look how many road accidents and whiplash accidents we are having in the UK,” or, “Look at the concentration of where they are.” One tends to find that there is a higher incidence of road traffic accidents in congested urban areas than in rural areas, and there are more claims management companies in conurbations than in shire counties. That is probably just a truism, but there we are.
In terms of the hon. Gentleman’s brief from the personal injury lawyers, Germany also has built-up areas, and we would not necessarily expect the incidence in our country and other countries to be so massively different.
I am glad the hon. Gentleman mentions Germany, because one provision in German law is that one cannot make a soft tissue injury claim—a whiplash claim—if one’s vehicle is travelling at below 8 kph. That was the subject of another of the amendments that we tabled to the Legal Aid, Sentencing and Punishment of Offenders Act but the Government chose not to accept.