I am not speaking on behalf of, or indeed against, any sectional interests; they are all entitled to make their points, and, on the whole, professional organisations do a very good job in this country. What I am saying, however, is that it is easy to be distracted—often when there is a political agenda on the table—from addressing the real problems and to start addressing what are not the real problems. Where the Government have clearly got things wrong—we could spend until the end of the debate arguing about road traffic claims and probably
about PPI claims as well—is in extending the attack on claimants across the board into areas such as employers’ liability and public liability insurance. Some of the changes being introduced in the Enterprise and Regulatory Reform Bill—again, at the behest of insurers and employers—are appalling in the way they balance, or unbalance, power in the legal system in favour of employers and away from employees, turning back the clock, in some cases, more than 100 years. However, I may going beyond the subject of the debate.
I will not detain hon. Members any further, because there is a reasonable degree of consensus on the problems we need to address. I suspect there is also a reasonable degree of consensus—Government Back Benchers may be slightly less confrontational about the way they express this—about the fact that the MOJ needs to do more to tackle what is a very common problem for all our constituents.
Sitting suspended for a Division in the House.
On resuming —
With a short suspension of the sitting and the luxury of having another hour of the debate to go, there is always the temptation to expound more fully some of the points one is making, but I shall resist it, particularly as I am keen to hear what ideas the Minister will put forward, and I know that other hon. Members are too.
There appears to be a consensus among the parties represented here, the media and many respected and trusted organisations such as Which? and Citizens Advice that there is a substantial problem to be dealt with. Some unscrupulous companies—clearly not all or even the majority of CMCs are unscrupulous—take opportunities provided by crises or abuses in sectors such as insurance, financial services or the personal injury market to profiteer. The question for us is how we should deal with that. My contention is that the Government have dragged their feet so far, and that where they have identified targets they have sometimes been the wrong ones. It is not just a matter of regulating the way contracts are drawn up. Many of the companies are sophisticated and will find ways around that, and they often deal, as many hon. Members have said, with vulnerable people who lack sufficient expertise in such things. Which? has made several sensible recommendations, such as the ban on up-front fees. I ask the Minister to go further than that and to examine the whole process that CMCs use to engage consumers, from the initial scatter-gun approaches—the adverts and text messages—through the process of signing up, the contracts, the way people are engaged, the terms and conditions and fees, to the point when redress is sought and the ways people can escape.
I was given an example earlier today—it is an industrial injury claim, but it is just as good—in which, effectively, the CMC that had decided to deal with the claim was negligent in not arranging for issue before the limitation period expired. That might have given rise to a claim against the company for professional negligence, but by
the time competent solicitors were engaged to deal with the matter, the company had decided to disappear; it deregistered and was simply not there for a claim to be made against it. That is common, and organisations guilty of one type of abuse will often be guilty of other types, which is why the Minister needs to consider how such companies operate across the piece.
I urge the Minister to look where the real villains are and not, as the Government tend to do at the moment, simply to attack lawyers because they are an easy target, or claimants because substantial lobby groups such as the insurance industry contribute funds to the Conservative party and daily whisper in its ear. She should not make decisions on that basis, but should base them on the real harm and damage that is being done to millions of people.
I have one further example, involving a constituent of mine. Normally I would be happy to name and shame the bank involved, but as I am speaking to the senior partner of its City law firm tomorrow to try to resolve the matter, I shall give it one chance and, if it does not work out, perhaps I will do it next week. My constituent had been mis-sold not just one but serial PPI policies over time, and she made a claim herself rather than using a CMC. She got judgment and enforcement, but on the advice of the bailiffs acting, she perhaps made the mistake of saying that she would go down to the bank’s headquarters in Canary Wharf and seize goods to the value of the claim. She now finds that the bank has started satellite litigation, and Queen’s counsel are employed effectively to intimidate and say, “You can’t take on the big boys and win in that way.”
I end on the point on which I began. If there was more responsibility in the financial sector and less willingness by the Government constantly to attack those who seek to represent through legal aid, through no win, no fee agreements, or simply through the advice sector, which does such a good job in this country, those who genuinely advise people in need—not the dodgy CMCs, but the people all our constituents rely on—we would not be in this mess. This is a triple whammy: there is a problem in the financial services sector with which the Government have not come to terms; there are problems in the advice and legal aid sectors, which the Government have created; and there are problems with CMCs, which the Government are going some way, but not sufficiently, towards resolving.
Although the Minister has time, she might not wish to respond all my points today. I am sure we will take them up in later debates. As she is coming fresh into the job and is not encumbered by some of the rather foolish statements made by her predecessor, I hope that she will look at the matter openly, in the interests of all our constituents and all those consumers who are faced with the bleak prospect of either not recovering funds to which they are entitled, or being fleeced by organisations that recover the moneys and take 25% to 30%, or simply do not recover them at all.
It is a great pleasure to serve under your chairmanship, Mr Walker. I congratulate my hon. Friend Jackie Doyle-Price on securing this debate on the regulation of claims management companies, or CMCs.
I acknowledge at the outset that some CMCs can provide a useful service for some consumers, by alerting them to circumstances in which there might be a justified complaint, and by supporting them in obtaining redress. Nevertheless, a notable minority fall to comply with many of the simple requirements placed on them. As my hon. Friend
Although substantial progress has been made since regulation began, there is clearly more to be done. I have listened carefully to the various thoughts and ideas that have been raised today in an informed and considered manner, and I would like to reassure the shadow Minister, Mr Slaughter, that I will listen carefully to everything and everyone I need to, including claimants and all other stakeholders. I am glad he has indicated that there is consensus on many of the issues that we need to address.
Providing consumer protection by driving out malpractice remains the primary objective of the Ministry of Justice’s claims management regulation unit, and we support that approach. Most CMCs want to comply, which is why the CMR unit uses a range of measures to help them to do so. For example, about a year ago the unit formed a specialist compliance team to focus on tackling the mishandling of PPI claims. The team has conducted a comprehensive programme of audits, and has issued warnings and taken other forms of enforcement action where problems have been found. That work continues, and includes targeting CMCs that submit claims where no PPI sale exists, those that charge up-front fees—we have heard a lot about that today—and those that operate call centres, to ensure that sales calls are compliant.
Within the personal injury sector, most of the issues relate to businesses or organised groups attempting to defraud the insurance industry. The CMR unit contributes valuable information and expertise, and has worked with a range of organisations and agencies to tackle fraud. Its operations have resulted in arrests, charges and convictions.
On unsolicited text messages, notably raised by Lord McNally of Blackpool on Monday in the House of Lords, and by my hon. Friend the Member for Thurrock and other Members today, I recognise that the growth in the practice has caused a nuisance to the general public, particularly as the content of the messages is often misleading. The problem presents big challenges, and we fully support the work of the Information Commissioner’s Office, or ICO, in enforcing the legislation that protects individuals from unsolicited text messages and other forms of direct marketing. It is important to
point out that such messages are generally sent not by CMCs but by others, to generate leads for others businesses including CMCs. The CMR unit is actively working with the ICO to investigate and take enforcement action against CMCs that accept leads or claims from that type of marketing.
The Information Commissioner has said that unsolicited texts are a breach of the EU regulations on electronic communication. Will my hon. Friend investigate, with the Information Commissioner, whether there is a resource issue regarding his tackling this activity, which is such a nuisance to our consumers?
We are working hard with the Information Commissioner, and I am happy to write to my hon. Friend on that point.
At a time when resources are scarce, much has been achieved. Regulatory enforcement action has increased year on year, with 150 audits of CMCs carried out, and 409 CMCs warned, suspended or cancelled over the past year. The CMR unit has also removed the licences of more than 800 CMCs, across sectors, since the start of regulation in 2007, and many others have left the market after the commencement of investigations and enforcement action.
That is where we are at, but where do we go from here? There have been calls over the years to consider transferring the claims management regulation regime to another regulator, but now is not the time for such a fundamental change. We have a big programme of reforms under way, and its central objective is to address CMC bad practices and strengthen the regulatory and complaints regimes to provide better protection for consumers and the public. Our reform agenda includes four main measures.
Following a review of the CMC conduct rules and an informal consultation with key stakeholders, we recently ran a public consultation on proposals to tighten those rules. We intend to issue a response by the end of this year. Most critically, we propose that, first, contract agreements between CMCs and consumers will have to be made in writing before any up-front fees may be taken. That concern was raised by my hon. Friend the Member for Thurrock and others.
Secondly, as highlighted by my hon. Friend the Member for Cardiff North, CMCs will have to refer to being regulated by the claims management regulator rather than the Ministry of Justice. The shadow Minister welcomed that proposal.
Thirdly, CMCs will have to inform their contracted client of any variation in or suspension of their authorisation; and, finally, CMCs that operate websites will be required to publish their terms and conditions online as standard, including examples of how their various costs are calculated in a specific format.
On the delay to the rules review consultation, which was raised by my hon. Friend the Member for Thurrock, I can confirm that the consultation was launched as soon as possible after internal clearance of the intention to consult and the release of the initial impact assessment.
Last year, we also ran a public consultation on imposing a ban on CMCs offering financial rewards or similar benefits as an inducement to make a claim. That proposal
was made in response to the recommendation contained in Lord Young’s report “Common Sense, Common Safety”. The ban will come into effect along with other amendments to the conduct rules from April 2013.
From next year, we intend to commence powers under the Legal Services Act 2007 to extend the legal ombudsman’s jurisdiction to provide an independent complaints and redress scheme for clients who are dissatisfied with the service provided by CMCs that they have contacted. Consumers will benefit because the legal ombudsman has wider powers of redress, including the ability to award compensation.
Lastly, we are implementing the primary recommendations contained in Lord Justice Jackson’s “Review of Civil Litigation Costs,” including in particular a fundamental reform of no win, no fee conditional-fee agreements and a ban on the payment and receipt of referral fees in personal injury cases.
How will restricting the ability of claimants to obtain proper legal representation restrict the operation of CMCs that either make unmeritorious claims or make meritorious claims incompetently?
We are not restricting access to justice in any way. That is another argument I have had with the hon. Gentleman in other debates over the past year and a half. Access to justice will still be possible and meritorious claims will continue to be made.
I have sought to cover a lot of ground in a relatively short space of time, and I have talked through improvements in the way the CMR unit does its day-to-day job and its work in preparation for next year’s reforms. We remain focused on delivering a successful and strong regulatory regime. To give consumers and defendants more confidence in the system, it is important that CMCs ensure that they comply with the rules.
I reassure all hon. Members here today that there will be no let up in the CMR unit’s compliance and enforcement work, and it will do what is essential to strengthen the regulatory and complaints regimes to provide better protection for consumers and the public.
I began this debate by saying that the industry has pulled off an amazing feat by uniting consumer groups and trade associations, and I can now say that it has pulled of another one by uniting both sides of the House. As Mr Slaughter says, there is clearly a consensus on what needs to be done to reform the regulation of the sector. The Government are taking a step in the right direction, but I think we all recognise that much more needs to be done.
I want to home in on a number of common themes in the speeches of all participants in the debate. I hope the Government will consider what more they can do to strengthen the regulatory powers in this area.
Obviously, the Government are reforming the way in which firms refer to their regulatory status, because the association with the Ministry of Justice has clearly been a marketing tool. It is important that all regulators are alive to the fact that, quite often, firms with dubious motives use their regulatory status as a kitemark, rather than as what it is—a statement of who is the regulator.
All regulatory agencies could learn a lot from being more fleet of foot in dealing with rogue operators in whatever sector. The reason why we are all here discussing the matter is, as my hon. Friend Jonathan Evans said, because of the banks’ practice of mis-selling payment protection insurance over a sustained number of years. As parliamentarians, we all need to play a very active role in ensuring that established practices that are detrimental to consumers are nipped in the bud. We have to be fleet of foot in doing that.
Everyone has shown their irritation with the incessant text traffic that we are all receiving. I remind the Minister that the Information Commissioner says that such activities are outside the EU regulations on electronic communication. We need to ensure that, when we have regulations, the regulators have teeth to enforce them. Otherwise, those regulations are meaningless red tape for legitimate operators and will not stop the rogues.
I encourage the Minister to keep alive to whether the regulatory tools are sufficient, because we are talking about rogue firms that deliberately set themselves up to profiteer at the expense of consumers. As the hon. Member for Hammersmith said, such firms will always be one step ahead of regulation, so we need regulators that will tackle such behaviour and come down on the rogue operators, leaving those who behave appropriately to get on with their business. We need to look more closely at the financial penalties for rogue operators, such as for when they refer bogus cases to the Financial Ombudsman Service. One thing that fuels the business is that it is a risk-free operation to send out loads of texts and to follow every lead. Sometimes they will hit the lottery and get a good pay-out, of which they may take a third. They do not have to pay anything out, because the burden of bogus claims is shared by the industry. I encourage the Government to consider closely whether there is more that can be done in that direction, perhaps bearing in mind the suggestion of my hon. Friend the Member for Cardiff North for a sector-wide compensation scheme, or perhaps engaging the expertise of the Financial Conduct Authority.
I thank colleagues for participating in this debate. There is clearly consensus that consumers are being fleeced. We need to find the villains and ensure that we have a regulatory system that is fit for purpose.
Question put and agreed to.