Clause 3

Compensation Bill [Lords] – in a Public Bill Committee at 1:15 pm on 22nd June 2006.

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Provision of regulated claims management services

Photo of Oliver Heald Oliver Heald Shadow Secretary of State (Justice), Shadow Secretary of State

I beg to move amendment No. 15, in clause 3, page 1, line 18, leave out ‘regulated'.

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

With this it will be convenient to discuss the following amendments: No. 18, in page 2, line 27, after ‘legal', insert ‘or other'.

No. 19, in page 2, line 29, after ‘another', insert—

‘( ) any service for money or money's worth to persons bringing claims'.

Photo of Oliver Heald Oliver Heald Shadow Secretary of State (Justice), Shadow Secretary of State

This group of amendments is all about ensuring that the regulation of claims management services is comprehensive. It is clear that self-regulation has not worked in this field and I welcome the Government’s decision to pass legislation that will effectively regulate claims management services.

In response to concerns raised by the Delegated Powers and Regulatory Reform Committee in the Lords and the Regulatory Reform Committee in this place, the Government have passed a significant number of amendments to what was originally proposed. Basically, that has ensured that some of the key points are in the Bill rather than leaving them to secondary legislation. I welcome that. The Minister who dealt with the matter in the Lords was very constructive.

The growth in the claims management sector came about as a result of the Government’s decision to pretty well abolish civil legal aid as it then operated and establish conditional fee agreements. As members of the Committee will know, civil legal aid has seen its budget reduced by 24 per cent. in real terms and considerable difficulties have been highlighted by the Access to Justice Alliance. Amendment No. 15 tackles the problem that two kinds of services appear to be referred to in the Bill: regulated and unregulated  services. The effect of removing the word “regulated”, which is what I suggest, is that clause 3(1) would read, “A person may not provide claims management services unless—(a) he is an authorised person, (b) he is an exempt person” and the other provisions would then apply.

The question for the Minister is: what are unregulated claims management services? The word “regulated” has not been used by accident. The implication is that there must be such a thing as an unregulated claims management service, and as the Minister knows I am concerned that the Government might have worded the clause so as to ensure that some bodies that deal with claims management, such as trade unions, are exempt. If so, it is hard to see how that fits in with the clause on exemptions. I would be interested if the Minister clarified why the word “regulated” is used.

The president of the Chartered Insurance Institute, Mr. Hales, has branded claims management firms as a national disgrace and blamed them for the surge in unjust and vexatious complaints against life offices and advisers. The Law Society has talked of the significant body of evidence that the public need protectionfrom unregulated claims companies who employ unacceptable practices such as cold calling, aggressive selling, insurance mis-selling and encouraging all kinds of frivolous claims.

The Department for Constitutional Affairs report on “Effects of advertising in respect of compensation claims for personal injuries” supports that view and shows that claims management companies employ unacceptable practices. Chart 11 on page 22 of the report shows that 20 per cent. of those who made a claim found out about their claims management company from an unsolicited phone call, 18 per cent. did so from television adverts, 17 per cent. were approached in the street and 3 per cent. were approached while in hospital. Clearly we do not want the concept of the ambulance-chaser to become established in our country, and therefore firm regulation is needed.

It is no surprise that companies target the area in an aggressive way. If we consider the endowment business, the Boleat report states that insurance companies estimate that there will be about a million endowment compensation claims this year, with a typical compensation figure of £6,000. That is obviously very lucrative for claims management companies and, as the Boleat report notes, all they have to do is write one letter in order to get the money. About 30 per cent. of claims come though the claims management companies, which are taking 35 per cent. plus VAT on each transaction.

Claims management companies can expect to earn hundreds of millions of pounds through such claims. It is a serious and urgent problem, and in drawing up the legislation we must avoid any loopholes. That is why I should like the Minister to explain “regulated”.

Amendment No. 18 is small, but it would add “or other” after “legal” and therefore affect the processing of “a legal or other” claim. The idea is to be comprehensive, but there is no doubt that insurance or administration, which was not directly legal in every aspect, could be considered a part of claims management companies’ work. As the Minister will  recall, when Claims Direct and the Accident Group were taken through the courts, they argued that they were insurance services and therefore exempt.

Amendment No. 19 is again designed to be comprehensive. If it were accepted, clause 3(3)(a)(iii) would read “referring or introducing one person to another,” and would be followed by a new sub-paragraph, “any service offered for money or money’s worth to persons bringing claims”. Adding those words would catch those people who carry out what are effectively claims management services, but who carefully do not present themselves as so doing. It would still exclude those who provide free advice.

It is not too far-fetched to imagine in a sector as inventive as the one under discussion that claims management companies seeking to avoid regulation may move into the rehabilitation sector and then provide all the other services as an ancillary service. I dare say that the Minister will tell me that the provision is inclusive and not exhaustive, but we must be careful.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

I support the amendments. They all seem to go in the right direction. I said on Second Reading that we should have as little legislation as possible in this country. We legislate far too much. The problem is often with administration, and if we administered better we would need to legislate less. I approach all legislation on the basis that we should not legislate unless we absolutely have to and we are persuaded by the evidence. There are sufficient considered views about the issue in part 2 to make it appropriate to legislate, and therefore to regulate.

I noticed—amusingly but understandably—that at the end of our discussions about part 1, civil servant team A departed and the Bill team for part 2 arrived. There are clearly experts on this sector here to assist the Minister, and no doubt they have had many issues to consider as the Constitutional Affairs Committee and others have reported. The Government have been under much non-partisan pressure to regulate this area. The hon. Member for North-East Hertfordshire broke down using a verbal pie chart the ways in which the literature comes our way: being stopped in the street is one way; and others include advertising, and the stuff that one picks up in shops or finds in newspapers.

We are making a rod for our own back if we start part 2 with “Claims Management Services” and then state that it will deal with regulated claims management services only. There could be a wonderful debate about what a claims management service is, but it is better to have one such debate, and if necessary leave it to the courts, rather than two, the first being about whether something is a claims management service, and the second about whether it is regulated.

We are trying to deal with an abuse of the free market in which person A or company A exploits person B or organisation B. We ought to catch all the fish in the net, not start to limit the definition in the title of the clause. I see where it goes: one looks for the definition of regulated, and in typical legalese, subsection (2)(e) says that

“services are regulated if they are—” and we get a circular definition—

“of a kind prescribed by the Secretary of State”.

We immediately set ourselves up for secondary legislation, which the Secretary of State must produce and to which Parliament must agree. The alternative definition is that services are regulated if they are

“provided in cases or circumstances of a kind prescribed by order”.

Again, there is only one way forward: secondary legislation. It is better that we define a claims management service and then leave it, letting the market decide. If there is a debate in court over whether something is a claims management service, we should let that happen.

The last reason is that, as the hon. Gentleman hinted, it is impossible to think ahead to how such things might happen. At the moment, we are thinking mainly of people who advertise on television, radio, hoardings and flyers. In the age of the internet and e-mail, people could proffer such services there, but they could also do so in other ways. A weekend community event in any of our constituencies could be sponsored by an individual or a company that wanted to advertise in a different way by selling something at a stall.

I am worried that if we start trying to define this by regulation, we will always have to be regulating. I urge the Minister to accept the amendment, resist over-prescription and over-definition, and try to ensure less unnecessary work for Parliament and lawyers, and less secondary legislation, which would be void.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering 1:30 pm, 22nd June 2006

There seems to be confusion in the Government’s mind about who should be covered by the draft legislation. That concern has been relayed to me by the National Accident Helpline, based in my constituency. I shall relate the angle from which it considers the Bill, particularly clause 3.

As the National Accident Helpline was mentioned by my hon. Friend the Member for Canterbury, I shall clarify that it provides initial free advice to people who have suffered a personal injury and facilitates their contact with a quality solicitor who can advise them on the merits of their claim.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I am interested in the hon. Gentleman’s point about initial advice. Does the claims management company give legal advice? If so, does it employ people legally qualified to do so?

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

I am grateful for that intervention. Yes, the company employs law graduates to provide initial advice. It is almost like a first-aid legal service for those people before they are passed on to solicitors.

Photo of Kevan Jones Kevan Jones Labour, North Durham

That is not a clear-cut answer, because there are law graduates and many people with law degrees who are not qualified solicitors covered by the Law Society. Who regulates such individuals?

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

That is a good question, and I shall undertake to give the hon. Gentleman a definitive answer in writing.

Photo of Kevan Jones Kevan Jones Labour, North Durham

Does that not explain the underhand way in which such companies operate? They are trying to give the public the impression that they are some type of legal organisation when clearly they are not, if they are not employed or governed by the Law Society as firms of solicitors are. Is that not exactly why the sector needs regulation?

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

That is exactly the point. We need regulation, and the National Accident Helpline welcomes the Bill. It wants a level playing field so that as many organisations involved with claims management and legal services as possible are brought under the same regulation. It is concerned that the Government’s thinking in introducing the Bill is not clear enough in the definitions of who should be caught by its provisions, particularly clause 3. I shall come back to the hon. Gentleman with the answer to his question.

The helpline is not a claims management company, but it will be caught by the Bill. It has a very good reputation in the field, and its intention is to ensure that genuine accident victims can access justice and are protected from unscrupulous players in the market. The helpline has been working closely with the Department for Constitutional Affairs in the drafting of the Bill, which it sees as a valuable opportunity to introduce quality regulation to the marketplace to tackle disreputable practice. I am sure that we all agree that such practice has damaged the sector’s reputation.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I am interested in the hon. Gentleman’s fierce defence of an organisation that I do not think can be defended. Will he tell me why someone who has had an accident should not go directly to a solicitor who has expertise and legal knowledge of accident law? Why should he have to go through a middleman such as the National Accident Helpline, which has no legal qualification and acts as a barrier between the claimant and justice?

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

My understanding is that there is no obligation for anybody to access the National Accident Helpline. Anyone can go straight to a solicitor if they so wish.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

The hon. Gentleman and I clearly have different views, but if somebody can go to an organisation that can give preliminary advice—I am not defending this particular organisation, but there are citizens advice bureaux and all sorts of other places—the last thing we should do is expect anybody to talk to a lawyer when they want first advice. The lawyers should come last in the list—and I am a lawyer.

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

Mr. Hollobone, you had better have the Floor.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

I am grateful for the intervention.

The Bill makes it clear that the detailed implementation of regulation will take place via secondary legislation. During consideration in the Lords and in the response to the report of the Delegated Powers and Regulatory Reform Committee, the Department made considerable progress in fleshing out some areas of the Bill and providing more detail on how it was envisaged the regulation would work. The National Accident Helpline is concerned that there is a need for greater clarification in a number of areas—in particular, who is covered by the legislation.

Photo of Oliver Heald Oliver Heald Shadow Secretary of State (Justice), Shadow Secretary of State

I am sure that my hon. Friend will put me right if I am wrong, but is not the National Accident Helpline made up of solicitors? It is a network of solicitors, and it has solicitors in each part of the country. Someone ringing up the helpline is told which one is in their locality. It is not right to think of the helpline as an operation independent of solicitors.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

I am sure that my hon. Friend is absolutely right. Perhaps I may copy him in on the correspondence that I will have with the hon. Member for North Durham (Mr. Jones).

Photo of Michael Clapham Michael Clapham Labour, Barnsley West and Penistone

On the back of the previous intervention, if the National Accident Helpline is a network of solicitors and acts to garner claims that go out to various areas, where do its fees come from? Are they levied on the claimant who telephones it for help, are they deducted by the solicitor and paid back to the National Accident Helpline, or is the payment made in another way?

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

I do not want to put on the parliamentary record an inaccurate answer to that legitimate and detailed question, but I undertake to ask the National Accident Helpline, in writing, to contact the hon. Gentleman and outline its fee structure.

Photo of John Mann John Mann PPS (Rt Hon Richard Caborn, Minister of State), Department for Culture, Media & Sport

I am sure that the hon. Gentleman will be able to answer this question: what is the remedy for a consumer complaint if a consumer is unhappy about the action taken or advice given by the helpline?

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

That is one of the elements of the Bill that we are discussing. Whatever arrangements apply to the National Accident Helpline under clause 3 should also apply to all the other organisations covered by the clause.

Photo of John Mann John Mann PPS (Rt Hon Richard Caborn, Minister of State), Department for Culture, Media & Sport

Just to clarify my question, what is the remedy for the consumer under current law?

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

I shall try to keep my intervention to two sentences. The answer to the question put to the  hon. Gentleman is that the first stage is that people get free advice over the phone—that advice is not regulated and is given by a law graduate—and they are then passed on to a solicitor who is regulated in the same way as every other solicitor. That is how the National Accident Helpline works. The measure would regulate it from the beginning of the process and not from the second stage. [Interruption.] No, the first stage is free.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

I confirm that when customers phone the helpline, the initial advice given to them is free. There is no charge for it. If they go on to engage with one of the solicitors in the helpline network, there is a fee at that stage.

Photo of Kevan Jones Kevan Jones Labour, North Durham

Those are important points. What happens if someone rings the helpline and is put in touch with a law graduate, which is what the hon. Member for North Southwark and Bermondsey described the individuals as being, and that person gives the wrong advice? Who regulates the advice that that person gives? Clearly, the solicitor is regulated as a solicitor. A law graduate might be involved, but clearly they are not so regulated. Like my hon. Friend the Member for Bassetlaw (John Mann), I am intrigued to know what the payment situation is between the helpline and the solicitors.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

Absolutely. That is why it is appropriate to answer the questions asked by the hon. Gentleman and the hon. Member for Bassetlaw in the best way, which is by asking the National Accident Helpline to write to them with the details of its structure.

I could make the same point about citizens advice bureaux. I used to be a volunteer at the Kettering bureau. I do not know what the complaints procedure is if someone goes to a citizens advice bureau and a volunteer gives the wrong advice.

Photo of John Mann John Mann PPS (Rt Hon Richard Caborn, Minister of State), Department for Culture, Media & Sport

With respect to the hon. Gentleman, whom I thank for giving way for a third time, we are attempting to legislate. It is, therefore, not good enough for him to say, “I will get a third party to write to you.” We are expected—perhaps even this afternoon—to make decisions on the clause, so the question is fundamental. What are the consumer rights? The financial relationship is also fundamental. Are the consumer rights proposed in the Bill sufficient in their strength and breadth to ensure full consumer rights at all stages? That question is fundamental to the issue at stake this afternoon.

Mr. Hollobonerose—

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

Order. Before the hon. Member for Kettering continues, I must point out that he is not responsible for the National Accident Helpline. We are in danger of extending the debate too widely.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

Thank you, Mr. Atkinson. I am happy to take interventions, but as you rightly say I am not employed by the helpline. I speak on its behalf as its constituency MP. However, I do not think that the hon. Member for Bassetlaw and I disagree. We are  talking about bringing in new legislation to cover a variety of different organisations and individuals who work in the sector, among them the National Accident Helpline. The fundamental points that the helpline is asking for are that the playing field be as level as possible and that the definition of who is captured by the Bill be comprehensively examined by Parliament before the law is passed.

The helpline has been working constructively with the Department to consider the model rules for authorisation that set out which claims, management activities and business models will be covered by the regulations. The definition is extremely broad. Clause 3 mentions those who provide “financial services or assistance”. That could cover individuals going from door to door and street canvassing, but the broad definition could also cover before-the-event insurers, who manage and sell claims to solicitors; liability insurers involved in third party capture of claimants who are not their policy holders, to divert them from independent legal advice; individuals passing on claims to solicitors for reward; and, potentially, even banks and bank managers involved in arranging litigation funding.

The Department’s thinking on breadth in relation to those who will be covered needs to be probed further, which is what we are doing this afternoon, to ensure a level playing field. The helpline is firmly of the view that the Department needs to give more clarity on who it intends to be covered.

Currently, it is envisaged that it will be the responsibility of personal injury lawyers to ensure that the conduct of individuals introducing claims to them complies with business rules. The helpline believes that individuals who seek out and pass on “warm” leads are often the most disreputable players in the sector and that their activities have caused much of the damage to its reputation that the Government are trying to tackle through the Bill.

The helpline contends that it is unrealistic to rely on solicitors receiving leads to investigate sources and methods and to regulate them. To exclude such individuals from direct regulation could be unjustified and potentially greatly damaging to the effectiveness of any new regulatory regime. Expecting other authorised businesses to be responsible for policing such individuals would not be effective.

Photo of Kevan Jones Kevan Jones Labour, North Durham 1:45 pm, 22nd June 2006

I have some sympathy with that argument, because I think that one of the biggest scandals of the Law Society and the chronic obstructive pulmonary disease scheme, and its involvement in claims handling, is that the Law Society and lawyers have not been careful about whom they deal with.

The hon. Gentleman said, however, that the National Accident Helpline should not be covered and that it is different from other types of claims handling organisation. Will he give evidence for how it is different? It advertises nationally, and the people who give the initial advice are clearly not legally qualified,  so why should it have a different status from that of the doorstep sellers whom myself and other hon. Members have come across in the COPD scheme?

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

I think that it was asking not for a separate status, but for the Government to define who is going to be caught by the legislation and to ensure that those engaged in the sector are regulated to the same level. That is the point that the helpline wants to get across. And that concludes my remarks.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

I would like to say a word or two prompted by that exchange. Again, I hold no brief for these people, although they sent me one like they did others. [Interruption.] The hon. Member for North Durham (Mr. Jones) must not be ridiculous. He must assume that we all act in good faith unless he has reason to believe otherwise, rather than make gratuitous and potentially offensive comments that have no base.

As I understand it, the helpline is a confederation of companies that set up, as it were, a collective access point for their service. It acts as many other companies do; if a person phones a solicitor’s office, instead of getting through to a solicitor first time, they will normally speak to a non-qualified person, after which they might get through to a legal assistant. In the bigger firms, it might take a long time to get through to a solicitor. They will have someone with some legal expertise giving initial advice who then passes people on to a solicitor. That seems to be a perfectly valid way for solicitors to work together as a co-operative or collective.

On liability, my understanding is that although a person who answers the phone and gives the initial advice is technically employed either by the company in question or one of the solicitor’s firms, they will be governed by the liability of the solicitor’s firm. The helpline is saying that it wants to be governed by the claims management service. It never said that it does not; it said that the sector should be regulated. It is perfectly happy to be within the system, but is seeking to ensure that everybody doing the same job is equally regulated by claims management service systems.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I totally disagree with the hon. Gentleman. I see no purpose for such organisations. He said that if a person goes to a solicitor they do not talk to one directly, and that it correct, but at least the advice that they give is covered by Law Society rules.

Those other people are frankly just middlemen. That is the important thing. I wish that the hon. Gentleman would listen to some of the horrendous cases that I and other Members have had to deal with. Claims handling companies, including the one that we have been discussing, are not making it clear that they are not solicitors. That is the important point and the reason why they need to be regulated. Is he advocating the company only on the basis of a brief that he has been sent? He should do more research before fiercely defending an organisation about which he clearly knows little.

Photo of Kevan Jones Kevan Jones Labour, North Durham

You are doing a good job of it.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

I am seeking to ensure that we have a debate on the facts. Other organisations such as Citizens Advice, the Association of Personal Injury Lawyers and others have written to me about the Bill. The company that we have been discussing has no more influence over me than anybody else. I form my own views, and I hope that the hon. Gentleman does too.

However, the argument is as follows. Of course the Law Society regulates lawyers and those who work for solicitors’ companies. In the past, that has not been a happy and successful operation. The number of complaints against solicitors has been legion, the handling of the complaints has been lousy and until recently people often got a bad deal. For many years I had many reasons to complain about solicitors on behalf of constituents.

Mercifully, there is to be an independent regulator of solicitors, as there should have been a long time ago—especially for those who use public money. I hope that the hon. Gentleman will also consider the evidence showing that over the years solicitors have not had a good track record in doing their job properly all the time, giving good advice or being regulated. The Legal Services Bill, introduced by the Minister the other day, seeks to put that right, because the Government have at last been persuaded that in-house self-regulation has not done the job properly.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I agree with my hon. Friend the Member for Bassetlaw that for the past two years in a row a record number of complaints have been made to the Law Society about solicitors.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

That is right. We agree about that. The Minister and the Government have moved down that road.

Just to be clear, let me say that the organisation made no suggestion that it wanted to be outwith the system; it wants to be inside the system. My understanding is that it is making the simple, general point that all those who act as intermediaries should be within, not outside, the system.

There are organisations with very good reputations, such as Citizens Advice. The bureaux are made up not only of lawyers; I regularly use mine and refer constituents to it in respect of all sorts of matters. Some who work there are lawyers; some are not. Some are experts in giving people advice, including about personal injuries, benefits and immigration. One does not have to be a lawyer to be an expert, and one certainly does not have to be a lawyer to judge where it is appropriate to pass a case. I hope that the hon. Gentleman will be fair to such organisations, which are not made up only of lawyers or those employed by them.

Photo of Michael Clapham Michael Clapham Labour, Barnsley West and Penistone

The point that we are seeking to make, of which the hon. Gentleman would have been well aware if he represented a mining community, is that since the COPD and vibration white finger schemes came into being, there has been a great proliferation of such claims firms, which in many circumstances levy very high fees on the person who seeks advice. They  then merely put the case to a solicitor. A person seeking advice on how to pursue a claim for damages can go immediately to a solicitor; there is no need at all for the intermediary.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

I understand the hon. Gentleman’s point and I know about his exact complaint. Companies have taken money off people and given them no service, no good service or no competent service.

According to the Home Office list, I deal with the second highest number of immigration cases of any MP; my neighbour, the Minister of State, Department for Constitutional Affairs, the right hon. and learned Member for Camberwell and Peckham (Ms Harman), has the highest. For many years, I have regularly asked people at my advice surgeries whether they were seeing a lawyer. When they say yes, I say that they should not. People normally get bad advice; the lawyers ask for money up front. Incompetent people who are not lawyers sometimes work at lawyers’ firms, and although the system is regulated, a lot are rogues and vagabonds who ought not to be doing the job.

Photo of Michael Clapham Michael Clapham Labour, Barnsley West and Penistone

That could be the London experience.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

It is absolutely the London experience. So I am entirely sympathetic, because in the days when there were docks in Bermondsey, and many dock workers, there was a comparable experience. Huge numbers of my constituents were members of the Transport and General Workers Union and worked in the docks. Generally, if people were wise, they would take their causes to the union. Sometimes that union not be the TGWU, but it would represent their interests perfectly properly, as one would expect. We should be careful that people do not fall into the wrong hands.

The logic of the hon. Gentleman’s argument, which he might wish to make clear to the Committee, is that only lawyers should deal with claims of the type envisaged by the Bill. If that were the case, he would argue that nobody should be allowed to do any processing of claims other than registered lawyers. That argument can be made, but I do not understand it to be the intention of the Bill or of the Government. The Government’s suggestion is that there are people other than lawyers who will be allowed to process claims, and I think that provided those people are regulated, accountable and liable, so that they can be taken to the cleaners if they do not do a decent job, we should not be directing all the work to lawyers.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I hope that the outcome of this regulation is that we see the end of claims management companies, and I think that a lot of them will close once the regulations come into force because of the sharp practices of which my hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) is well aware. The hon. Gentleman says, “process a claim,” and it needs to be exactly that. If it is about filling in a form and passing the matter to a solicitor, that needs to be clear. One of the terrible things that I and my hon. Friends who represent coal mining constituencies have come across is that those involved pass themselves off as having some type of quasi-legal position, when clearly they do not.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

I understand that point too. Over the years it has been a little battle of mine to make sure that when people turn up at court to represent someone, they do not get away with giving the impression that they are lawyers, when they are not. They are clerks, not lawyers. One can go into a solicitor’s office and receive advice, and often it is not a lawyer that gives the advice—sometimes it is a clerk or someone who is in the legal assistants’ profession. I am always careful to check when people write to me from a law firm whether the name at the bottom of the letter is the name of one of the solicitors at the top or that of somebody else.

I am absolutely against people passing themselves off as one thing or another. I do not think I share the view that there should be nobody in England who does this work other than lawyers, but the hon. Gentleman will argue his case. When the Minister responds, I should be interested to hear whether the Government expect that after enactment, when the regulator has been set up, it will be not just the really dubious characters that go, but all claims management companies, and whether that is Government policy. I do not understand that to be what the Government expect and want, but let us hear the answer.

Like the hon. Gentleman—I think that we are all going generally in the same direction and I suspect that that is why we are all here—I hope that the Bill will get rid of the cowboys who are out to get a quick buck and then disappear. It was the same with the legislation on minicabs, which was pressed by my then hon. Friend the Member for Richmond Park—now Baroness Tonge—among other hon. Members. Minicabs were not properly regulated. Now that they are regulated, people—women in particular—feel much safer and the regime is tighter, as it should be. The measure has not got rid of minicabs, however; they still exist, but they are licensed and regulated, but the liability is much greater.

Photo of John Mann John Mann PPS (Rt Hon Richard Caborn, Minister of State), Department for Culture, Media & Sport

I seek your advice, Mr. Atkinson, on whether at this stage make general comments of the type made by the hon. Gentleman, or speak about the clause standing part of the Bill.

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

As we are on the first group of amendments to quite a large section of the Bill, it makes more sense for the Committee to proceed as we have been doing, so if the hon. Gentleman continued I am sure that that would be to the advantage of the Committee.

Photo of John Mann John Mann PPS (Rt Hon Richard Caborn, Minister of State), Department for Culture, Media & Sport

Thank you, Mr Atkinson.

I want to put some questions to the Minister that I shall illustrate with a specific claims management company called Vendside Ltd. Hon. Members may be familiar with that company. Opposition Members may be particularly familiar, because I understand that the company has written to them this week making various allegations against a collusion of Labour MPs, myself included. If any hon. Members have such a letter, I would be keen to be given a copy. It demonstrates the nature of some claims handlers.

I want to be absolutely certain that the legislation will ensure that collusion between a claims handler and a solicitor is fully covered. There are two forms of  collusion. In one form, there is an integral relationship, whether formalised or informal, whereby the claims handler gives cases to a specific solicitor or a small group of solicitors—as we have seen not only with Vendside but with other claims handlers dealing with claims in the mining industry. In other words, the solicitor has a vested interest in defending the reputation of the claims handler and its attempts to raise finance, because the claims handler is giving them lots of business. That is well documented among a range of claims handlers, of which Vendside is only one. It is essential that we do not allow consumer complaints to fall between the two stools.

The second aspect is particularly relevant to Vendside Ltd. As well as having a range of solicitors whom it works through—a panel of six different solicitors over the past six years—it employs its own solicitor to advocate on its behalf. At the moment, that is Brooke North in Leeds. If one does a press search, one sees that a Mr. Stopdale, a solicitor from Brooke North, has been quoted repeatedly on various issues over the past few weeks—in essence, it would be reasonable to say, advocating the case of Vendside Ltd.

The case of Vendside Ltd. throws up another complication. I understand from correspondence and my research that it is a fully owned subsidiary of the Union of Democratic Mineworkers. That raises all sorts of complications, because a trade union is not able to levy VAT, but a limited liability company is able to do so. It is unclear, at times, who is actually who in the UDM and Vendside, because they have the same solicitor. A year ago they had different solicitors, and made a point of that. Now they have just one solicitor. The letter that has been sent to certain Opposition Members is headed “UDM Nottingham section/Vendside Ltd.”. It is written on Vendside headed paper, but the person who signed the letter is a president. Vendside does not have a president; the person who signed the letter is the president of the UDM. The president of the UDM is signing letters as the president of the UDM on the headed paper of that limited liability company.

That confusion could be used to negate consumer rights. The consumer is bound to be confused about whom they are dealing with. There may be legal technicalities, too. The law in relation to a trade union, any kind of friendly society or akin organisation is somewhat different. It is governed in statute as opposed to the law relating to a limited liability company. Therefore, the question of whether things will fall between the two is rather important.

In addition, who will carry out the claims management regulation? Is there an equivalent in terms of the reality—the sanctions and the powers? Otherwise, organisations would set up in one form or another, or transfer matters in one form or another, purely to ensure that consumer rights are minimised. That would be a particularly unhealthy arrangement. I shall give an illustration.

Let us consider hearing loss claims in both the textile and the mining industries. A claims handler, Vendside Ltd., acquired the claim. It was passed to a solicitor who passed it to another solicitor. That solicitor has used a medical company that was owned partly by the first solicitor. Some of the people working for Vendside Ltd. have been doing what was described as marketing  work and, between them, different fees have been passing backwards and forwards. I referred to a set of minutes on Second Reading that outlined how some of those finances worked. As for detailed consideration today, how do we ensure a system that does not allow—this is beyond triangulation—a position in which four or five different parties are involved?

Photo of Oliver Heald Oliver Heald Shadow Secretary of State (Justice), Shadow Secretary of State 2:00 pm, 22nd June 2006

I follow what the hon. Gentleman is saying; I agree. Does he agree with me that the danger is that, if we leave a loophole, those sort of people will move into it? Different arrangements have been alighted on; he has mentioned some of them. He will be aware of the scandal of the National Union of Mineworkers accepting the proceeds of misrepresentations made by solicitors seemingly on its behalf and then taking a kick-back out of the miners’ compensation. Whatever loopholes there are will be exploited, because a lot of money is involved. Should not everybody be covered?

Photo of John Mann John Mann PPS (Rt Hon Richard Caborn, Minister of State), Department for Culture, Media & Sport

I have taken many cases that relate to claims that originated through the NUM, but one is successful because the solicitors concerned have had through the Law Society a series of adjudications made against them. Last week, Raleys solicitors were instructed by the Law Society to pay back the money that was deducted because it failed to give proper cost advice to the individual. It has been asked to pay an additional £400 compensation. There are many individual consumer complaints, some of which are with the Law Society, and many more will be following. There the consumer has found that there is redress.

However, what is unique about Vendside Ltd. is that the redress is there for those who go through solicitors. Adjudications have been made against firms such as Moss and Beresfords. Probably 85 per cent. are going that way. For reasons that have not been explained, which are not the Minister’s responsibility because they are that of a different Department and predate her ministerial elevation—and highly appropriate that was—the Government chose to have an agreement with the claims handler. In fact, there are three: one for hearing loss, one for COPD and one for vibration white finger.

The consumer redress when claims are handled by the claims handler without the solicitor is purely through the civil courts. The dilemma in going to the civil courts is that one can throw large amounts of money at the matter through appeals. Therefore, the individuals—in my case, my constituent—are not those who readily go to court; they tend to regard courts as places to avoid. Their perception of a court is in respect of arrest on a criminal charge. I have carried out a survey on the matter; people do not readily go to court. The idea that they would have proper consumer redress by going through the civil courts is nonsense. There is a loophole whereby, if one goes via a solicitor, one has the potential of redress. In my view, that is beginning to work well. It needed some campaigning to get the Law Society to act responsibly in respect of regulation, but after much pressure it is doing so now. However, if one goes solely through a claims handler, and in an agreement made by the Government one has no redress, where does one go? That is absolutely fundamental to how this matter is handled.

The situation is even worse, however. Not only does one have no redress, but I have had to request on behalf of constituents some of the basics that would be available if one went through a solicitor, such as the client file. One would want that because, as I have found in a series of cases—I shall not go into the detail because that is not relevant—the service is part of the compensation claim, and there could be serious money resting on it, so one needs to see whether that has been put in. My argument against a solicitor when it has not been put in is that the solicitor might well be liable. Solicitors have paid out some significant sums for negligence because they have failed to put that part of the compensation claim in. One can check that only if one examines the full file. Slowly but surely, through the Law Society, I am getting hold of the files, going through them and assessing them. I am not a solicitor, but my judgment as to whether such matters should be further investigated is reasonable, so I can give sound advice to my constituents.

Vendside Ltd., and its solicitors, Brooke North, refused to release the files. If one took that route, one would not even be able to see one’s own file. Consumer rights are about not just complaint but ownership of one’s file. At the moment, one has no redress whatever in that respect.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

It would be interesting to know whether the hon. Gentleman believes that only lawyers should be able to do that work. I think that I am right in saying that, as of today, if he has a file on a case of his with a law firm, he does not have the right to see that file either. He will have that right only when he has settled all his bills and terminated his contract, and even then it will be limited. I am not sure, but I think that that is the position.

Photo of John Mann John Mann PPS (Rt Hon Richard Caborn, Minister of State), Department for Culture, Media & Sport

Again, I shall not go into the detail of the battles that I have been fighting on that matter. Suffice it to say, we are winning the cases in getting access to the files. It took a bit of a public campaign to get that moving, but that is now happening and the files are coming through. The Law Society has been very clear in that respect—if a file is complete, one can get hold of it and see whether there is a negligence issue. If one suspects that there is, one has the opportunity to do something about it. The point about Vendside Ltd. as a claims handler, and the three absurd agreements that the Government signed, is that one does not even have that basic right.

Photo of Michael Clapham Michael Clapham Labour, Barnsley West and Penistone

My hon. Friend will have come across cases in which, in addition to those from the claims handler, charges have been levied by solicitors. Most such solicitors have no contact with trade unions, but he might have found that they have levied as much as £1,000 per claim. One such firm, Beresfords in Doncaster, has agreed as a result of pressure from MPs to refund claimants. It is not just the claims handlers; in the mining cases we have found solicitors, too, who have levied additional fees.

Photo of John Mann John Mann PPS (Rt Hon Richard Caborn, Minister of State), Department for Culture, Media & Sport

They certainly have; I have uncovered many of them. The Leeds solicitor, Irwin Mitchell, was charging 25 per cent. The company with the most money, Thompson’s, was charging constituents such as  my Mr. Allen directly. A range of solicitors charge levies or success fees—few of the leading ones do not—but that is a separate issue, because there is a remedy there. I do not think that the powers of the Law Society are strong enough to enforce adjudications without all the palaver that we have had with Raleys, such as appeals and solicitors’ disciplinary tribunals. In my view, the Law Society should strike off solicitors who refuse to abide by the club rules. It is straightforward. If that is not happening, we should legislate so that it does and so that such people are not entitled to be solicitors any more.

I come to claims handlers. The hon. Member for North Southwark and Bermondsey asked who should be allowed to proceed with cases. That is a vexed question. In relation to the mining and hearing loss claims, I see no basis for the Government to sign an agreement with a claims handler. From the evidence, the Government should cancel that arrangement forthwith, because consumer rights are not built into it.

The only way that I would be prepared to countenance the idea that a claims handler should proceed with cases is if the consumer rights were equivalent to going through a solicitor. There may well be arguments—my hon. Friend the Member for North Durham will doubtless put them at some stage—that claims handlers should not be allowed to do so anyway. Even if that were the case, it could be considered only on the basis of equivalence of rights.

There are two other aspects. One relates to Vendside and the hearing loss claims. It is not just the mining industry; the textile industry is involved as well. One of the perplexities that I am still struggling to understand—I am still asking questions—is that I found women who worked together who appeared to have equivalent industrial deafness, some of whose claims have proceeded while others have not. There seems to be an interesting unwillingness to take claims to court, and that decision appears to be made by the insurers’ solicitors. Someone goes to a claims handler, and the claims handler gives the case to a solicitor, who perhaps passes it to a second solicitor. A third solicitor then judges that there is no claim, and that is the insurers’ solicitor.

Something in that does not add up. If that is right, proper and within the law, the law is wrong. If a woman with deafness takes a claim for industrial deafness, whether the employer is liable is arguable, but if the claim has proceeded through a claims handler, a solicitor and perhaps another solicitor and is then stopped by the insurers’ solicitor, that is rather dubious.

The fundamental question is how that fits into the draft legislation, particularly when there is a financial relationship, with fees being paid, and greater triangulation among the parties. I could see how there might be an unduly close financial relationship between the claims handler and perhaps even the insurer or the insurer’s broker. The remit and role of the Financial Services Authority and the Association of British Insurers in that context must be examined. Otherwise, the sort of ruses that took place with hearing loss claims, which appear to have been legal,  will recur. In 2000, a hearing loss claim settled in a couple of months at costs of around £600 or £700 to the claimant’s solicitor suddenly became a five-year process in which £3,000 to £4,000 went in all directions for what appears to be wholly unnecessary insurance, third parties in medical investigations, repayments to the first set of solicitors, claims handlers and their marketing companies. If all that unnecessary expense is legal, we must ensure that the law is tightened so that it does not happen.

Vendside is not alone, but it is the biggest offender in my area in terms of volume and the most litigious in trying to ensure that what it does is not challenged. I faced three spurious and unsuccessful complaints to the Parliamentary Commissioner for Standards, all of which were dismissed. Letters are now being sent to Opposition Members. I hope that they do not file them appropriately too quickly; I hope that they will let colleagues involved know that they have received letters.

Photo of Oliver Heald Oliver Heald Shadow Secretary of State (Justice), Shadow Secretary of State 2:15 pm, 22nd June 2006

I feel rather left out. I have not had one of those letters. Can the hon. Gentleman let me have a copy?

Photo of John Mann John Mann PPS (Rt Hon Richard Caborn, Minister of State), Department for Culture, Media & Sport

I shall put the hon. Gentleman on the mailing list. Numerous Opposition Members have been happy to let me know that they have had letters and have then been perfectly happy to let me see a copy of the letter in which I was named. Other colleagues are not named, but there is collusion between some of us, and I suspect that some in this room may be involved in the collusion.

Photo of Julian Brazier Julian Brazier Shadow Minister (Transport)

May I reassure the hon. Gentleman that I have received no such letter? I suspect that the authors would have found me unsympathetic to their activities.

Photo of John Mann John Mann PPS (Rt Hon Richard Caborn, Minister of State), Department for Culture, Media & Sport

That perhaps shows how some claims handlers are as effective at targeting Members of Parliament as they are at handling some of their claimant cases.

The irony is that Vendside is not the worst. There are worse companies—P and R Associates, for example. The amount of money that is deducted from my constituents is sometimes more than £3,000. IDC is another example; again, solicitors have deducted thousands of pounds. I suppose that the worst of all in terms of what it has done is Union and General Services. The name sounds good: an ex-union official, a Mr. Revill of Thorne in Doncaster, set it up with, I guess, some of his associates or friends. That company charged a fee for passing cases on to solicitors and then went into voluntary liquidation. It may have done that because it suddenly found that its outgoings were greater than its incomings, but there could be another reason why a claims handler would go into voluntary liquidation. How could one pursue it through the civil courts? The ability of a small claims handler without the resources that an organisation such as Vendside has to keep using appeals through the courts to try to reverse decisions that it could lose if my constituents or others were successful could be negated if it went into voluntary liquidation as a limited liability company  and disappeared. How will we deal with a consumer complaint against a claims handler that goes into liquidation? There needs to be at least equivalence with the powers to deal with solicitors.

Does my hon. Friend the Minister not feel that it is appropriate for us to build into the Bill a requirement for Vendside Ltd, with its unique agreement with the Government, to repay the money to the claimants? The Government, using their employer responsibility, have paid the costs and have done so very generously, so there has been double charging. Is it not incumbent on the Government, as it is a Government agreement, and on Parliament to ensure that the consumer gets proper redress by legislating to ensure that the money is repaid?

Photo of Kevan Jones Kevan Jones Labour, North Durham

I welcome regulation of claims handlers, but I hope that they are put out of business by it, because I see no purpose whatever to those organisations. I congratulate my hon. Friend the Minister on her approach to the issue. She has stated the important fact that the consumer’s interest and rights should come first. Like my hon. Friend the Member for Bassetlaw, I believe that that is the important point.

My concerns about the phrasing of the clause are somewhat similar to those of my hon. Friend, and I would like answers. I am concerned about cases that will fall between the two stools. I accept that the draft Legal Services Bill is coming, which will tackle the woeful way in which the Law Society has dealt with some cases. I agree with the hon. Member for North Southwark and Bermondsey that the Law Society does not merit any great accolades in this respect. It is clear that the claims handling scandal in the chronic obstructive pulmonary disease scheme could not have gone on without the collusion of solicitors—solicitors working closely together.

I shall give two examples to illustrate my concern about what will happen even with the new regulation. The first, to which my hon. Friend the Member for Bassetlaw has referred, concerns Freeclaim IDC, which was started in the 1990s in Ashington in Northumberland under the name Industrial Disease Compensation. It has operated two scams.

The first involved the chronic obstructive pulmonary disease scheme, when IDC said that it would indemnify people’s claims even though it knew there was no cost involved. One case referred to me involved a man named Mr. Jobes. His only redress to recover the £3,600 that the company stole—I do not use the word lightly—from his compensation was for me to take the case to the Law Society. Credit is due to the Law Society case officer, who was tenacious in pressing the matter. The claim was passed on by IDC to a Liverpool-based company called Silverbeck Rymer, and the Law Society found that, as in the cases taken up by my hon. Friend the Member for Bassetlaw, the company was negligent in the cost advice that it gave to the client. The decision went to appeal and resulted in Silverbeck Rymer having to pay the £3,600 back to Mr. Jobes. It was a successful case, but my concern is that Silverbeck Rymer clearly had a number of cases with IDC. I intend to take the matter up with the Law Society to find out in how many other cases IDC has  done the same thing. Unless people complain they will not get justice. That is the important point.

Under the regulation, if IDC were ever to get regulated—I would argue strongly that it should not—would there be a mechanism for the Secretary of State or the regulator to examine a number of problems in relation to a company? It is clear thatMr. Jobes is not the only person to have been scammed in such a way. The Law Society can investigate only if there is a complaint. We need a mechanism whereby if a complaint is made in one case, other cases can also be examined.

Where is the dividing line between a solicitor and a claims management company? In its literature, IDC calls itself a “panel of solicitors,” giving the impression that it is some type of legal organisation when clearly the people in question have no legal qualifications. It says that its “panel of solicitors” is made up of “experts in their field”. They are not. Often, they are solicitors’ firms that are down on their luck and want cases to put through their books because of the hard times upon which some high street solicitors have fallen.

We must also clarify the matter of advertising and the farming of claims, which relates to another case that demonstrates IDC’s second scam. Once the Jobes scam was exposed, IDC changed the system to charge people not on a percentage basis but through an administration fee for getting the claim and passing it on to a solicitor. It said that it was charging a “modest” fee of £100 plus VAT, which people might say is fine until they find out that the solicitors actually collect the administration fee at the end of a case and pass it on to IDC. My constituent Mr. Barker cannot understand why he has to pay that fee, given that all IDC did was pass his case on. The “panel of solicitors” that IDC used in his case were a company called Mincoffs in Newcastle, whose submission in relation to the Law Society complaint that I have already put in is very enlightening. It appears that Mincoffs is paying for the cases to be passed on. More disturbingly—this is very worrying—I have it in writing that Mincoffs is paying for what it calls “sponsorship advice sessions” and other materials in local working men’s clubs.

Where do we draw the line drawn between the claims handling firm and the solicitor, because in this case they are on a panel and IDC is badging it, and Mincoffs were clearly paying for the advice session or promotional material? It is important that this Bill and the draft legal services Bill do not create a loophole or chasm that people can fall through between the regulation of claims handlers and the regulation of solicitors. I know the Minister does not want such a situation to arise.

Photo of John Mann John Mann PPS (Rt Hon Richard Caborn, Minister of State), Department for Culture, Media & Sport 2:30 pm, 22nd June 2006

My hon. Friend makes an excellent point. In the context of what he is saying, how does he consider the case of Vendside and Indiclaim? Vendside is a claims handler, and that is generally accepted. Indiclaim is the marketing arm of the Union of Democratic Mineworkers. Nobody had heard of Indiclaim until it was discovered that certain solicitors, as well assisting in getting the Vendside fee, were paying up to £500 per claim, in the case of one solicitor, to  Indiclaim, a company that was owned by one of the members of Vendside. Until then, the operation was totally secret. Would Indiclaim be a claims handler, or could it be a ruse out to get out of complying with legislation?

Photo of Kevan Jones Kevan Jones Labour, North Durham

My hon. Friend makes a good point. That is why it is important to raise these things now and get clarification. The hon. Member for North-East Hertfordshire said that such people are ingenious and will create scams and new organisations. They develop what they call “their product” as it goes along. The important thing is that if a claims handling company then sets up marketing companies, as my hon. Friend suggests, or a solicitor does it, they need to fall within this regulation. This must be dealt with in terms of ownership or some direct connection, otherwise I foresee that these people will just reinvent themselves.

My hon. Friend touched on my final point: claims handling companies going bust or being put into liquidation. I know of numerous cases, as does my hon. Friend the Member for Barnsley, West and Penistone, in which various claims handling companies were set up off the shelf for, as I call it, raping the COPD scheme. They got in plenty of claims, sold them to solicitors—or had some relationship with solicitors—and as soon as the scheme finished, they wound up it completely.

People might ask whether that matters, because the claims were passed over to solicitors who could deal with them, but it does, because the COPD scheme and some other legal actions have time limits and deadlines. In a number of cases, people have been phoned up and door-knocked by these companies, and have filled in forms thinking that they were registering a claim only to find that the company, or various companies, had gone into liquidation without registering the claims with solicitors. What recourse do such people have? Some would say that it is under civil law, but that is not really so because the company has gone bust and the directors have disappeared. It is interesting to consider the backgrounds of some of the directors who have been involved in everything from double glazing to timeshare scams.

Photo of David Hamilton David Hamilton Labour, Midlothian

I shall give a breather to the double act that is taking place. I, too, have a concern about the number of solicitors and claim partners who deal with clients in Scotland only to find that Scottish law is different from English statute. When they discover that, they back off, leaving people high and dry in Scotland.

I have had to deal with numerous cases in Scotland involving English claims handlers, who are governed by the Law Society of England and Wales, not by the Law Society of Scotland. We are beginning to get a number of claims by people who have missed the boat simply because they thought that they had made the claim only to find that they were time-barred because they dealt with claims handlers at that point. In dealing with the compensation legislation, I hope that the Minister will examine that problem. Although the Bill covers England and Wales, I hope she will act accordingly to ensure that Scotland is incorporated into it.

Photo of Kevan Jones Kevan Jones Labour, North Durham

My hon. Friend makes a good point, and it takes us back to the fundamental point raised by my hon. Friends the Members for Sherwood (Paddy Tipping), for Bassetlaw and for Barnsley, West and Penistone. The people we are dealing with—the consumers—are not used to dealing with solicitors. When they are phoned up or doorstepped, they think that by filling in a form with a claims handling company, they are registering a claim. We cannot blame them for thinking that because some of the forms are in legalese and look like legal documents to the layman. When people are left high and dry by these companies, they have no legal redress at all. I am interested to know what redress those individuals will have under the provisions. If a solicitor makes a mistake by not registering a claim, they have recourse to the Law Society, but claims handling companies are not covered.

There will be situations in which people set up companies simply for the purpose of registering a number of claims and then sell what they can. Perhaps they will stick the more difficult ones in a drawer and forget about them. People have no legal redress in such situations, and it is important that we get clarification on that important point.

Photo of Lembit Öpik Lembit Öpik Shadow Secretary of State for Northern Ireland, Northern Ireland Affairs, Shadow Secretary of State for Wales, Welsh Affairs

What interests me about what the hon. Gentleman says is the impression that some companies give that by simply filling in the form, people can somehow get redress for their grievance. Does he accept that that is because the claims culture, in the context in which he is discussing it, is driven by the profit motive? One does not condemn the companies for that, but it underlines the importance of properly regulating them.

Photo of Kevan Jones Kevan Jones Labour, North Durham

It does, and that it is an important point. These companies are in it for the money. They are not interested in anything else, and in some cases they do not even give any legal advice. They do not really care about that; all they care about is getting a number of forms filled in that they can sell on. The collusion of certain solicitors’ firms with these claim handlers has made the situation more difficult recently by giving people the impression that there are claims to be made.

The hon. Gentleman’s point was also made in the Select Committee report and by the regulator—that the claims culture myth is being built up by such people. They do not do what a lot of solicitors do and what I certainly used to do as a trade union legal officer. When certain people came to see me, I said, “Sorry, you don’t have a claim,” but it is not in the interests of these firms to say that because they want the money. That is what concerns me.

No one should use a claim handling firm in any circumstance: they should go directly to a solicitor to get advice, and they will tell somebody if they do not have a claim. The cases I dealt with concerned asbestos, whereby chest X-rays were taken for individuals. One gentleman came forward, and when I said there was no case because he was not suffering from pleural plaques, he asked, “Why can’t I get any money?” I told him, “Because you’re not ill. You’re not going to die from a lethal disease.” If that case were dealt with by a claims handling company, no doubt it would have sold him insurance and taken him through the entire system.  That would mean two things: first, giving bad advice and building up people’s hopes when there was not a claim, and, secondly, a creating a culture, as referred to by the hon. Member for Montgomeryshire, where claims are made when they should not be.

The regulation of claims forms is long overdue. I welcome the provisions and the Minister’s customer-focus. I hope that she addresses the points that my hon. Friend the Member for Bassetlaw and I raised. We must not allow loopholes or chasms between this legislation and the legal services legislation that lead to people not getting the consumer rights they deserve.

Photo of Bridget Prentice Bridget Prentice Parliamentary Under-Secretary, Department for Constitutional Affairs

This has been a helpful and comprehensive debate. I absolutely and completely agree with my hon. Friend. The whole point of the provisions is that consumer rights come first. That underlines this element of the Bill.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

The Minister said that she completely agreed with the hon. Member for Bassetlaw, who said, if I remember correctly, that he hoped that the introduction of the Bill would lead to the end of the claims handling industry. Does she see that as the objective of the legislation?

Photo of Bridget Prentice Bridget Prentice Parliamentary Under-Secretary, Department for Constitutional Affairs

I wish the hon. Gentleman would not look unnecessarily for negativity. I said—I shall repeat it, because I feel passionately about it—that I agree with my hon. Friend the Member for North Durham that the purpose of the clause is to put consumer rights at the heart of the Bill. That is part of the reason why we introduced this element of the Bill, and I do not resile from it at all.

Let me briefly set out exactly what clause 3 is about. I shall then try to respond not only to the amendments tabled by the hon. Member for North-East Hertfordshire, but to some of the other issues raised. Clause 3 defines “claims management services” and prohibits individuals from providing regulated claims management services without authorisation from the regulator or an exemption by order of the Secretary of State.

Individuals acting in a voluntary capacity are specifically excluded from the scope of the regulation for good reason. We do not want to impose unnecessary burdens on individuals who might offer advice to friends or on those who offer their services on a voluntary basis for not-for-profit organisations. A volunteer in the citizens advice bureau will not be caught by the clause. In this context, an authorised person will be an individual, company or organisation authorised by the regulator. That single authorisation will cover the employees of that company or organisation.

We do not want to over-regulate, so we are very conscious of what the Better Regulation Task Force says on the issues. That is why we have structured the Bill to allow for flexibility and proportionate regulation. We do not want to impose any unnecessary burdens in seriously protecting consumers who might have been disadvantaged by the activities of some claims companies. I have provided Committee members with a draft copy of the order underclause 3(2)(e), and I hope that it has assisted the consideration of this part of the Bill.

Before I deal with the amendments, let me try to deal with some of the issues that have been raised. The hon. Member for North-East Hertfordshire wanted to know how the clause on exemptions would fit in. Those who provide regulated claims management services will be those specified in clause 3(2)(e). Those considered not to need authorisation could therefore be exempted. That would include solicitors, barristers, the not-for-profit sector and trade unions, which we shall come to later.

The hon. Member for North Southwark and Bermondsey joined the hon. Member for North-East Hertfordshire in asking about the use of the word “regulated”. The point of taking a wide definition of claims management services is to ensure that all kinds of service, wherever provided, can be captured. Equally, however, we do not want to regulate areas that do not need it.

The hon. Member for North Southwark and Bermondsey asked for an example of something that would be unregulated. The one that comes to mind is that of a surveyor where a motorway is being constructed. There is evidence of surveyors speaking to people in the vicinity about whether they need to make a claim for blight. There is not a serious problem at the moment, but the clause would allow us to bring such things into regulation should that be necessary later. That is the point of doing so much through the secondary legislation route. I hope that that ensures that the regulations targeted only at those who need to be regulated. We followed the approach used by the Financial Services Authority in regulating its remit. Our approach also has the benefit of legal certainty, rather than leaving the matter to the courts.

I turn to the debate about the National Accident Helpline. To clarify, as there seemed to be confusion throughout the Committee about the helpline’s purpose and how it is funded, it is a claims management company. It captures claims and refers them to solicitors. It is involved in claims handling activities and it has a network of solicitors but it is not regulated by the Law Society. It also sells after-the-event insurance and can arrange loans for claimants to pay their insurance premium. Those are the things that some of my hon. Friends have serious concerns about.

The helpline is funded by referral fees from solicitors and by the commission that it gets from the insurance and the loans. It would be regulated under the scheme. I am perfectly prepared to accept what the hon. Member for Kettering said—the helpline has been willing to work with us on the issue and it would have no worries about being regulated under the scheme, as it believes that it is providing a high-quality service and therefore does not think that it would be removed from the system on the grounds that it was undermining it. It is a good example of the sort of organisation that would be regulated under the clause.

Of course, anyone who is regulated under the clause and does not meet the standards that the regulator sets can be removed from the scheme and other penalties may be attached to them, including up to two years’ imprisonment. We are not thinking of the issue as light regulation, as heavy burdens are placed on companies to ensure that they raise their game and their standards.  

Photo of Kevan Jones Kevan Jones Labour, North Durham 2:45 pm, 22nd June 2006

I am grateful for that clarification. The helpline is a claims handler like any of the other cowboys in the industry. Does the Minister agree that it is important that organisations such as the National Accident Helpline make it clear to clients that they are not solicitors but middlemen and that they also sell insurance? It is important that the consumer knows that, so that he or she has the choice to go directly to a solicitor rather than going through that middleman.

Photo of Bridget Prentice Bridget Prentice Parliamentary Under-Secretary, Department for Constitutional Affairs

My hon. Friend makes an important point and one that was raised before. He mentioned it in his contribution. An important feature of the authorisation criteria is that the claims management company will have to provide details about the information that it provides to claimants. That information will be useful to the regulator if complaints are received about fees charged. We do not intend that the regulator should be prescriptive about the level of fees, but it should be transparent and clear, in particular about any free services and whether charges are met under another scheme. Any complaints from a claims company that does not comply with that requirement would be in breach of the terms and conditions of the authorisation and would therefore face disciplinary action.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I have a point about the notion of free legal advice. Will the Minister agree that if a claims handling company is giving free legal advice, it should be exactly that—it must be given by a qualified individual who is on a par with someone regulated by the Law Society and not just by a law graduate who has no experience? It is clear that I, and others, could set up a claims handling company with people who had a law degree but had not practised for many years, and give free legal advice, which would be of no use in helping that individual.

Photo of Bridget Prentice Bridget Prentice Parliamentary Under-Secretary, Department for Constitutional Affairs

My hon. Friend makes an important point. The information given to the client must make it absolutely clear what the client will receive from the company. In his speech, he also talked about the investigation of allegations and the regulator will be able not only to investigate complaints but to take the initiative himself and carry out audits and investigate allegations from individual claimants, MPs, or anyone else. That will include the powers to seize information and documents and to obtain a warrant to enter and search premises, and there are strong controls over what will be done. Of course, the regulator will be able to enforce clear and effective sanctions.

My hon. Friend the Member for Bassetlaw wanted to raise the issue of the confusion between Vendside and the Union of Democratic Mineworkers. Again, I agree that there has to be clarity for the consumer about who is dealing with their claim and whether that person is regulated. Under the proposals in this part of the Bill, Vendside would require authorisation and would have to comply with the regulators’ rules. The model rules that we have already published state that authorised businesses must ensure that all information given to the client is clear, transparent and not misleading. If Vendside is not capable of doing that, it would not get authorisation.

Photo of John Mann John Mann PPS (Rt Hon Richard Caborn, Minister of State), Department for Culture, Media & Sport

Would Indiclaim, described as the marketing arm of the UDM, be similarly regulated as a claims handler?

Photo of Bridget Prentice Bridget Prentice Parliamentary Under-Secretary, Department for Constitutional Affairs

I want to come to the issue of marketing companies. Companies will not be able to evade regulation by setting themselves up as marketing companies. Authorised companies will be required to declare to the regulator any links that they have with parent or subsidiary companies and any previous companies that the directors have worked for.

My hon. Friend the Member for Bassetlaw raised the issue of a company putting itself into voluntary liquidation in order to avoid anything. Effective enforcement is essential to prevent any company evading regulation. There will be compliance checks and audits that can flush out any early concerns about a business that might be failing. The regulator does not have to wait for an audit to take place but can take action to suspend or cancel authorisation if he feels it is appropriate to do so.

In dealing with complaints, it should also be said that authorised persons will have to set up an internal complaints procedure. Where the consumer feels that their complaint has not been handled appropriately or to their satisfaction under the internal procedure, they can refer the matter directly to the regulator. Again, if the investigation of that complaint uncovers a breach of the rules, that could result in disciplinary action, including suspension or cancellation of authorisation.

My hon. Friend also talked about the collusion between solicitors and claims handlers. There is nothing to stop solicitors and claims handlers from working together, but if they are providing regulated claims management services, solicitors will be regulated by the Law Society and the claims handlers by the regulator. We will ensure that all regulators work in a joined-up fashion so that they address all the abuses, if there are any, and safeguard consumer rights. The provision is an interim measure because, as the hon. Member for North Southwark and Bermondsey has mentioned, once the Legal Services Bill becomes law that regulation will come under the auspices of the legal services board.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

I should have waited for the Minister to finish what she was planning to say. I have been thinking of the one case that she gave as an argument for keeping in the word “regulate” and resisting the amendment, which was that of a surveyor.

Surveyors would be governed by their professional code of conduct and their organisation. They would have to be members of their professional body and therefore would have been covered. If a local authority officer comes and gives advice to someone who is also talking about the prospect of a claim if a building gets put up or if a road comes past them, would they fall outside the regulatory processes? Would there be no way in which things said by people employed with public money to do a public job would be covered by this legislation? I have not yet heard a very persuasive argument for resisting the amendment, only one little example that I think is covered in other areas anyway.

Photo of Bridget Prentice Bridget Prentice Parliamentary Under-Secretary, Department for Constitutional Affairs

In the case of surveyors, there is a suggestion that some are going out and looking for individuals and giving them advice. However, the hon. Gentleman is right that they should be covered by their own professional organisation. What I am saying is that if they started to act as claims handlers, we would need to look at whether or not they would be brought into legislation. As far as local authorities are concerned, if a local authority was giving bad advice, there are other ways that people can deal with them through the local authority ombudsman. That would be the best way to look at that. However, if I may, I will return to that.

Finally, I will turn to my hon. Friend the Member for Midlothian (Mr. Hamilton). We are in discussions with the Scottish Executive about the way that we deal with things in Scotland. I have to say that, luckily for Scotland, there does not seem to be the same problem with unregulated claims that we have in England. However, it would be possible for the Scottish Executive to follow similar lines to the ones that we are using here, if they felt that that would become an issue. Claims management companies operate much less extensively in Scotland and Northern Ireland than they do in England and Wales. In Scotland, that is partly because of a different legal system.

Photo of David Hamilton David Hamilton Labour, Midlothian

To clarify, there is a specific problem in Scotland about ex-coal miners. In my own area, I do not have the same problems as have been exhibited by my colleagues. However, there are many cases in Ayrshire, Lanarkshire and Fife in which people have been stripped of money to which they feel entitled. It does happen. However, Scotland has a population of 5 million against England’s 50 million; that is why it is less.

Photo of Bridget Prentice Bridget Prentice Parliamentary Under-Secretary, Department for Constitutional Affairs

I take what my hon. Friend says. I have just found what I needed to know about surveyors. There is limited evidence that there are surveyors who have been effectively acting as claims handlers. They liaise with the Highways Agency to seek compensation for people whose homes might be blighted or who are near newly constructed motorways. The compensation is supposed to reflect the loss of value suffered by the properties.

To be fair, we are not aware of any consumer being disadvantaged by that activity. If it came to light that consumers were being disadvantaged, we have the order-making power that would bring that under the regulatory net.

Photo of Oliver Heald Oliver Heald Shadow Secretary of State (Justice), Shadow Secretary of State 3:00 pm, 22nd June 2006

Why would that not be covered by the hon. Lady’s definitions section, which mentions giving advice in relation to the making of a claim? Why does she need the extra, bolt-on bit about regulating and having an order-making power? Why not just cover everybody in the claims handling business? Then, if she wants to exempt those to whom other regulatory regimes apply, fine.

Photo of Bridget Prentice Bridget Prentice Parliamentary Under-Secretary, Department for Constitutional Affairs

The reason not to target everybody is that we want targeting to be proportionate. That is why we deliberately picked out the five areas where we  think that there are problems at the moment. The potential for the regulatory net is very wide. However, this way we have flexibility to ensure that we can act quickly to impose regulation in areas where there is an immediate problem, and to avoid overregulation where there is not a problem.

We have consulted extensively with stakeholders, including APIL, the Association of British Insurers and the Criminal Injuries Compensation Authority, and with our own legal services consumer panel, which involves Citizens Advice, the National Consumer Council, the Office of Fair Trading, and Which?, all of which have welcomed what we are doing—as has everyone who has advised us. That is why we want to make it a matter of targeting.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

I am just working out that the Minister is now saying that she wants to include the word “regulated” because the Government have five initial groups in mind: personal injury, surveying, employment, criminal injuries compensation, and compensation for the mis-selling of financial products. Will she tell us whether she is aware of any other claims management activities in existence, in relation to which she does not believe there to be abuse, so that they would fall outside the system? I am also intrigued as to why Scotland and Northern Ireland do not have the same issue. A note later would be helpful.

Photo of Bridget Prentice Bridget Prentice Parliamentary Under-Secretary, Department for Constitutional Affairs

On the second point, part of the reason why Scotland does not have the problem is because of the different Scottish legal system. Our advice from Scotland is that there is not the plethora of claims management companies in Scotland that there is in England.

Photo of Bridget Prentice Bridget Prentice Parliamentary Under-Secretary, Department for Constitutional Affairs

Maybe, and no doubt when they do, we shall have the opportunity and the flexibility to regulate appropriately. One reason why I cannot yet cite examples is that, to be honest, we do not really know what is out there, which is why we need flexibility. We do not want to overregulate, but if a problem arises we shall have the flexibility to regulate in secondary legislation.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I know that my hon. Friend has tried to cover all the points that were mentioned. One point that I mentioned related to claims handlers who register claims but do not pass them on to a law firm, so that the claim goes out of time. How would claimants who suffer as a result of that be redressed? It is a detailed point, but perhaps if she cannot give an answer now she will reflect on it and respond in writing. It is an issue of concern to me and many other Members who have dealt with claims handling companies. Claims fall out of time either because companies go bust or because there is simple neglect in passing on claims that are time-limited in law.

Photo of Bridget Prentice Bridget Prentice Parliamentary Under-Secretary, Department for Constitutional Affairs

I understand what my hon. Friend is saying. I need to reflect and come back to him on it,  but I suspect that it is something that we should examine in terms of the regulation.

On the details of the amendments, I agree with the hon. Member for North-East Hertfordshire and the principle behind his amendment: all claims companies providing claims management should be captured. However, I hope that the definition in clause 3, in its entirety, covers his concerns.

I understand that the purpose of amendment No. 18 is to ensure that representation that is not strictly legal, such as the mis-selling of endowment policies—that is the most obvious example—is covered. Again, I think that the wide definition in clause 3 does what is intended and applies the description “claims management services” to any advice or service in relation to the making of the claim. So the definition includes all the aspects of making a claim.

For the avoidance of any doubt, however, the clause also specifies that the provision of services could include

“the provision of services by way of or in relation to legal representation”.

That does not mean that other representation is excluded. I would argue the contrary. The words “in particular” indicate that the list in subsection (3)(a) is not exhaustive so it is unnecessary to mention activities that would obviously fall within “the provision of services”. That includes representation that is not necessarily legal.

Amendment No. 19 is also unnecessary, again because I think that the definition in clause 3 covers the concerns and has been constructed carefully to cover organisations whether or not they are to receive payments. That therefore would apply to companies acting as a call centre that simply take details about claims from consumers and pass them on to a solicitor for a fee. As I have said extensively, the definition in clause 3 is wide to ensure that all related activities are covered. I ask the hon. Gentleman therefore not to press the amendment.

Briefly, the hon. Gentleman mentioned the activities of rehabilitation farmers. There is still some dispute in the industry as to whether there is as yet such a thing as a rehab farmer, but if credit rehabilitation farmers act in the context of making a claim or giving advice, those services would fall within the regulatory ambit of the Bill. Those providing such services would be caught and would have to seek authorisation.

The debate has been extensive and has shown the need for clause 3. There are unscrupulous people out there undermining consumer confidence. I think that the way in which we have constructed the clause provides the wide definition needed to ensure that claims farmers are caught and regulated when necessary. Equally, if people are not involved in any of the activities where we feel that there are problems, they will not be overregulated. That is in accordance with the Better Regulation Commission principles. So I ask the hon. Gentleman to withdraw his amendment and I ask the Committee to accept the clause.

Photo of Oliver Heald Oliver Heald Shadow Secretary of State (Justice), Shadow Secretary of State

On the basis of the Minister’s assurances, and in order to give me a moment to research the role of surveyors, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Oliver Heald Oliver Heald Shadow Secretary of State (Justice), Shadow Secretary of State

I beg to move amendment No. 17, in clause 3, page 2, line 9, after second ‘services', insert

‘offered in England or Wales'.

The amendment attempts to ensure that if such ingenious claims management services try to operate from outside the United Kingdom, services within England and Wales will be regulated. I understand that the Claims Standards Council on its website has already flagged up the problem of companies and individuals operating from bases in places such as Fuengirola and South Africa. I should be grateful to hear the Minister’s response.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Shadow Lord Chancellor and Shadow Secretary of State for Justice, Party Chair, Liberal Democrats

I have just one question on that. I can see the argument, but how will one know that they are operating from Fuengirola or the Cayman Islands? The public find it difficult enough to find out whether their lawyers are legally qualified. The chances of their discovering whether they come from Tenerife or Timbuktu are even more remote.

Photo of Bridget Prentice Bridget Prentice Parliamentary Under-Secretary, Department for Constitutional Affairs

I understand the intention behind the amendment, and it is perfectly reasonable. All that I would say to the hon. Member for North-East Hertfordshire is that while there is nothing to prevent a company from basing itself outside the jurisdiction and continuing to offer regulated claims management services, it still has to be authorised to do that; otherwise it is committing an offence and is liable to prosecution. We could get into a debate about extradition, but I do not wish us to do that here, and my hon. Friend the Member for Worcester (Mr. Foster) would have a horrible look on his face if I went down that road. However, I can say that they would have to be regulated. We would also have the power to ask other providers to co-operate in not dealing with unauthorised providers. It would not be in the Law Society’s interests, for example, for lawyers to deal with unauthorised providers.

Photo of John Mann John Mann PPS (Rt Hon Richard Caborn, Minister of State), Department for Culture, Media & Sport

There have been examples of offshore insurance companies—from the Isle of Man, for example—in recent times. Does that mean that a claims handler and a solicitor will need to declare to their regulators whether they have offshore accounts? If not, why not?

Photo of Bridget Prentice Bridget Prentice Parliamentary Under-Secretary, Department for Constitutional Affairs

I am not sure that I can give my hon. Friend a comprehensive answer to that question. I suspect—I shall check—that Financial Services Authority rules cover it. If they do not, I shall ensure that I come back to him with a clearer answer.

Photo of Oliver Heald Oliver Heald Shadow Secretary of State (Justice), Shadow Secretary of State

I think that the Financial Services and Markets Act 2000 specifically extended the jurisdiction out to the Isle of Man and the Channel Islands. The hon. Member for Bassetlaw raises the intriguing possibility of having what amounts to an alternative business structure combining insurance, claims  handling and solicitors’ activities based in the Isle of Man. What would be the Minister’s response to that? I do not trust the people involved in that area.

Photo of Bridget Prentice Bridget Prentice Parliamentary Under-Secretary, Department for Constitutional Affairs

I am not a financial expert by any means, so I am loth to comment. However, I undertake to get back to the Committee on that question, because it is important and we would all want clarification as to what would happen in the case of somebody with offshore activities.

Photo of Oliver Heald Oliver Heald Shadow Secretary of State (Justice), Shadow Secretary of State

Perhaps the Minister would write to the Committee before Report to explain what happens in terms of the Isle of Man, the Channel Islands and any other obvious problem areas in the European Union. That would be extremely helpful.

Photo of Oliver Heald Oliver Heald Shadow Secretary of State (Justice), Shadow Secretary of State

On the basis of that very constructive response from the Minister, I shall not seek to divide the Committee. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 ordered to stand part of the Bill.