These two amendments touch on an issue that would have been covered had I moved amendment No. 16. That is the need to get on with this, and to introduce some robust arrangements that will act relatively quickly in this area. Amendment No. 25 says that the FSA should be the regulator. I tabled this slightly probing amendment because the FSA is the most appropriate body to regulate the claims management industry. It may be difficult to persuade the FSA to take it on, but I wonder whether that is the end of the matter. Baroness Ashton of Upholland said in the other place that the FSA does not wish to take it on, but is that the end of it?
I suppose that my point is a bit more fundamental. Who tells the regulator what it should and should not do? I hate to say it, because I am sure that the Minister does not look at the matter entirely in this way, but it seems as though the FSA has been allowed to say, “Sorry, chum. Okay, we do the insurance industry and a lot of this work is, in effect, in the insurance sector—after-event insurance—but we are not prepared to take it on.” Who governs the country? Is it Ministers or Parliament who say what happens or is the FSA entitled to pick and choose? If Ministers genuinely do not feel that it is appropriate for the FSA to do this it would be a different matter, but if it is just that it has rather a lot on and it would be inconvenient to take up such institutions, I wonder whether we should accept that and let it get away with that.
Amendment No. 20 would impose a duty to appoint a regulator, rather than making it a permissive power. Ministers have searched the regulation world high and low looking for a regulator to take this function on. It seems that, in the interim, we will be left with the Lord Chancellor, plus a trading standards organisation. Is the Minister able to give us any more idea than previously about what the final position will be? From what I have read in the draft Legal Services Bill, the Legal Services Commission is not to be the front-line regulator; it has a more supervisory role, overseeing the activities of organisations like the Bar Council and the Law Society. Its role is, in a sense, to give those organisations a licence or supervise them, not to do the job. What is the Minister really proposing as the long-term solution? Does he envisage a separate front-line regulator in this area? Clearly, it cannot be the Claims Standards Council, because that does not seem to be a robust or effective body.
These two amendments are trying to clarify why the FSA, which deals with insurance, is not the regulator, why the Minister will only have discretion to appoint a regulator and what the final outcome is supposed to be.
On amendment No. 25, the Minister knows that our view is that the FSA, although a prospective candidate, would not be the logical regulator—whether it has said that it wanted to do so is a separate question—and that the logical regulator is the regulator in the wings, coming through in the draft Legal Services Bill. I accept that it is better to have an interim arrangement and then hand it over to that regulatory body, because there is a closer affinity between the services that lawyers purport to offer and these sorts of services, rather than those currently regulated by the FSA and these services.
I fully take the hon. Gentleman’s point that that structure may be robust, but within it the Legal Services Commission sits at the top, overseeing the regulatory activities of the Bar Council, the Law Society, the Institute of Legal Executives and various other bodies in the legal world. At the moment there is no front-line regulator for claims handlers and, although the structure will be in place, that is still a live issue, is it not?
I accept that. My fairly spontaneous response is that there will be a fourth satellite to deal with the industry, coming under the general umbrella of the new legal services board but not dealing with the other three distinct professional groups.
Will ongoing consumer complaints be immediately admissible to the regulator, and will the regulator be given guidance on relevant Law Society policy decisions made over the past year or two that could provide good guidance on how the regulator should deal with complaints against claims handlers?
The question of who is the regulator must be followed by the question of who pays for the regulator. The clause allows the Secretary of State to pay grants to the regulator, and in another place Baroness Ashton has stated that she envisages an initial grant of £750,000 to launch it. The regulator will have the power under paragraph 7 of the schedule to charge
“fees in connection with applications for, or the grant of, authorisation” or
“periodic fees for authorised persons”.
Those are considerable powers, and I would welcome further assurances from the Minister about the level of fees envisaged.
The matter of funding should be about having a level playing field for the fees involved and ensuring that all those covered by the regulations pay for the regulator rather than just some of the participants. We need further to explore how to set the level of fees, as it is likely that there will be different levels depending on a number of factors, such as turnover, type of activity and so on. In another place Baroness Ashton stated that she believes the number of players in the market will drop dramatically once a system of regulation is introduced. I am sure that all members of the Committee would welcome that, even if we approach the matter from different perspectives. It means that there can be no certainty about the level of fees or whether the system can be self-funding.
I appreciate the concerns that the hon. Gentleman has expressed about who should regulate. I said on Second Reading, and repeat now, that we have decided that the DCA should be the regulator for a couple of good reasons. First, as the hon. Member for North Southwark and Bermondsey said today and made clear on Second Reading, it is an interim solution pending the wider reform of legal services. In the longer term it would be ideal to have an organisation independent of Government to regulate the service, but we need to act quickly and effectively to tackle the abuses that consumers are experiencing. That is why the Secretary of State being regulator fits the bill.
We considered a number of existing regulators, but none proved suitable. The hon. Member for North-East Hertfordshire mentioned the Claims Standards Council as one example. Irrespective of the desire of some existing organisations to take on the role, we did not believe that the Financial Services Authority, with its existing responsibilities, was a particularly suitable candidate, and the same might be said for the Office of Fair Trading. Both have tightly defined remits and it would not be appropriate to distract either organisation from its core regulatory work.
The hon. Member for North Southwark and Bermondsey said on Second Reading and reiterated today that the industry should be regulated by what he referred to as a member of the family of regulating legal services. Like him, I believe that claims management services are much more akin to legal services than to financial ones. Yes, sometimes claims management companies carry out insurance and so on after the event and, in that case, they would be regulated by the FSA. However, as for claims management, they should be regulated by the Secretary of State. The hon. Gentleman was right. When companies undertake that type of service after the event, they should be regulated by the FSA, but it only gives authorisation in respect of the insurance activity, not the claims management activity. In claims management, profits are made from the fees that would come from solicitors, so it seems more appropriate that such matters are regulated under the system.
Baroness Ashton of Upholland had discussions with the Economic Secretary to the Treasury when the Bill was discussed in the other place. They agreed that the FSA should concentrate on doing what it is good at, which is regulating financial services. We have invited expressions of interest from trading standards departments to run the monitoring and compliance of the function and I hope, if I can, to give members of the Committee more details about the regulatory regime before the Bill leaves the House and, indeed, give them details about the appointment of the appropriate senior individual in the DCA to lead the implementation.
Does the hon. Lady accept that, when the legal services board is set up, it should be completely independent of the Government? It should not have any conflicts of interest. If the Secretary of State is to be one of the regulators underneath the legal services board, which he has appointed, does she agree that there would be a problem of independence, conflicts of interest and the like? Is it not the case that there must be an ultimate solution that has some independent regulator under the legal services board?
Yes, I agree absolutely. Of course, the legal services board will be able to regulate directly if it chose to do so. We will be looking carefully at that matter to reach a suitable long-term solution.
When the impact of the regulation of the market becomes clear and the wider reforms of the legal services are further advanced, we might be able to make a much better decision about the longer-term solution for delivery regulation within the framework. On that basis, I ask the hon. Gentleman to withdraw amendment No. 20.
Amendment No. 25 suggests that the Secretary of State could designate only the FSA as regulator. I have already covered the reasons why that would not be appropriate. I say to my hon. Friend the Member for Bassetlaw that clause 8 will allow for transitional provisions and that will, for example, give the regulator discretion to investigate complaints in respect of conduct that had started before the Bill becomes law.
I say to the hon. Member for Kettering that we will be consulting on the formula for setting the level of fees. We envisage that it is likely to include a one-off application fee and an annual fee based on turnover. Obviously, that will be proportionate. We have the funds in place to ensure that the regime can be set up properly and that the consumer can benefit immediately from the Bill when it is enacted.
I will certainly consider that. One of the problems regarding the extent of an investigation in the transition period is that there might not be appropriate records of any action taken by the claims management company, but I shall certainly consider the Law Society’s role and whether we need to make anything clearer so that the aspect that my hon. Friend rightly raises can be covered in the transition.
‘, and ensuring maximum clarity and simplicity of all relevant documents,'.
This is a very simple amendment to try to ensure that the regulator, if we are to have one, does the most important job of all, which is to ensure that anybody providing information provides it as clearly as possible. We all spend our lives complaining that anything that is or could be legal or results in a right, an entitlement, a claim, an action or damages is often governed by small print. That is the bugbear of insurance policies: people claim insurance and are suddenly told, “I’m sorry, you’re excluded,” because of the small print.
I want to ensure that we say as clearly as possible that the documents that issue from the industry should have the maximum clarity and simplicity. It is a sort of plain English request, and the amendment would ensure that it happens. There is a terrible danger when we get into the bureaucracy that a regulator concerned about regulating the things that matter behind the scenes will not be concerned about creating simple processes.
If bright and rich people are caught by people trying to flog claims, they will survive relatively untrammelled: the financial consequences will be less serious for them, and they will be able to cope. If they are very bright, it is on their own head. The people whom we need to protect are the vulnerable: those who are not so bright, and certainly not rich, who discover that they have been caught out.
I hope that the Minister, whether or not she accepts the exact wording, will accept the burden of the case behind the amendment and will consider putting similar wording into the Bill. I am not one of those who seeks to make Bills longer rather than shorter, but it must be a clear duty. We are concerned that the industry should tell people what it means so that they can understand it and there is no confusion.
I have some sympathy with the amendment. It is obviously a good idea that there should be as much clarity as possible, and simplicity is always a good thing. I am put in mind of the new Coroners Bill, the draft of which has been published with a plain English explanation next to the legal provisions. We should try to encourage things to be written in a way that people can understand.
If claims handlers have a role, part of that role is access to justice: explaining to people who might not realise it that they have a claim. There have been plenty of examples of that not being done in a straightforward way, and I am one of the first to say that the area should be properly regulated, but if claims handlers are talking to, communicating with or giving documents to people, it is a good idea for those documents to be simple and straightforward and to have the clarity suggested by the hon. Gentleman.
I have every sympathy with the amendment. I totally agree with the hon. Member for North Southwark and Bermondsey on the principle behind his amendment. I do not think, though, that it is necessary to put it into the Bill.
The regulator is required under clause 4(2)(c) to promote the interests of persons using regulated claims management services. The provision implicitly includes advice and guidance for those wishing to pursue a compensation claim in the regulated areas. It is right that consumers have clear and relevant information on the claims process and what they can expect from authorised persons.
We will produce a leaflet aimed at those using claims management services. It will be written in plain and unambiguous terms, clearly setting out the obligations of those working in the regulated areas to provide details of the standard of services that they will provide. The leaflet will also include information on charges, cooling-off periods and consumers’ routes of redress if they have any cause for complaint. We also intend that the authorised persons should provide information and documents that are clear and easy to understand. The model rules that we published in March state that all information given to the client should be clear, transparent, fair and not misleading.
The hon. Member for North Southwark and Bermondsey raised the issue of plain English, and I totally endorse it. We all support the example that the hon. Member for North-East Hertfordshire gave of a plain English explanatory note to the Coroners Bill, and that is what we want in all our communication with the public, so that the legal system and legal services are more accessible to them.
I hope that hon. Members agree that the draft regulations already sent to them are a good example of plain English. Having said that, I have made the regulations a hostage to fortune, and someone will find some gobbledegook in the middle of them and come back to me about it. I endorse the principle behind the amendment, but the Bill does not need it and I ask the hon. Gentleman to withdraw it.
In a moment when I have nothing better to do, I shall look at the rules to see if I can find anything, and if I do, I shall bring it to the Minister’s attention. I accept her statement that absolute clarity is dealt with in the rules. Without troubling her to rise again, when the regulator is set up, which might be in the Department at first, will she be kind enough to write to them pointing out that the issue was raised and that she, on behalf of the Government, supported the view that there should be clarity? With that additional authority on behalf of the Committee and the Government, I am very happy to beg to ask leave to withdraw the amendment.
Again, I very much accept the principle that the hon. Gentleman advocates in the amendment. The regulator should have some independence from the industry that is being regulated, and that would apply if the power to designate an existing body as a regulator was used. The existing provision, subsection (2)(b), is an adequate safeguard. We must retain the flexibility to designate a regulator, and in the longer term, there might be a body that is suitable for that designation. As we said during an earlier debate, once the legal services board is set up and the power to designate a regulator is transferred to it, there might be an opportunity to designate a regulator. I support the hon. Gentleman on that point.
I could not agree more that commercial interests should not influence the regulator, but the existing requirement to avoid conflicts of interest will ensure that and provide clear consumer protection. On that basis, I hope that the hon. Gentleman will withdraw the amendment.
I have one question to put to the Minister. I am conscious that we are coming to the end of our enthralled attention to the matter for the day. It is a question that I might have asked under the previous clause but can equally well ask under this one. I am happy for the Minister to reply later.
The Minister identified the five areas that the regulator will be asked to regulate on. I listed them earlier. Will she ensure that they use the same definitions as solicitors have to use when they advertise their business? Nowadays solicitors can advertise. They do so by category of subject: welfare law, housing law, employment law and so on. Can we ensure that there is consistency of definition, so that if there is a claims regulation business to do with, for example, employment or criminal injuries compensation, it uses the same list of services that one can find among the list of services that solicitors offer? That may need negotiation with the Law Society. I am not sure whether the society is governed by regulation on how legal services are advertised. It seems to me that there is logic in having consistency between the two.
Responding to that question gives me the opportunity to introduce my friend Mrs. McGlumshie. Officials will have heard me speak of her. She does not exist and is a figment of my imagination but becomes very alive when officials use language that I do not think she would appreciate. In response to what the hon. Gentleman said, if we can get consistency between what is in the Bill and what is put on advertising services, we will work towards that. I will ask the Law Society to discuss with us how we can do that.
This has been an important debate. It is an important part of the Bill. It sets up a system that will give consumers the confidence and the redress that they need where claims management goes wrong. I am sure that every Member on the Committee will endorse the fact that we are moving in the right direction in putting the consumer at the heart of the redress system.