Cold calling about claims management services

Financial Guidance and Claims Bill [Lords] – in a Public Bill Committee at 10:30 am on 6th February 2018.

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“(1) The Privacy and Electronic Communications (EC Directive) Regulations 2003 (S.I. 2003/2426) are amended as follows.

(2) In regulation 21 (calls for direct marketing purposes), after paragraph (5) insert—

‘(6) Paragraph (1) does not apply to a case falling within regulation 21A.’

(3) After regulation 21 insert—

(1) A person must not use, or instigate the use of, a public electronic communications service to make unsolicited calls for the purposes of direct marketing in relation to claims management services except in the circumstances referred to in paragraph (2).

(2) Those circumstances are where the called line is that of a subscriber who has previously notified the caller that for the time being the subscriber consents to such calls being made by, or at the instigation of, the caller on that line.

(3) A subscriber must not permit the subscriber’s line to be used in contravention of paragraph (1).

(4) In this regulation, “claims management services” means the following services in relation to the making of a claim—

(a) advice;

(b) financial services or assistance;

(c) acting on behalf of, or representing, a person;

(d) the referral or introduction of one person to another;

(e) the making of inquiries.

(5) In paragraph (4), “claim” means a claim for compensation, restitution, repayment or any other remedy or relief in respect of loss or damage or in respect of an obligation, whether the claim is made or could be made—

(a) by way of legal proceedings,

(b) in accordance with a scheme of regulation (whether voluntary or compulsory), or

(c) in pursuance of a voluntary undertaking.’

(4) In regulation 24 (information to be provided for the purposes of regulations 19 to 21)—

(a) in the heading, for ‘, 20 and 21’ substitute ‘to 21A’;

(b) in paragraph (1)(b), after ‘21’ insert ‘or 21A’.”—

This amendment inserts a provision into the Privacy and Electronic Communications (EC Directive) Regulations which prohibits live unsolicited telephone calls for the purposes of direct marketing in relation to claims management services except where the person called has given prior consent to receiving such calls.

Brought up, and read the First time.

With this it will be convenient to discuss new clause 9—Ban on unsolicited real-time direct approaches by, on behalf of, or for the benefit of companies carrying out claims management services and a ban on the use by claims management companies of data obtained by such methods—

“(1) The FCA must, within the period of six months beginning with the day on which this Act comes into force, introduce bans on—

(a) unsolicited real-time direct approaches to members of the public carried out by whatever means, digital or otherwise, by, on behalf of, or for the benefit of companies carrying out claims management services or their agents or representatives,

(b) the use for any purpose of any data by companies carrying out claims management services, their agents or representatives where they cannot demonstrate to the satisfaction of the FCA that this data does not arise from any unsolicited real-time direct approach to members of the public carried out by whatever means, digital or otherwise.

(2) The FCA must fix the appropriate penalties for breaches of subsection (1)(a) and (b) above.”

This new clause would require the FCA to ban cold calling for claims management companies. Critically, it would also ban the use by these companies of any data obtained by cold calling. Together, these provisions would make cold calling for CMCs illegal and cut off the revenue stream to cold callers, by preventing CMCs using their data. The new clause would also allow the FCA to set the appropriate penalties for any breach of either of these bans. The bans would come into effect with the passing of this Bill.

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury

Government new clause 6 is about cold calling made for the purposes of providing claims management services. As Members will be aware, that topic has been discussed at length during the passage of the Bill. The Government have listened to the debates closely and committed in the other place to table an amendment that would restrict cold calls made by claims management companies. The new clause makes good on that commitment.

Calls from claims management companies and other entities are not merely a source of irritation, but can result in extreme distress to those answering the calls, especially the most vulnerable in our society. As the Government have stated in previous debates, we have forced companies to display their calling line identification when they call. We have made it easier to prosecute those involved in making the calls by removing the threshold for financial penalties to be administered and we have strengthened the Information Commissioner’s powers for imposing fines on wrongdoers.

In addition, the claims management regulator and the Solicitors Regulation Authority have taken action against claims companies and solicitors that have breached tough direct marketing rules, including in relation to accepting illegally generated leads. However, we appreciate that we need to do more to truly eradicate the problem. New clause 6 seeks to ban cold calls made for the purposes of direct marketing in relation to claims management services, except where the person called has given prior consent to receiving such calls. The new clause will insert a provision into the Privacy and Electronic Communications (EC Directive) Regulations 2003, which govern unsolicited direct marketing.

The new clause will ensure that any call, whether it is from a claims management company, an individual or a lead generator, made for the purposes of direct marketing in relation to claims management services, is an unlawful call unless the receiver has explicitly consented to that call being made to them. The new clause takes the onus away from the individual to opt out of such calls being made to them—by signing up to the telephone preference service, for example—and puts the responsibility back on the organisation and its due diligence before making such calls.

There are complexities in legislating, including those related to navigating EU frameworks. However, the Government are convinced that the new clause will have the effect of making unwanted calls from claims management services unlawful.

Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party

Is there not a concern that, having given consent to be phoned once, an individual might then be subject to a series of unwanted phone calls? One could imagine a situation in which an initial call is wanted by one of our constituents, but a company takes advantage of the permission to make a series of unwarranted further calls by arguing that it has the legal power to do so. What would happen in that situation?

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury

I will need to write to the hon. Gentleman on the mechanics of what can be done subsequently and how quickly and am happy to do so as quickly as possible.

Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party

I apologise for intervening again, but I am thinking of an elderly constituent. One hears of scams and constituents being taken advantage of. How do we protect the individual who genuinely wants information and perhaps gives permission once, but then, perhaps because of their age or infirmity or whatever, they start to get taken advantage of? How do we prevent that?

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury

I am sorry that I cannot give the hon. Gentleman a full service response, but I will look into that issue carefully and keep in mind the specific circumstances he has described, which I will seek to address in my reply.

The new clause is another robust proposal to add to our package of measures to tackle unsolicited marketing calls. I hope they will be gratefully received by consumers across the UK.

Photo of Jack Dromey Jack Dromey Shadow Minister (Work and Pensions) (Pensions) 10:45 am, 6th February 2018

I again seek your guidance, Mr Rosindell. I presume I am able now to address new clause 6 and our new clause 9. New clause 8 has not been selected, but I want to make reference to a couple of points of substance in relation to it, which are relevant to this debate. I seek your guidance on that.

Certainly you may speak to new clause 9. New clause 8 has not been selected, so you must mention it in a way that would be acceptable. You are experienced enough to follow the deft way the hon. Member for Harrow West dealt with it.

Photo of Jack Dromey Jack Dromey Shadow Minister (Work and Pensions) (Pensions)

Perhaps I will emulate the fleetness of parliamentary foot of my hon. Friend the Member for Harrow West.

I will start with a rather bizarre example, which is of no consequence to me personally. Ironically, as we were getting ready for Committee last week, I had a cold call. Out of the blue, the individual concerned said, “I understand you’ve had a car accident,” to which I replied, “Yes. How did you know?” She said, “We’re here to help you.” I then said, “Actually, the car accident was 38 years ago. I pulled up at a pedestrian crossing and somebody ran into the back of my car.” She said, “Oh. I’m not sure we can help you with those circumstances.”

To make a more serious point, the new clause would require the FCA to ban cold calling for claims management companies. Critically, it would also ban the use by those companies of any data obtained by cold calling. Together, those provisions would make cold calling for CMCs illegal and would cut off the revenue stream to cold callers by preventing CMCs from using their data. The new clause would also allow the FCA to set up appropriate penalties for any breach of either of those bans, which would come into effect with the passing of the Bill.

Cold calling is not just a social nuisance; it is often a direct threat to consumers’ financial wellbeing. It is often an invitation—or, more exactly, an inducement—to criminal activity. There are now 2.6 million cold calls every month. That number has increased by 180% in the last year. Whatever the Information Commissioner’s Office is doing is not working, and the problem continues to grow rapidly.

A Which? report from November 2016 found that in 17 of the 18 cities surveyed, more than a third of all private phone calls were nuisance calls, and that four in 10 people in the Scottish sample were intimidated by the calls. Older people are particularly vulnerable to cold callers. I have seen that personally: a 99-year-old woman was cold called four times, and on one of those occasions she suffered serious consequences as a result. Like her, more than 11 million pensioners are targeted annually by cold callers. Fraudsters make 250 million calls a years—equivalent to eight every second. For some, they are a danger. They prey on some of the most vulnerable people in society.

There is sadly no better example of that than the British Steel workers in Port Talbot. When a deal was struck last year to keep Tata Steel UK afloat, members of the £15 billion British Steel pension fund were given the option to shift their assured benefits to the Pension Protection Fund, join a new retirement scheme backed by Tata or transfer to personal pension funds. However, that led to what has been called a “feeding frenzy” at the site, as dodgy introducers preyed on workers, who were more than likely confused about the position of their pension, and may not have had the financial education to make such an important decision themselves.

Photo of Craig Tracey Craig Tracey Conservative, North Warwickshire

We all agree that cold calling is a huge issue, but the problem with the new clause is that it seeks to place the burden of establishing when cold calling is taking place on the FCA. Does the hon. Gentleman agree that that approach would divert resources away from what it should be doing—ensuring that the right business models are in place and that there is better transparency for consumers?

Photo of Jack Dromey Jack Dromey Shadow Minister (Work and Pensions) (Pensions)

Given the evidence of huge growth in cold calling and the consequences that individuals can pay as a result—I will give a tragic example in a moment—our strong view is that the time has come to send an unmistakeable message: a ban on cold calling, full stop.

I will give an example in relation to Port Talbot and the consequences I referred to last week. The Pensions Advisory Service was eventually asked to go down to Port Talbot, some months after the crisis developed. It told me only last week the heartbreaking story of that shift supervisor who had worked for British Steel all his life. He burst into tears and said, “Wrongly advised, I made the wrong decision.” He also said, “I’ll never, ever forgive myself, because the 20 people on my shift who I supervised all followed my example.”

The evidence is powerful and compelling, and I do not think for one moment the Government would argue against it. The question is: what do we now do about it? The introducer concerned at Port Talbot—I have often described them as vultures—bought meals for workers in local pubs and convinced them to transfer their pensions, often into totally unsuitable schemes, where some could have lost up to six figures from the total of their pension.

The Financial Conduct Authority is probing concerns about pension changes that appear to have affected about 130,000 members of the Tata retirement fund. South Wales police are now investigating. That is a clear example from the world of work where dodgy practices have been used, with a negative and often serious impact on workers’ finances. Our new clause would stop all unsolicited real-time approaches by, on behalf of, or for the benefit of companies carrying out claims management services.

There is a huge and rising number of claims for alleged holiday sickness. In July and August 2016 alone, one operator took 750,000 British, 800,000 German and 375,000 Scandinavian customers to Spain. The Scandinavians lodged 39 claims for holiday sickness—essentially, food poisoning—the Germans 114 and the British about 4,000. It is not only pensions where cold calling has had a negative impact. It is also commonplace for claims management companies to use it to harvest cases of road traffic accidents as well as for holiday sickness, where sadly, the UK has become the world leader.

The Association of British Travel Agents said there were about 35,000 claims for holiday sickness in 2016: a 500% rise since 2013. About one in five Britons—19%, or about 9.5 million people—has been approached about making a compensation claim for holiday sickness. As a result, hoteliers in the markets affected are now threatening significant price increases, and some are even considering withdrawing the all-inclusive product from UK holidaymakers entirely. The great majority of honest holidaymakers may suffer as a consequence of the wrongdoing of a small minority, encouraged by cold calling.

A total ban on cold calling would likely lead to a fall in the harvesting of false holiday sickness claims. In the words of Lord Sharkey in the other place a ban is necessary to deal with the “omnipresent menace” of cold calls. Baroness Altmann has said:

“People need protection from this nuisance now. They shouldn’t have to wait still more years for a ban....Direct approaches to people on their mobiles or home phones should have no place in the modern world of business.”

That kind of thing not only costs our travel industry a huge amount and raises prices for everyone but directly encourages criminal acts on a larger scale, and it is welcome that there have been some early prosecutions accordingly.

Photo of Neil Coyle Neil Coyle Labour, Bermondsey and Old Southwark

I thank my hon. Friend for raising the issue and for mentioning ABTA, which is based in my constituency. ABTA has done a huge amount of work on the need to introduce exactly what he advocates, to highlight incidents of people fraudulently trying to make claims, supported by cold calling, while posting on Facebook and elsewhere about how much they have enjoyed their holidays and how boozed up they have been. There is clearly a need to address the issue.

Photo of Jack Dromey Jack Dromey Shadow Minister (Work and Pensions) (Pensions)

My hon. Friend is absolutely right. ABTA is increasingly concerned about the consequences for consumers more generally and for its business in particular. Hoteliers and airlines will suffer unless the growing scandal, at the heart of which is shameless cold calling, is ended.

We already ban cold calling for mortgages, and we welcome the Government’s commitment to introducing an immediate ban on cold calling for pensions, but we should also be able to ban cold calling for CMCs, and include a ban on the commercial use of data obtained by cold calling. An unmistakeable message needs to be sent: “If you cold call illegally we will probably catch you and, in any case, you will not be able to sell or use any data collected illegally”.

Laws can, of course, be broken, which is why the new clause gives the FCA the power to set appropriate penalties for a breach of either of the bans. Since the banning of cold calling for mortgages, technology has made enormous progress, and we hope that the Government will be prepared to go yet further in the next stages. The ban on cold calling for mortgages has made truly massive-scale cold calling illegal, but the scale of cold calling continues to grow. Cold calling can and does have damaging and dangerous consequences, especially for the vulnerable, for the elderly, for workers like those in Port Talbot at a time of crisis in their lives, and for the business community. It is time to call a halt to all of that, which is what new clause 9 would do.

New clause 6 inserts a provision into the European Union’s privacy and electronic communications directive, which prohibits unsolicited telephone calls for the purposes of direct marketing, in relation to claims management services, except when the person called has given prior consent to receiving such calls. The provision will treat the telephone numbers of everyone cold called about claims management as if they were listed on the telephone preference service register. In 2017, the ICO received 11,805 reports of unsolicited direct marketing calls about claims management from people already on the TPS register, in addition to reports of 17,112 calls and texts for which absence from the register was not deemed to represent consent. The Government amendment will simply add more cases to the yearly total—28,917 in 2017—and will do little to stop the scourge of cold calling. We will not oppose the provision but we invite the Government to comment on our points.

On new clause 8, which has not been selected, the Chairman is absolutely right that it would be an abuse—

The hon. Gentleman knows that he cannot speak directly to new clause 8.

Photo of Jack Dromey Jack Dromey Shadow Minister (Work and Pensions) (Pensions)

In the circumstances, of course I accept your ruling, Mr Rosindell. All I would say is that the example of the Port Talbot introducers is scandalous and the impact on the lives of the vulnerable is outrageous. We are determined to stamp out that practice. Coming back to the core proposal contained in our new clause, the time has come to ban cold calling, full stop.

Photo of Ellie Reeves Ellie Reeves Labour, Lewisham West and Penge 11:00 am, 6th February 2018

It is a pleasure to serve under your chairmanship, Mr Rosindell, on my first Bill Committee.

New clause 9 would introduce a much-needed ban on cold calling by claims management companies, including in relation to personal injury. Although the Government have previously stated that they are committed to introducing a ban, new clause 6 simply does not go far enough.

It is estimated that claims management companies make around 51 million personal injury-related calls and texts each year and that most people have received one. Not only are such calls a nuisance, they also exploit vulnerable people. Not surprisingly, 67% of people are in favour of a ban on personal injury cold calling. It is worth noting that solicitors are already banned from cold calling in personal injury claims, but the fact that claims management companies are not risks bringing the sector into disrepute.

Cold calling can generate the false perception that obtaining compensation is easy, even where there is no injury. It can put pressure on people to pursue unmeritorious or, at the very worst, fraudulent claims, which they otherwise may not do. It may never have been the intention of someone to make a claim, but if they receive a text promising them thousands of pounds, it might seem very tempting. As my hon. Friend the Member for Birmingham, Erdington has already spoken about, there is evidence to suggest that cold calling has led to a rise in holiday sickness claims.

There is a context. The Government are proposing to reform compensation rules for whiplash claims and to increase the small claims limit in road traffic accidents from £1,000 to £5,000, and in public liability and employers’ liability claims from £1,000 to £2,000. The Government say that that is to cut down on fraudulent claims and bring down insurance premiums. However, many, including myself, are concerned that it will have a significant impact on access to justice, with people not being able to access proper legal advice in such claims, which can often be complex. Surely a better solution would be to have an outright ban on cold calling in personal injury claims by claims management companies, which is what new clause 9 seeks to do. The new clause is clear—it would result in a ban on all cold calling by claims management companies and would also ban other methods of approach, such as texting.

In contrast, new clause 6 creates confusion. It would ban cold calling unless someone has given consent. What amounts to consent in this context may not always be clear and people, especially the most vulnerable, may struggle to understand that they have consented to being cold called or may not appreciate what they have consented to. My hon. Friend the Member for Harrow West has raised concerns about the elderly and infirm. The Minister has not today been able to give any comprehensive answer on how those fears will be dealt with. Put simply, new clause 6 does not go far enough to ban the scourge of cold calling.

Earlier this month, Lord Keen stated in evidence to the Justice Committee that

“effectively stopping cold calling is an immensely complex process, because cold calling nowadays is carried out by unregulated entities from outwith the United Kingdom. We have instances of it being carried on in south America to target the UK. They then spoof their telephone numbers...so that it is impossible to trace the origins of the call.”

Will the Minister therefore assure me that more will be done to tackle such complex instances of cold calling, notwithstanding the measures in the Bill, so that the problem does not simply carry on under a different guise and vulnerable people do not continue to be exploited in this way?

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury

Opposition new clause 9 is identical to the Lords amendment and seeks to compel the FCA to ban unsolicited direct approaches by, on behalf of or for the benefit of companies providing claims management services. It also seeks to ban those companies from using data obtained through those methods. Unfortunately, it would give the FCA a duty it cannot enforce under its current regime.

I assure the hon. Member for Birmingham, Erdington and the hon. Member for Lewisham West and Penge that the Government are committed to tackling the issue properly and have consulted with the FCA, the claims management regulation unit and the Information Commissioner’s Office to ensure that Government new clause 6 does so in the most effective way—it will amend the Privacy and Electronic Communications (EC Directive) Regulations 2003 to prohibit direct marketing calls by claims management services unless an individual has given their consent. I was challenged on that matter, and I will clarify by letter.

The provision will be implemented by the ICO as the regulator responsible for the enforcement of the regulations. It has considerable powers and can issue fines of up £500,000. Under the incoming general data protection regulation, the unlawful use of personal data can attract fines of up to £17 million or 4% of annual turnover. The ICO is committed to enforcing the sanctions in the Privacy and Electronic Communications (EC Directive) Regulations 2003 and has issued nearly £3 million in monetary penalties for breaches of direct marketing since January last year. We have worked with the ICO in developing the new clause, and it is confident that it will be able to enforce it in conjunction with the FCA.

The FCA will of course have a role to play and will use all the tools available to take action where it discovers behaviour causing consumer harm. I acknowledge the cases that both Members raised, which are unacceptable. I am also confident that the FCA will work closely with the ICO where breaches are identified. I am sure members of the Committee will agree that it is better to include a new clause that will work—Government new clause 6—than to include new clause 9. As such, I encourage both Members not to press their new clause to a vote.

Photo of Jack Dromey Jack Dromey Shadow Minister (Work and Pensions) (Pensions)

We are not convinced. It comes down fundamentally to the issue of principle. If it is right that all the evidence is that cold calling has been deeply damaging for the elderly, for the vulnerable, for those at a time of crisis in their lives, such as the Port Talbot workers and now, dare I say it, Carillion workers, and for business, then in those circumstances the practice has to end, full stop. The difference between the two new clauses is that we are saying precisely that with new clause 9. While the Government take some steps in that direction with new clause 6, the reality is that this unacceptable practice will continue and is likely to continue to grow.

The Minister talked about penalties handed out thus far of £3 million, but it is a billion-pound industry of abuse. We therefore believe it to be right to send that unmistakeable message so that never again will those people, particularly those at a time of crisis in their lives, fear that supposedly friendly phone call that time and again leads them to make disastrous decisions with disastrous consequences. Our intention is to press new clause 9 to a vote.

Question put and agreed to.

New clause 6 accordingly read a Second time.

Question put, That the clause be added to the Bill.

The Committee divided:

Ayes 9, Noes 8.

Question accordingly agreed to.

New clause 6 added to the Bill.

New Clause 9