Legal Services Act 2007 (Claims Management Complaints) (Fees) (Amendment) Regulations 2017 — House of Lords, 2016-12-20
Topic: Domestic Commerce
Jeremy Hugh Beecham (Labour, Centre-left): My Lords, we support the transfer of responsibility for regulating this somewhat parasitic industry to the Financial Conduct Authority, not least because my noble friend Lady Hayter played a part in making the necessary legislative provision for the step that the Government are now taking Most of us, I suspect, will have been subjected to cold calling from a range of outfits of this kind. I confess to sometimes being tempted to adopt the approach that I heard someone once advocating—saving the presence of the right reverend Prelate—of saying, "I am so glad you called, I would like to talk to you about Jesus". That could have the effect of shortening the conversation, although in practice, like most people, I simply put down the phone. But this is an increasing nuisance that we all have to contend with. It is a nuisance that the industry has failed to tackle. It has an appalling record. Fines of over £2 million have been levied since 2015, and 1,400 licences have been revoked. In the current year there have been some 40 investigations, 16 of them leading to withdrawal of a licence. In 2013 there were 8,500 complaints, and no less than 76% of customers in a survey were doubtful about the benefits of using these companies The Brady report, which recommended the change in regulation, stated that, "there is a widely held perception among stakeholders and government that there is widespread misconduct among Claims Management Companies" They flourish in part, of course, because of the withdrawal of legal aid, which, together with changes to court fees, has curtailed access to justice for many who need properly qualified advice and representation. The Government are consulting on the small claims limit, below which it will not be possible for a successful claimant to recover costs. Is not that move likely to increase the role of CMCs, as the Transport Select Committee warned as long ago as 2013? Moreover, we are dealing only with registered claims management companies. Are there statistics on the number of unauthorised companies which may be operating? What is the Government’s estimate of that number, and how can the companies be dealt with As the Minister said, regulation of the sector needs to extend beyond the—admittedly crucial and obvious—financial aspects to monitoring how it performs on behalf of clients and requiring minimum standards, preferably before licences are granted. This will no doubt fall to the Financial Ombudsman Service, as opposed to the Financial Conduct Authority. I take it that the two organisations will remain in close touch. It might have been better if one could have contrived a situation in which a single authority dealt with both aspects. However, presumably there will be communication between the two. In the meantime, should not the Government or one of the authorities involved warn the public about the risks involved in engaging with such organisations and offering independent guidance on which companies they should consider instructing on the basis of their past performance As I said, we welcome the approach taken here. Perhaps the Minister can indicate when the further change of responsibility involving the Financial Ombudsman will take place; it looks as though it will be some time in the coming year. We very much support the Government extending that element.