Tuesday, July 09, 2013

Ros in the Lords: Short Debate - Claims Management Companies

Here's another of Ros's interventions that I hadn't covered, from 29 May 2012...

There has, in recent times, been a lot of fuss about claims management companies. They aren't looked at with as much concern as payday loan companies, but they remain one of the more annoying things about modern life...

Baroness Scott of Needham Market (Liberal Democrat)

My Lords, I thank the noble Lord, Lord Kennedy, for securing today's debate. Topics such as this, which are limited in scope but of real importance to the public, are exactly the sort suited to one hour Questions for Short Debate. The noble Lord has done us a great service by drawing attention to the many problems which are being caused by poor practice and, indeed, often illegal practice, in this area.

I suspect that had the noble Lord tabled a Question for Short Debate on the level of nuisance calls from claims management companies, he would have been overwhelmed by speakers. The number of calls from companies selling their so-called services for payment protection insurance, utility deals, home insulation schemes and accident compensation has now reached epidemic proportions. Debt consolidation services are particularly perfidious, preying as they do on those who are already vulnerable. At home in Suffolk, I routinely receive two or three calls every day from such companies. On one glorious evening, I received five. These related either to PPI, which I have never taken up, to a loan which has never existed, or to some accident which I have never had. It is irritating enough for me, but for elderly and disabled people who physically struggle to get to the phone, this is a real problem. I am increasingly finding people who have turned off their landlines because of the intrusion of these calls. I recently moved to a new flat in London. I had a new phone connected and it was a mere 30 minutes before I received my first PPI call. When the claims management industry gets your number faster than your husband does, things have come to a pretty pass.

The Financial Ombudsman Service website states that when it investigates a complaint, it expects to see evidence that a financial business has carried out a reasonable search to ascertain whether there has ever been a PPI policy. If only the dozen or so companies contacting me every week would do so. As we have heard from the noble Lord already, the impact on the financial services institutions in investigating completely bogus claims is quite large. I ask the noble Baroness: what can be done to oblige companies to do this research before they start down this route?

Will the noble Baroness also raise with Ofcom the question of nuisance calling, particularly the effectiveness of the telephone preference service? Signing up to this service is often offered up as a solution, and millions have done so. However, complaints are simply passed on to the Information Commissioner, as the telephone preference service itself has no enforcement power. Can the Minister confirm that to date there has not been a single case of prosecution under the Act? Would she agree that the epidemic growth in these calls is a demonstration of the fact that the TPS system as currently set up is simply not working? Is she able to say, through work done by the Information Commissioner, what percentage of the problems is caused by overseas phone calls, which are, of course, outside the scope of the telephone preference service?

One of the most worrying aspects of all this is that of data protection. There are many organisations-scandalously, these include public bodies-to which we give information in good faith, which routinely sell on this data. Once they have the details, they sell them on, so that it is impossible to escape from their clutches. I am sure I am not alone in being alarmed that not only my home and mobile phone numbers are used, but increasingly my parliamentary e-mail as well.

The Ministry of Justice website has a large section dedicated to claims management issues. I read with interest that companies should:

"not engage in face to face 'cold calling', or in any form of high pressure selling".

That leads me to reflect that either the companies which are doing the calling are not registered, or that they are registered and are flouting the rules. Perhaps the definition of "high pressure selling" needs to be tightened up. In any event, will the Government consider ways in which the public could more proactively report this kind of behaviour, enforcement could be made, and action could be taken when transgressions are found?

There is a trade body called the Association of Regulated Claims Management Companies, to which companies engaged in these activities can be affiliated. It offers a form of accreditation, unlike the Ministry of Justice, which simply registers companies and strikes them off if they transgress. The Motor Accident Solicitors Society has made the valid point to me that this is a complex area, and people often need help to make claims for legitimate injuries. It is entirely in the interest of good practice in the industry to weed out the bad people and ensure that they are removed. Can the noble Baroness say what sort of dealings the Government have with these trade bodies and how they might work more closely with them in the future?

Finally, will the Minister undertake to hold discussions with the Ministry of Justice to see how a higher profile might be given to how the public can deal with these issues? The MoJ website is highly factual, but does not go in for bold statements. Certainly, in this place, it is the personal injury sector which has been most complained about; however, it is actually the financial services sector which is really worrying the public. The financial services sector has less than a third of authorised businesses operating in this sphere, but it gets more than 90% of the complaints. Most of those complaints are about either cold calling or about up-front fees. As the noble Lord, Lord Kennedy, has already said, the MoJ report for last year records 3,213 authorised businesses in this field, an increase of 91 over the year. More than 1,000 were suspended or had surrendered their licences in some way.

This is clearly a sector in which there is a lot of churn. So while we absolutely need a robust regulatory framework, we also need real enforcement and bold public awareness campaigns about how to deal with claims management companies, right from that first call, through to the way that they use personal data and then on to the substance of how they conduct their business.

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