Posted 07 February 2018 by Donna Scully
Ahead of the latest debate on the Financial Guidance and Claims Bill, Carpenters called for a comprehensive ban on all cold-calling. Our written evidence to the Bill Committee is available here:
Financial Guidance and Claims Bill [HL]
Written evidence submitted by Carpenters (FGCB29)
1. Carpenters is the UK’s largest motor injury law firm, working in partnership with major insurers and brokers to represent their policyholders. A policyholder involved in an accident will be referred to Carpenters by their insurer, and we then represent that customer in the pursuit of a non-fault claim.
2. We broadly welcome the provisions of the Financial Guidance and Claims Bill and particularly the transfer of responsibilities of the Claims Management Regulator from the MoJ to the Financial Conduct Authority. This was one of the key recommendations of the Brady Review, and is long overdue
3. We hope that this new function is not ‘lost’ within such a super-regulator and that the CMR has sufficient resources and powers to continue to police the sector. It is also vital that the new regulatory regime for CMCs is fully operational as soon as possible, particularly with the Government’s intended reforms to whiplash claims.
Regulation of Claims Management Services (Part 2)
4. A robust regulatory regime for CMCs operating within the PI market is particularly essential as one of the main beneficiaries of the Government’s proposed reforms to whiplash claims – the introduction of a tariff for damages in the forthcoming Civil Liability Bill and raising the small claims limit - will be CMCs. The proposed reforms will dramatically increase activity in the claims management sector. In our view, it is entirely contradictory that the Government is – rightly – seeking to re-organise and in some ways strengthen the regulation of CMCs with this Bill, whilst at the same time – wrongly - effectively deregulating the market and actively encouraging CMCs to operate in the PI market.
5. After every regulatory change in the market, CMCs and others have recalibrated their business model. The better ones will become legislatively compliant under the oversight of the FCA, but the less reputable ones will find loopholes and work-arounds, adapting to survive to the changed regulatory landscape. In seeking to create a system where professional legal representation is priced out of much of the market, the whiplash reforms could lead to a proliferation of a new generation of CMCs, after a period of relative decline, with a vested interest in maximising the value of the claim and encouraging negative behaviour, this ‘support’ will be unqualified, unregistered and unregulated.
6. This is the context to the Part 2 provisions for regulating the CMC market. The market fully anticipates that there will be a growth in CMCs as a direct consequence of the proposed reforms. It is generally felt that CMCs, with a lower cost base and fewer regulatory burdens, will be able to make the numbers work and will likely flourish in the new claims market. The less reputable ones will drive income by inflating claims and exploiting claimants. They will fill the hole left by solicitors as they exit the market. Customers will be represented by individuals who are not required to have any qualifications or experience, no professional indemnity insurance and do not have any real supervision or regulatory scrutiny. The CMC will take a significant proportion of customer’s damages and there is a higher risk that customers will be encouraged to bring a fraudulent claim, potentially unwittingly.
NC 3: Capping CMC fees
7. We agree with the proposal that CMCs should adhere to a cap on a percentage deduction from damages. This must, however, be considered alongside future registration fees charged by the FCA. If they are set too high, there is a danger that this could drive CMCs underground into the unregulated market. Once the primary legislation is in place, we hope that the regulations to implement this measure are fully consulted upon, allowing the fuller picture to be taken into account.
Clause 4, NCs 6 & 9 (Cold-calling)
8. It was very disappointing that the Government have resisted the inclusion of provisions to ban the cold calling and texting of consumers about making a personal injury claim. A blanket ban would dramatically reduce the number of frivolous and potentially fraudulent claims made each year. It would enable identification of rogue unregulated CMCs. It would also cut off at source those claims pursued by a small minority of solicitors that have been developed through cold calling. Such a move would almost certainly not stop cold calling in its entirety, but it should dramatically reduce the millions of calls made each week that have blighted the sector for too long.
9. Whilst it was welcome that Opposition peers succeeded in amending the Bill (Clause 4) during its passage through the House of Lords, we have serious doubts about whether it is fully applicable to PI claims, whether the new Single Financial Guidance Body (SFGB) is the correct regulating body and whether the process for implementation would be too cumbersome and delayed.
10. We do not believe that the Government’s proposed alternative approach (NC6) is sufficiently robust to curtail the problem of cold-calling. It is too limited in scope and contains too many possible loopholes with the provisions relating to consent.
11. NC9 would however be far more likely to implement a meaningful barrier to CMCs carrying out millions of telephone cold-calls, spam texting and other forms of unwanted communication. Although other agencies will inevitably be involved in policing such a comprehensive ban, aligning the regulatory oversight of CMCs and the banning of cold calls within the auspices of the FCA makes better sense (than the SFGB).
12. On that basis, we fully support New Clause 9 and would urge the Committee to amend the Bill accordingly.