Mr.
Jones: I have a point about the notion of free legal
advice. Will the Minister agree that if a claims handling company is
giving free legal advice, it should be exactly that—it must be
given by a qualified individual who is on a par with someone regulated
by the Law Society and not just by a law graduate who has no
experience? It is clear that I, and others, could set up a claims
handling company with people who had a law degree but had not practised
for many years, and give free legal advice, which would be of no use in
helping that individual.
Bridget
Prentice: My hon. Friend makes an important point. The
information given to the client must make it absolutely clear what the
client will receive from the company. In his speech, he also talked
about the investigation of allegations and the regulator will be able
not only to investigate complaints but to take the initiative himself
and carry out audits and investigate allegations from individual
claimants, MPs, or anyone else. That will include the powers to seize
information and documents and to obtain a warrant to enter and search
premises, and there are strong controls over what will be done. Of
course, the regulator will be able to enforce clear and effective
sanctions. My hon.
Friend the Member for Bassetlaw wanted to raise the issue of the
confusion between Vendside and the Union of Democratic Mineworkers.
Again, I agree that there has to be clarity for the consumer about who
is dealing with their claim and whether that person is regulated. Under
the proposals in this part of the Bill, Vendside would require
authorisation and would have to comply with the regulators’
rules. The model rules that we have already published state that
authorised businesses must ensure that all information given to the
client is clear, transparent and not misleading. If Vendside is not
capable of doing that, it would not get
authorisation.
John
Mann: Would Indiclaim, described as the marketing arm of
the UDM, be similarly regulated as a claims
handler?
Bridget
Prentice: I want to come to the issue of marketing
companies. Companies will not be able to evade regulation by setting
themselves up as marketing companies. Authorised companies will be
required to declare to the regulator any links that they have with
parent or subsidiary companies and any previous companies that the
directors have worked for.
My hon. Friend the Member for
Bassetlaw raised the issue of a company putting itself into voluntary
liquidation in order to avoid anything. Effective enforcement is
essential to prevent any company evading regulation. There will be
compliance checks and audits that can flush out any early concerns
about a business that might be failing. The regulator does not have to
wait for an audit to take place but can take action to suspend or
cancel authorisation if he feels it is appropriate to do so.
In dealing with complaints, it
should also be said that authorised persons will have to set up an
internal complaints procedure. Where the consumer feels that their
complaint has not been handled appropriately or to their satisfaction
under the internal procedure, they can refer the matter directly to the
regulator. Again, if the investigation of that complaint uncovers a
breach of the rules, that could result in disciplinary action,
including suspension or cancellation of authorisation.
My hon. Friend also talked
about the collusion between solicitors and claims handlers. There is
nothing to stop solicitors and claims handlers from working together,
but if they are providing regulated claims management services,
solicitors will be regulated by the Law Society and the claims handlers
by the regulator. We will ensure that all regulators work in a
joined-up fashion so that they address all the abuses, if there are
any, and safeguard consumer rights. The provision is an interim measure
because, as the hon. Member for North Southwark and Bermondsey has
mentioned, once the Legal Services Bill becomes law that regulation
will come under the auspices of the legal services
board.
Simon
Hughes: I should have waited for the Minister to finish
what she was planning to say. I have been thinking of the one case that
she gave as an argument for keeping in the word
“regulate” and resisting the amendment, which was that of
a surveyor. Surveyors
would be governed by their professional code of conduct and their
organisation. They would have to be members of their professional body
and therefore would have been covered. If a local authority officer
comes and gives advice to someone who is also talking about the
prospect of a claim if a building gets put up or if a road comes past
them, would they fall outside the regulatory processes? Would there be
no way in which things said by people employed with public money to do
a public job would be covered by this legislation? I have not yet heard
a very persuasive argument for resisting the amendment, only one little
example that I think is covered in other areas
anyway.
Bridget
Prentice: In the case of surveyors, there is a suggestion
that some are going out and looking for individuals and giving them
advice. However, the hon. Gentleman is right that they should be
covered by their own professional organisation. What I am saying is
that if they started to act as claims handlers, we would need to look
at whether or not they would be brought into legislation. As far as
local authorities are concerned, if a local authority was giving bad
advice, there are other ways that people can deal with them through the
local authority ombudsman. That would be the best way to look at that.
However, if I may, I will return to
that. Finally, I will
turn to my hon. Friend the Member for Midlothian (Mr. Hamilton). We are
in discussions with the Scottish Executive about the way that we deal
with things in Scotland. I have to say that, luckily for Scotland,
there does not seem to be the same problem with unregulated claims that
we have in England. However, it would be possible for the Scottish
Executive to follow similar lines to the ones that we are using here,
if they felt that that would become an issue. Claims management
companies operate much less extensively in Scotland and Northern
Ireland than they do in England and Wales. In Scotland, that is partly
because of a different legal
system.
Mr.
Hamilton: To clarify, there is a specific problem in
Scotland about ex-coal miners. In my own area, I do not have the same
problems as have been exhibited by my colleagues. However, there are
many cases in Ayrshire, Lanarkshire and Fife in which people have been
stripped of money to which they feel entitled. It does happen. However,
Scotland has a population of 5 million against
England’s 50 million; that is why it is
less.
Bridget
Prentice: I take what my hon. Friend says. I have just
found what I needed to know about surveyors. There is limited evidence
that there are surveyors who have been effectively acting as claims
handlers. They liaise with the Highways Agency to seek compensation for
people whose homes might be blighted or who are near newly constructed
motorways. The compensation is supposed to reflect the loss of value
suffered by the properties.
To be fair, we are not aware of
any consumer being disadvantaged by that activity. If it came to light
that consumers were being disadvantaged, we have the order-making power
that would bring that under the regulatory
net. 3
pm
Mr.
Heald: Why would that not be covered by the hon.
Lady’s definitions section, which mentions giving advice in
relation to the making of a claim? Why does she need the extra, bolt-on
bit about regulating and having an order-making power? Why not just
cover everybody in the claims handling business? Then, if she wants to
exempt those to whom other regulatory regimes apply,
fine.
Bridget
Prentice: The reason not to target everybody is that we
want targeting to be proportionate. That is why we deliberately picked
out the five areas where we
think that there are problems at the moment. The potential for the
regulatory net is very wide. However, this way we have flexibility to
ensure that we can act quickly to impose regulation in areas where
there is an immediate problem, and to avoid overregulation where there
is not a problem. We
have consulted extensively with stakeholders, including APIL, the
Association of British Insurers and the Criminal Injuries Compensation
Authority, and with our own legal services consumer panel, which
involves Citizens Advice, the National Consumer Council, the Office of
Fair Trading, and Which?, all of which have welcomed what we are
doing—as has everyone who has advised us. That is why we want to
make it a matter of
targeting.
Simon
Hughes: I am just working out that the Minister is now
saying that she wants to include the word “regulated”
because the Government have five initial groups in mind: personal
injury, surveying, employment, criminal injuries compensation, and
compensation for the mis-selling of financial products. Will she tell
us whether she is aware of any other claims management activities in
existence, in relation to which she does not believe there to be abuse,
so that they would fall outside the system? I am also intrigued as to
why Scotland and Northern Ireland do not have the same issue. A note
later would be
helpful.
Bridget
Prentice: On the second point, part of the reason why
Scotland does not have the problem is because of the different Scottish
legal system. Our advice from Scotland is that there is not the
plethora of claims management companies in Scotland that there is in
England.
Simon
Hughes: Perhaps they just have not got that far
yet.
Bridget
Prentice: Maybe, and no doubt when they do, we shall have
the opportunity and the flexibility to regulate appropriately. One
reason why I cannot yet cite examples is that, to be honest, we do not
really know what is out there, which is why we need flexibility. We do
not want to overregulate, but if a problem arises we shall have the
flexibility to regulate in secondary
legislation.
Mr.
Jones: I know that my hon. Friend has tried to cover all
the points that were mentioned. One point that I mentioned related to
claims handlers who register claims but do not pass them on to a law
firm, so that the claim goes out of time. How would claimants who
suffer as a result of that be redressed? It is a detailed point, but
perhaps if she cannot give an answer now she will reflect on it and
respond in writing. It is an issue of concern to me and many other
Members who have dealt with claims handling companies. Claims fall out
of time either because companies go bust or because there is simple
neglect in passing on claims that are time-limited in
law.
Bridget
Prentice: I understand what my hon. Friend is saying. I
need to reflect and come back to him on it,
but I suspect that it is something that we should examine in terms of
the regulation. On the
details of the amendments, I agree with the hon. Member for North-East
Hertfordshire and the principle behind his amendment: all claims
companies providing claims management should be captured. However, I
hope that the definition in clause 3, in its entirety, covers his
concerns. I understand
that the purpose of amendment No. 18 is to ensure that representation
that is not strictly legal, such as the mis-selling of endowment
policies—that is the most obvious example—is covered.
Again, I think that the wide definition in clause 3 does what is
intended and applies the description “claims management
services” to any advice or service in relation to the making of
the claim. So the definition includes all the aspects of making a
claim. For the
avoidance of any doubt, however, the clause also specifies that the
provision of services could include
“the provision of services by way
of or in relation to legal
representation”. That
does not mean that other representation is excluded. I would argue the
contrary. The words “in particular” indicate that the
list in subsection (3)(a) is not exhaustive so it is unnecessary to
mention activities that would obviously fall within “the
provision of services”. That includes representation that is not
necessarily
legal. Amendment No.
19 is also unnecessary, again because I think that the definition in
clause 3 covers the concerns and has been constructed carefully to
cover organisations whether or not they are to receive payments. That
therefore would apply to companies acting as a call centre that simply
take details about claims from consumers and pass them on to a
solicitor for a fee. As I have said extensively, the definition in
clause 3 is wide to ensure that all related activities are covered. I
ask the hon. Gentleman therefore not to press the amendment.
Briefly, the hon. Gentleman
mentioned the activities of rehabilitation farmers. There is still some
dispute in the industry as to whether there is as yet such a thing as a
rehab farmer, but if credit rehabilitation farmers act in the context
of making a claim or giving advice, those services would fall within
the regulatory ambit of the Bill. Those providing such services would
be caught and would have to seek
authorisation. The
debate has been extensive and has shown the need for clause 3. There
are unscrupulous people out there undermining consumer confidence. I
think that the way in which we have constructed the clause provides the
wide definition needed to ensure that claims farmers are caught and
regulated when necessary. Equally, if people are not involved in any of
the activities where we feel that there are problems, they will not be
overregulated. That is in accordance with the Better Regulation
Commission principles. So I ask the hon. Gentleman to withdraw his
amendment and I ask the Committee to accept the
clause.
Mr.
Heald: On the basis of the Minister’s assurances,
and in order to give me a moment to research the role of surveyors, I
beg to ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn.
Mr.
Heald: I beg to move amendment No. 17, in clause 3, page
2, line 9, after second ‘services',
insert ‘offered in England or
Wales'. The
amendment attempts to ensure that if such ingenious claims management
services try to operate from outside the United Kingdom, services
within England and Wales will be regulated. I understand that the
Claims Standards Council on its website has already flagged up the
problem of companies and individuals operating from bases in places
such as Fuengirola and South Africa. I should be grateful to hear the
Minister’s response.
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