The Financial Claims and Guidance Bill [HL] 2017-19 was introduced in the House of Lords on 22 June 2017 and completed its passage though that House on 21 November 2017. It was introduced to the House of Commons on 22 November 2017 as Bill 131 and had its Second Reading on 22 January 2018. The Commons Committee had three sittings and ended on 6 February 2018. Report Stage and Third Reading were on 12 March and 24 April 2018. The Financial Guidance and Claims Act 2018 received Royal Assent on 10 May 2018. The Act has two parts:
- Part 1 merged three existing government-sponsored guidance services - the Money Advice Service, the Pensions Advisory Service and Pension Wise - to create a new Single Financial Guidance Body (SFGB). This is to help “ensure that members of the public can access good-quality, free-to-client, impartial financial guidance and debt advice.” The provisions follow three government consultations. The SFGB is expected to be set up and operational from January 2019. (HL Deb 24 July 2018 c1601).
- Part 2 made changes to the regulation of claims management companies (CMCs). CMCs provide advice and services to assist people in making compensation claims in various sectors, such as personal injury and financial products. The Government had expressed concern that “there is evidence of malpractice” in the industry. In March 2016, following an independent review, the Government said it would change the regulatory system for CMCs. Under the Act, regulatory responsibility passes from the Ministry of Justice to the Financial Conduct Authority (FCA).
- Also in Part 2, complaints handling is transferred from the Legal Ombudsman to the Financial Ombudsman Service. The FCA is given the power to impose a cap on the fees that CMCs can charge for their services. Ahead of this, an interim cap on fees would apply to PPI claims.
House of Lords stages
The Bill was amended in the House of the Lords. Most of the amendments were to Part 1. These included opposition amendments to enable the Secretary of State to introduce a ban on pension cold-calling and to increase take up of Pension Wise. Both were replaced with government amendments with the same aim.
The Government amended the Bill at Third Reading to enable the introduction of a ‘debt respite scheme’ in England, Wales and/or Northern Ireland. This would be designed to protect individuals in debt from further interest, charges and enforcement action for a set period and enable a realistic repayment plan to be put in place. The issue had been raised previously by many Peers, who pointed to the experience of such arrangements in Scotland. Other government amendments to Part One were to:
- Make it explicit that the SFGB should target those ‘most in need’, particularly those in vulnerable circumstances (s2 (1) (d));
- Make it clear that public financial guidance is free and impartial (s3);
- Make it a specific offence for someone to create the impression that they are providing information, guidance or advice on behalf of the SFGB when they are not (s15 and 16); and
- Ensure public consultation before the Government lays draft regulations to dissolve the SFGB (s24).
Government amendments to Part 2 enable the introduction of an interim fee cap in relation to PPI claims and provide for FCA regulation of CMCs to extend to Scotland.
House of Commons stages
The main changes to the Bill at Commons Committee stage were government amendments to:
- Require pension schemes to recommend guidance (s18 and 19); and
- Provide for a ban on cold calling for claims management services (s35).
Report stage amendments
Government amendments at Commons Report Stage related to cold calling for pensions and other financial products (now s21 and 22) and to the take-up of pensions guidance (now s18 and19) – see sections 3.12 and 3.13 below.
The Government made a statement on pensions cold calling on 12 July 2018 and launched a consultation on draft regulations on 20 July 2018. Once it has considered the responses, in the Autumn it intends to lay regulations under the affirmative procedure and, subject to parliamentary approval, bring the regulations into force as soon as possible thereafter.