My Lords, the noble Baroness, Lady Meacher, apologises to the House that she is unable to be in her place. However, we both support the objectives of the Bill to protect people from unscrupulous practices by CMCs.
The spirit behind the amendment, as we are all aware, is to ensure that transitional provisions are in place in time to safeguard people who face the risk of a significant detriment as a result of the mis-selling of payment protection insurance. It is of the utmost importance that plans are in place as soon as possible, to respond to the Financial Conduct Authority’s campaign to inform people about the deadline for compensation claims for the substantial numbers of people affected.
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Currently, consumers incur fees of 30% or more when using a claims management company, when they could achieve the same results by claiming directly from lenders without charge. Citizens Advice continues to see people with problems caused by CMCs. Half of all those cases refer to complaints about up-front or final fees. Last year, the average up-front fee paid by CAB clients was £477. Many clients have been misled about whether they had to pay fees at all; others paid fees up-front, only to be told they did not have a valid claim and therefore they received no refund.
We understand that, as the Bill stands, the FCA may not be in a position to comply with the duty to address CMCs’ bad practices before early 2019. However, the FCA has already begun its campaign to alert consumers to its deadline of August 2019 to make complaints about PPI. Can the Minister advise the House on whether our understanding of the early 2019 date is correct?
We hope the Government will agree that it would be helpful for the transitional arrangements that could be put in place within two months of the passage of this Bill to give the Claims Management Regulator the power to cap CMC fees before regulation is transferred to the FCA. We would be very grateful if the Minister would comment on the possibility of introducing such a provision. We understand the CMR is well prepared to do that. The Ministry of Justice consulted on introducing such a cap for financial claims in February 2016. It would appear that the work within the CMR to implement its proposals had reached an advance stage by the time the general election was called.
There is a legislative precedent to transfer the power to the CMR in the interim. The Financial Services Act 2012, which transferred consumer credit regulation from the Office of Fair Trading to the FCA, included an interim power for the OFT to suspend consumer credit licences, under Section 108. The OFT exercised that power twice before its abolition. We regard the interim protection provided by our amendment to be crucial.
Before ending this short contribution, can I ask the Minister to assure the House that the FCA will have powers to regulate the activity of CMCs, even when they employ a solicitor to make claims, thus bringing it under the regulation of the Solicitors Regulation Authority? If that does not happen, we may need to return to the issue on Report.
I realise that the amendment, as it stands, does not achieve its intended aim, due to a tabling error, but I would be grateful to the Minister and the House if the issues behind the spirit of the amendment could be explored further. I beg to move.