My Lords, I declare my interests as set out in the register.
Who does not enjoy a holiday in the sun? But your Lordships should be warned, for the ingenious claims farming industry has us all in its sights—or at least those noble Lords who take package holidays to Spain or other more exotic destinations. ABTA, the Association of British Travel Agents, records that, since 2013, its members have reported an increase of more than 500% in the number of holiday sickness claims, with no corresponding rise in reported sickness levels in resort.
We now hear stories of CMCs targeting holidaymakers while still in resort to make claims, and of claims being made long after the holiday—the time limit is up to three years—when no real verification of the facts is possible. No doubt many such claims are the result of cold calling, although I suppose touting for business
in a Spanish resort might more properly be dubbed hot calling. At the heart of this new surge of claims is the ability of CMCs to obtain a commercial return from a combination of deductions from the claimant’s damages and from side arrangements with solicitors and medical report providers.
Amendment 70A proposes to extend Clause 17 to cap the fees that CMCs can charge in claims for personal injury, as well as in claims for PPI and financial mis-selling. Most of Part 2 of the Bill deals with transferring existing powers to the FCA, but Clause 17 represents an extension of those powers. It gives the FCA power to cap the fees charged by CMCs in certain types of claim.
Clause 17(2) requires the FCA to make such rules to cap fees only in respect of claims relating to financial products or services. I respectfully suggest that that is not wide enough and we should extend that now. This amendment would extend the requirement to cap fees to claims for personal injuries—beyond holiday sickness claims, which is wholly intentional, as I will explain.
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Over the last 10 years, we have seen significant rises in claim numbers for, first, whiplash, then noise-induced hearing loss, then clinical negligence and now holiday sickness. All have been driven by often quite distasteful and misleading advertising setting out the claims from CMCs. Indeed, you can pick up leaflets in the waiting rooms of hospitals and GPs’ surgeries telling you how to bring a clinical negligence claim. Such advertising campaigns are expensive and can run only if the revenue they generate is substantial and lucrative. My noble friend the Minister may say, “Well, you have the Advertising Standards Authority”. I agree: it is sometimes called in to intervene. However, it can address only the adverts themselves. Its remit cannot run to controlling the flow of money from the claims that ultimately pays for the advertisements. Action is urgently needed to cap the amount these CMCs can take from consumers to fuel such campaigns.
Amendment 70B, in my name, seeks to tackle a different part of the same problem. In an earlier debate, my noble friend the Minister mentioned that comprehensive review of the claims management industry taken forward by the amazingly effective Carol Brady. She notes in paragraphs 6.5 and 6.6 that:
“Current rules state that, before seeking to enter into a contract with a client, CMCs ‘must make reasonable enquiries as to whether the client has alternative mechanisms for pursuing a claim and must advise the client unambiguously of ombudsman schemes or other official means of redress.’ … Stakeholders from the CMC industry feel this is sufficient requirement for CMCs to inform consumers of alternatives. However, Citizen’s Advice research (2014) found that 39% of people who had used a CMC to make a claim didn’t know that they could have made the claim themselves, and almost half said that they if they had been aware of the free alternatives, then they would not have used a CMC”.
That is all a direct quote from Carol Brady’s report. She went on to recommend that:
“CMCs should signpost consumers to alternative claim resolution channels (e.g. direct to the firm/ombudsman) at the appropriate times when communicating with consumers”.
I have no sense that this problem has improved or that the recommendation has been acted upon, although it has been cited by Ministers from time to time in meetings.
I have just had the opportunity of meeting with ABTA and was told that it recently set up its own free service for resolving holiday sickness claims. I am sad to report that take-up is slow. The revenue available to CMCs by pushing claims in another direction remains all too alluring. My amendment seeks to give the requirement teeth. In my opinion, the only threat effective in compelling compliance by CMCs is to denude them of their right to charge for their services. A robust approach of this kind would naturally require substantial safeguards to be put in place. My amendment aims simply to probe the Government’s intentions on this important point. Does my noble friend the Minister intend to implement this vital recommendation from the Brady report? I would be happy to outline what I believe is the right approach if he were, once again, kindly to agree to meet me and allow me to persuade his officials and him of this. I beg to move.