My Lords, the co-pilot is back in charge. Amendments 39A and 39B, moved by my noble friend Lord Hunt of Wirral, seek to include the arrangement of credit hire agreements and the commissioning of medical reports within the scope of claims management regulation. I am grateful to him for the powerful advocacy he put into moving his amendments and for the support he has received from the noble Earl, Lord Kinnoull, who underwrote—that may be the right expression to use—the amendment with a nostalgic reference to Meccano. I am also grateful to my noble friends Lord Flight and Lord Deben for their support. We will be coming to an amendment on cold calling in due course.
As I explained in Committee, I understand and sympathise with my noble friend’s concerns, and I can see how these issues link with claims management activity. However, I would maintain that credit hire organisations and medical reporting organisations are not claims management companies as such, and therefore it does not automatically follow that they should be regulated in the same way as claims management companies or, indeed, by the same regulator. When the independent review of claims management regulation reported and recommended the transfer of claims management regulation to the FCA, it did not consider an extension of scope to the credit hire and medical reporting organisations which we are debating at the moment.
However, I want to be clear with noble Lords that the Government understand how important these issues are. That is why we are considering what more can be done on credit hire. We have identified this as an area of concern and we have specifically sought the views of stakeholders in the call for evidence in the section of the whiplash reform consultation that closed in January this year. I can assure my noble friend that the Government are actively continuing to work on these issues, and as a result of this debate I will certainly speak to my noble and learned friend Lord Keen of Elie and ask that his department prioritise and publish the second part of its consultation response, which will set out the Government’s position on the issue raised in our debate today.
Similarly, and as I set out in Committee, good-quality medical evidence is central to the Government’s whiplash reform programme. MedCo is working well and is providing both the Government and the relevant regulators with invaluable data on a number of important areas. However, medical reporting is much wider than just the provision of whiplash reports. Reports can be sought from and provided directly by individual specialists as well as by medical reporting organisations, and any regulation of this sector would need to be applied fairly to all those involved in it, not just to one component.
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I assure my noble friend that MedCo has taken, and continues to take, firm enforcement action against those claimant solicitors, medical experts and medical reporting organisations that breach the MedCo rules and the government policy that underpins them. That has resulted in many such organisations being suspended and/or removed from the system entirely because of their attempts to game the system. We will keep this sector under review and continue to work closely with MedCo to promptly identify and tackle any other bad behaviours as they arise.
CMCs are just part of this wider market. The Government agree with my noble friend that there could be scope for more formal regulation of these sectors, but adding the provision of credit hire services and medical evidence to regulated CMC functions is not the way to deal with it. These are specialised sectors and any regulation would need to be grounded in the appropriate expertise to deal with the particular challenges each sector poses. As credit hire organisations and medical reporting organisations are separate issues to those under consideration in the Bill—I identified the action that Government are taking on them—and, as they are being dealt with separately, I would urge my noble friend not to press the amendment.
I turn to my noble friend’s Amendment 39C, which commanded support from all sides of the House. It seeks to extend the duty on the FCA to cap fees to include personal injury claims. I remind noble Lords that the duty on the FCA to cap fees—to protect consumers from being charged excessive fees—is specifically in relation to financial services claims for a good reason. As I explained in Committee, different types of CMCs manage claims in different ways. Those dealing with personal injury claims, such as holiday sickness claims, tend to focus on marketing activities. Those in the
financial services claims sector, on the other hand, tend to represent clients all the way through the claim process. It is telling that, in 2015/16, 95% of consumer complaints about CMCs related to financial services claims, compared to only 2% that were related to personal injury.
However, I acknowledge the point made by a number of noble Lords that the market could change, particularly following our reforms in relation to whiplash. We understand that markets can change, which is why the FCA already has a broad power to restrict fees across the range of claims management services that it will regulate. The Government have worked closely with the FCA and relevant regulators in the personal injury sector while developing their whiplash reforms. That collaboration will continue as the work progresses, to ensure effective and appropriate controls are developed to underpin those reforms.
While changes might happen in relation to the personal injury CMC market in the future, it would not be right for the Government to impose now a requirement on the FCA to do something when we do not know the exact nature of the problem we are trying to tackle or, indeed, whether it will definitely exist. The FCA is aware of the Government’s planned changes and the potential impacts they could have on the personal injury CMC market. It will be important for the FCA to consider the impact of government changes on the market and how CMCs operate before deciding whether to use its fee capping power. If, as noble Lords have suggested, further risks to consumers emerge in this market, the FCA already has a range of regulatory tools and powers at its disposal that will enable it to take swift, effective and proportionate action to deal with consumer harms. I will draw the FCA’s attention to points that have been made in the debate.
I hope my noble friend will agree that it is too early to presume that there will need to be a fee cap for CMCs operating in the personal injury market, which has a different business model to financial services. I hope he agrees that the FCA is well placed to monitor and respond to any emerging risks. In light of that, I encourage him to withdraw his amendment.