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. It had its Second Reading on Monday 22 January 2018. The Commons Committee consisted of three stages and ended on 6 February 2018. The Bill as amended in Committee can be found here: Bill 160. It will next be considered at Report Stage and Third Reading on Monday 12 March 2018.
The Bill has two main parts:
- Part 1 would merge 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 late 2018. (HL Deb 21 November 2017 c86).
- Part 2 would make 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 has 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 Bill, regulatory responsibility will pass from the Ministry of Justice to the Financial Conduct Authority (FCA).
- Also under Part 2, complaints handling would be transferred from the Legal Ombudsman to the Financial Ombudsman Service. The FCA would also be 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:
- Enable the Secretary of State to introduce a ban on pension cold-calling on the advice of the SFGB (clause 4). As discussed below, the Government has now tabled its own amendment to the same effect.
- Increase take-up of pensions guidance, by requiring the FCA to make rules ensuring that pension providers check that individuals have received guidance before drawing their pension benefits ‘flexibly’. This was provided for in clause 5.2 of Bill 131. However, it was removed at Public Bill Committee stage, with the Government bringing forward its own amendments with the same broad purpose (cl 19 and 20 of Bill 160).
The Government amended the Bill at Third Reading in the Lords 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. Clause 7 would require the Secretary of State to seek advice from the SFGB on the establishment of such a scheme, to be published within 12 months of that body being established. Clause 8 would require the Secretary of State, as soon as reasonably practicable after receiving such advice, to consider making regulations to establish a debt respite scheme.
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 (clause 2 (1) (d));
- Make it clear that public financial guidance is free and impartial (clause 3);
- 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 (clause 16); and
- Ensure there is a public consultation before the Government can lay draft regulations to dissolve the SFGB (clause 23).
Government amendments to Part 2 would enable the introduction of an interim fee cap in relation to PPI claims (clauses 29 and 30) 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 introduce:
- Clauses 19 and 20 which would place requirements on pension schemes to recommend guidance; and
- Clause 34 which would provide for a ban on cold calling of individuals for the purpose of providing claims management services.
Report stage amendments
In advance of Report Stage on 24 April, the Government has tabled amendments relating to cold calling and take-up of pensions guidance – see sections 3.4 and 3.13 below. The Work and Pensions Select Committee welcomed this, while calling on the Government to go further in certain respects (Press release 6 March 2018). The amendment papers are here.