The Financial Guidance and Claims 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. It was introduced to the House of Commons on 22 November 2017 as Bill 131 and is scheduled to receive its Second Reading on Monday 22 January 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.
The Bill was amended in the House of Lords. Most of the amendments were to Part 1. These included opposition amendments intended to:
- Enable the Secretary of State to introduce a ban on pension cold-calling on the advice of the SFGB (clause 4). The Government was concerned that the amendment would not enable such a ban to be enforced. Its intention is to bring forward its own draft legislation for scrutiny in 2018 (HL Deb 24 October 2017 c862).
- 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’ (as they can do under the ‘freedom and choice’ reforms introduced in April 2015) (clause 5 (2)). The Government argued that requirements on providers to signpost to guidance were already in place and that it would be better to wait for the final report of the FCA’s retirement outcomes review in the first half of 2018, to ensure that any intervention is well-targeted (HL Deb 31 October 2017 c1302).
In November 2017, the Work and Pensions Select Committee proposed alternative amendments to both of these, which would:
- Require the Government to make regulations to introduce a ban on pension cold-calling by June 2018, or make a statement by the end of July explaining the delay and setting a timetable for making regulations;
- Ensure that, subject to certain exemptions, an individual must show evidence of having received or expressly refused guidance before being granted access to a pension pot. (Protecting pensions against scams: priorities for the Financial Guidance and Claims Bill, HC 404, 11 December 2017).
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 a number of 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 1 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 21).
Government amendment to Part 2 would enable the introduction of an interim fee cap in relation to PPI claims (clauses 27 and 28) and extend FCA regulation of CMCs to Scotland (clause 29).
Issues raised by the opposition where there was no amendment included: the future of the pensions dashboard; how to ensure people receive holistic guidance on pensions, including the State Pension; and whether the SFGB should be required to produce advice on how to assess the impact of government policy on financial inclusion, financial capability and household debt.