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The Earl of Erroll: My Lords, then it is not audit trail information.
Lord Phillips of Sudbury: My Lords, I am sorry to interrupt but it is an important point.
Baroness Scotland of Asthal: My Lords, the relevant parts are Clause 19(3) to (5) and Clause 20(4). Clause 20(4) authorises the provision of paragraph 9 information to those mentioned in Clause 19(3) to (5). Those are the two references.
Lord Phillips of Sudbury: My Lords, we ought to deal with this outside the Chamber. I think you will find that Clause 20(4)(a) simply describes the persons
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who may have access to the information. I cannot see anywhere in Clause 19 access to paragraph 9. Every reference says,
I am sorry to have intervened. This could all be sorted out after today.
Baroness Scotland of Asthal: My Lords, I am very happy to look at it. It is difficult when we are doing it on the hoof. I thought it was included, but it may be better if we look at the precise detail of Clauses 19 and 20. We believe that it relates to both those clauses. To make it clear, I shall write to the noble Lord and I shall be happy to discuss the matter outside the Chamber. I hope we shall have a joint resolution on the issue, even if we do not agree on the consequences of it at the end of the day.
Our main purpose—I know we are agreed on this—is that the audit log should act as a safeguard for the individual to ensure that, where permission is given, we have an appropriate record of it against which some scrutiny could take place by the individual if he or she so chose. To that extent we are agreed. It looks as though we are not necessarily agreed on whether it is necessary to authorise the keeping of that record on each occasion. Your Lordships have our point about being able to frustrate fraud and people who may want to take advantage of any perceived lacunae. With that, I hope we shall be able to close this sitting relatively rapidly.
Lord Phillips of Sudbury: My Lords, I am grateful to the Minister and I apologise for bowling a fast one on Clauses 19 and 20. As she so rightly says, we need to talk about this on another occasion.
The noble Baroness talked of an aide-mémoire, having an audit log and the fact that that would give a citizen an opportunity to detect patterns of fraudulent usage. That is absolutely true but, frankly, we want citizens to have that choice. Many of us might take the choice of our cards being logged in the audit trail, but we do not believe that the citizen should be deprived of the choice of whether that shall be captured in the register. In view of what the noble Baroness has said, I am very happy to withdraw the amendment at this stage.
Amendment, by leave, withdrawn.
[Amendment No. 34 had been retabled as Amendment No.37A.]
Lord Bassam of Brighton: My Lords, I beg to move that consideration on Report be now adjourned.
Moved accordingly, and, on Question, Motion agreed to.
House adjourned at fourteen minutes past ten o'clock.
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Monday, 16 January 2006.
Grand Committee
The Committee met at half-past three of the clock.
[The Deputy Chairman of Committees (VISCOUNT SIMON) in the Chair.]
Compensation Bill [HL]
(Third Day)
Links to other Grand Committee Sittings on the Bill
Clause 2 [Provision of regulated claims management services]:
Lord Hunt of Wirral moved Amendment No. 27A:
Page 2, line 2, after "by" insert "the Secretary of State under the transitional provisions made under section 7(3) or"
The noble Lord said: The amendment gives us an opportunity to pause and reflect for a moment on the need for transitional provisions, given the urgency of the overall situation. Amendment No. 27A would insert the proposed text after,
It may be for the convenience of the Committee if we group Amendment No. 51, which would turn a "may" into a "shall" on page 3, Clause 3(8). I hope that the Minister will reflect for a moment that under Amendment No. 51 we are seeking to state that while no person is designated under subsection (1) as the regulator, the Secretary of State shall exercise the functions of the regulator so that there is no gap. In Amendment No. 67A, we have sought to amend Clause 7(3) so that it reads:
"Regulations shall make transitional provision about the extent to which the Secretary of State shall exercise functions arising under this Part, prior to him designating a Regulator".
I hope that this will also be an opportunity for the Minister to bring us up to date with any developments that may well have taken place since the previous Committee sitting. However, two themes will inevitably emerge as we deal with the remainder of the Bill: first, to ensure that there are no loopholes in the legislation that can easily be exploited; and, secondly, to ensure that as much material as possible is set out in the Bill and is not left to secondary legislation.
When considering claims management companies, it is always important for us to remind ourselves of the background against which this legislation will sit. This is an industry which has grown up to fill a gap in the market. That gap arose when the present funding arrangements for claims were introduced, which is why the market has remained unregulated until now.
However, I recall—I have quoted from this report before—the very good report of the Better Regulation Task Force, Better Routes to Redress, in which one of its main themes was an implied and explicit criticism of claims management companies. Page 21 of the report states that,
"the sector was characterised by hard-sell advertising and direct-marketing which encouraged people to 'have a go' even if there was little chance of actually achieving the large payout being dangled as an inducement. We heard about people being
- encouraged to make claims for tripping over the same paving slab or driving over the same pothole. Ultimately the whole sector was brought into disrepute".
There were many in the industry who expressed concern at that time. Indeed, the Better Regulation Task Force said that it cropped up at virtually all of its meetings.
I can readily understand the Government's response that regulation should be a matter for companies under the doctrine of self-regulation. We saw that with the general insurance sector setting up the General Insurance Standards Council—GISC. I think that the Government were probably quite pleased with the way that that developed until the European Commission and the European Union decided to introduce compulsory, statutory regulation. Therefore, the work of GISC was handed over to the Financial Services Authority.
I think that the noble and learned Lord the Lord Chancellor hoped that that would be the way regulation of the claims management sector should develop. Of course, it went badly wrong. I think that it went badly wrong because into the market place came a whole range of individuals and companies who were there for profit and not there to look after the victim. The Better Regulation Task Force pleaded with the sector to "bring itself into order"—I think that that was the phrase it used—and that if it failed to do so, the DCA would step in and regulate the sector. Ultimately, the noble and learned Lord the Lord Chancellor appears to have changed his mind overnight between 21 and 22 March. It is an interesting turnaround. At some time, I hope that someone will explain it to me. But on 21 March 2005, the noble and learned Lord, at the Legal Services Reform Conference, said:
"There has been a lot of concern recently about claims management companies . . . I welcome the steps the Claims Standards Council has been taking to try and respond to these issues. But I will be looking carefully to see how the protection of consumers' interest can be improved".
Twenty four hours can be a long time in politics: lo and behold, the following day, the noble and learned Lord said:
"Voluntary self-regulation has a role, but obviously we cannot rely on it. Some statutory teeth are needed".
He also said, and I repeat that this was on the following day:
"I believe the time has come to take clear and firm action. So I can announce today that we will legislate on claims managers. We will use the law to regulate their activities",
and here we are. It may be that the noble and learned Lord did not have the necessary sanction from colleagues to make the announcement on the previous day. I do not want the Minister to think that I am in any way being critical, because I very much welcome the clear and firm statement made on 22 March.
To explain why—this is really what this amendment is all about—the noble and learned Lord the Lord Chancellor stressed that if statutory regulation was to be introduced, it would need to be introduced
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"quickly". I quote the word "quickly" from his speech of 22 March. He had previously in the same speech said:
"I said in November that the claims management sector must be properly regulated. I said that high pressure selling, sharp practices and targeting vulnerable people must stop".
"We hear of people being stopped in the high street and being asked to make a claim, harassed to sign agreements which they may not understand. Others receive persistent phone calls pushing them to make a claim. Some are visited again and again until finally they are persuaded to pursue a claim".
My summary of these very good comments is that we need to see action taken now.
I hope that the Minister will be able to bring us up to date with what has happened since the previous Committee day. As the Committee knows, I have been pressing all along for action to be immediate. We have now reached the position where the industry has palpably failed at its attempts at self-regulation. I believe that the wider public perception of the industry is at a low ebb. For that reason we need clear and precise regulation which will be really effective and will, by means of appropriate transitional provisions, have immediate effect upon enactment.
Much of today's debate, particularly on the amendments that follow, will be about gaps. I believe that the Minister and the Committee share the intention that there should be no gaps in the regulatory cover, no loopholes in the provisions, no "wriggle" room, no types of relevant activity left out, no types of relevant people missed and—to my mind most important of all—no gaps in time. That is really what this amendment is all about.
I give two examples of the way in which the situation has deteriorated. An article appeared in Insurancetimes in August headed,
"Dodgy claims management companies are forging the NHS kitemark on promotional literature and commandeering old ambulances to illegally target vulnerable hospital patients".
That concerned a case where an ambulance was parked outside an accident and emergency department and people attending hospital were encouraged to make their claim with that particular company. It was later disclosed that the personal injury care line concerned was a member of the Claims Standards Council. Such incidents give rise to concern.
The second area relates to an article that appeared in The Lawyer, again in August, headed "Blood Money", with the sub-heading,
"The ambulance-chasers are back, this time offering their services to victims of the London bombings".
"Claims companies are trying to make money out of the bombings by luring people into agreements that will entitle the claims companies to large shares of compensation payments".
That was a quotation from the President of the Law Society, who then explained,
"The Law Society went public after it was contacted by victims of the bombings who had already telephoned claims companies—one had offered its services on a 'no win, no fee' basis under the Criminal Injuries Compensation Authority (Cica) scheme for one-fifth plus a cut of the compensation".
The President of the Law Society pointed out that,
Those are two examples of where things are happening as we speak. I dare to confess to the Committee that I have surfed the Internet and have found a number of other rather disquieting developments to report when we discuss later amendments. I hope that the Government will respond positively to Amendment No. 27A.
3.45 pm
Amendment No. 51 speaks for itself. This is one of the areas where, if there is a gap in time—whether before a regulator has been set up or between regimes—the Lord Chancellor must stand in. We have to send a clear message to the sector about the all-embracing scope of this new regime. There are those in claims management companies and solicitors who want to see high standards set and therefore will welcome such a commitment. Those who do not want exacting requirements will move on; and no one will be sorry to see them go. The most obvious gap in time, however, is at the beginning. I would welcome clarification from the Minister on how soon after commencement she and her hard-working officials envisage that a regulator will be designated and his or her powers set up. I do not just mean after commencement, I really mean now, because the sorts of situations I have been describing are happening out there and vulnerable people are being targeted.
In Amendment No. 67A we have sought to tie in the transitional provisions which are referred to in a number of places, but in noticeably vague terms. I feel strongly that this is all about sending the right messages from the outset. Those in this sector who are not trying to meet reasonable standards need to understand that there is no further period of grace. There is no more "last chance saloon". The last chance was stated very clearly by the noble and learned Lord the Lord Chancellor over a year ago. Too many are operating in this market for short-term gain. Another 12 months grace will, I am sure, suit their purposes very nicely indeed. I really want to hear from the Minister that their time is up. I beg to move.
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