Some exciting legislation has just been through the House of Lords. Thanks to dedicated work by peers across all sides, the Financial Guidance and Claims Bill includes significant improvements to consumer protection in connection with cold-calling, help for vulnerable people, rescheduling debts and regulation of claims management companies.
The Bill aims to merge guidance bodies Money Advice Service, Pensions Advisory Service and Pension Wise under one umbrella. They will be rebranded as a single financial guidance body, offering the public free financial education, information and guidance.
The new body does not yet have a name but, clearly, it must not include the word “advice”. The Government refused to remove the word from the debt counselling functions of the new organisation, which is a mistake.
Nevertheless, the body should help more people recognise the value of paying for professional independent advice. Helping the public understand the difference between guidance and advice – and appreciating the value of IFAs’ expertise and qualifications – is vital.
The Government suffered several defeats in the Lords as a cross-party group of peers were determined to force ministers to add important new measures to the legislation.
Our amendments included explicitly encompassing consumer protection in the guidance body’s remit, enabling a pensions cold-calling ban, imposing a duty of care on financial firms for vulnerable individuals, and requiring the Government to establish a debt respite scheme. In addition, there will be an immediate 20 per cent cap on CMC fees for PPI misselling claims. Currently, many customers are charged far more than this and lose significant amounts of their compensation.
Perhaps the most important new measure was introducing default guidance, requiring all customers wishing to transfer or withdraw pension savings to be automatically enrolled into free financial guidance, unless they have an IFA.
Pension Wise uptake is woefully low – less than 10 per cent have a guidance session – yet those who use it report satisfaction rates around 90 per cent. Ensuring everyone is auto-enrolled into guidance can help them make better-informed decisions and protect more against scams and fraud. When the Bill moves to the Commons, we hope these new measures will not be overturned and, indeed, further improvements be added.
A Lords amendment to add cold-calling to the Bill’s title enables MPs to press for a proper ban, rather than the Government’s plan to rely on the Information Commissioner’s Office. The ICO’s powers are about as much use as a chocolate fireguard – merely trying to catch perpetrators after customers have been scammed.
A far more effective remedy is to make the FCA responsible for banning both cold-calling and the use of leads obtained from unsolicited approaches. Such nuisance calls and texts are an increasing menace.
FCA implementation could strip firms of their licence if they benefit from cold-calling, thereby undermining such business models. Cold-calling for mortgages was banned long ago, now we can do this for pensions and CMCs too.
Ros Altmann is former pensions minister