Compensation Bill [Lords]

I point out gently to the right hon. Gentleman and to other colleagues that if they allow me to develop my speech I will come to that point. The practices we want to stamp out fall into three main areas. The first is the encouragement of frivolous claims, by raising false hopes about the compensation available, through high-pressure marketing techniques, such as my hon. Friend the Member for Amber Valley (Judy Mallaber) described. Secondly, consumers are misled about the options for funding their claim; in some cases, companies do not let them know that there is a free alternative and, in others, they sell inappropriate additional services, such as loans to fund insurance premiums. Thirdly, we want to protect consumers against poor-quality advice where claims managers act directly for them. Citizens Advice frequently has to pick up the pieces when claims farmers leave consumers high and dry. Its 2004 report, ““No win, No Fee, No Chance””, referred to a woman who had tripped and suffered cuts and bruises. Three years later, she was offered £500 compensation from the company concerned, but on the advice of a claims management company she it turned down and was encouraged to borrow money to pursue the claim. She eventually won £1,200 but that was deducted from her loan, leaving a shortfall of £950 which is still accruing interest. Clearer information about the risks and the likelihood of additional costs that would have to be met from her own pocket might have led to a better outcome. Which? has recently carried out research into claims management companies dealing with endowment mis-selling and found wide variation in the fees charged and services given. It also found evidence of scaremongering by some claims management companies, which suggested that claims brought by individual consumers themselves would almost certainly fail. The evidence is actually to the contrary. My Department and the Advertising Standards Authority have recently funded comprehensive market research on the impact of claims advertising, which, among other things, confirmed that people have limited understanding of what is involved. Terms such as ““No win, no fee”” are often misinterpreted and the need for a third party to be at fault is not always apparent. The research is being presented to the bodies responsible for the various advertising codes, and they are considering whether changes to the codes are necessary.