My Lords, I will be very brief. I know that the Committee is keen to move on to the simple and straightforward government amendments. This amendment is designed to do just one thing, which is to persuade the Government to ban cold calling in the service of debt management providers.
Cold calling lead generation and cold calling directly is banned for mortgages and has been for a long time. It was banned because it was felt that it generated high risk for consumers. Cold calling lead generation for debt management providers is much higher risk for consumers. The FCA published its thematic review of debt management advice in June of this year. It makes extremely worrying reading.
The FCA acknowledged that debt management is one of the highest risk activities in consumer credit. Its review found that: customers are not sufficiently made aware of the nature of the service being offered, including any fees they may be required to pay; customers are not being made aware, as is compulsory, that help in managing debt is available free of charge; the debt advice provided may not be in the customer’s best interests and debt solutions that are not suitable, affordable or sustainable are offered; customers are recommended or sold additional products that may not be in their best interests; the nature and level of fees charged by some fee-charging debt management firms is such that they affect the customer’s ability to make significant repayment towards their debt; and firms do not market themselves in a manner that is clear, fair and not misleading.
There is other stuff, too, about the lack of protection of client money. It is all extremely damning. I know that the Minister and the FCA are fully aware of this problem and of its scale. For example, StepChange, a free debt management advice company, had more than 500,000 people contacting it for advice in 2014 alone, which was a 56% increase on the number for 2012.
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Cold calling to generate leads for fee-charging debt management firms is a key aspect of the business. The FCA rules require cold callers to make customers aware of the existence of free debt management advice. The FCA found that information about the availability of free advice was either not provided, not sufficiently prominent or biased. Quite who regulates these cold callers is not entirely clear; there is a kind of regulatory Bermuda Triangle, with the FCA, the ICO and Ofcom all having some responsibility. As a result, cold callers are not properly regulated at all. I know that the Minister and the FCA have this under review, but it will take a year or so for that review to appear and longer for anything to actually happen. In that year or longer, hundreds of thousands, perhaps even millions, will have been exposed to unscrupulous cold calling lead generators.
We know what the problem is. We banned cold calling for mortgages. Cold calling lead generation for debt management companies affects the most financially vulnerable people in our society. The people affected are much more vulnerable than people looking for a mortgage. Why delay? Why not apply right now the
same rules to cold calling for debt management as to cold calling for mortgages? That is what the amendment proposes; I beg to move.