Financial Guidance and Claims Bill [HL]

Explanatory Notes

Policy background

Single Financial Guidance Body

3 The Financial Guidance & Claims Bill builds on a Government commitment to ensure that members of the public can access good-quality, free-to-client, impartial financial guidance and debt advice. These services are currently provided by a number of different organisations, including financial services firms, and the utilities and charity sectors.

4 Government-sponsored pensions guidance, money guidance and debt advice is currently provided by the Money Advice Service, the Pensions Advisory Service, and the Department for Work and Pensions under the ‘Pension Wise’ banner.

5 In October 2015 the Government launched a review of public financial guidance provision in the United Kingdom. The review, Public financial guidance consultation 1, sought views on how publicly funded pensions guidance, debt advice and money guidance (including financial capability) could best be structured to help people make effective financial decisions.

6 In March 2016 the Government set out proposals to replace the Money Advice Service with a new, streamlined money guidance body, and to bring together the Pensions Advisory Service and ‘Pension Wise’ into a new pensions guidance body (Public financial guidance review: proposal for consultation 2). Whilst stakeholders were generally supportive of the Government’s aims, concerns were raised over how the two bodies would work together, and whether a single body could provide a better, more streamlined service.

7 In October 2016, the Government took the decision to create one single financial body instead of two, and in December 2016 HM Treasury and the Department for Work and Pensions published a further consultation, Public financial guidance review: consultation on a single body 3, setting out proposals for a single financial guidance body that could provide more joined up debt advice, money guidance and pensions guidance, support the development of a national strategy to improve financial capability and debt management, and co-ordinate the provision of financial education to children and young people. This consultation closed in February 2017.

Claims Management Services

8 Claims management companies are businesses which provide advice and / or other services in relation to the making of compensation claims for personal injuries, financial products and services, employment issues, industrial and criminal injuries and housing disrepair. There are currently around 1,400 authorised claims management companies in operation.

9 The Claims Management Regulation Unit was established in the Ministry of Justice in April 2007, and regulates claims management companies active in England and Wales. This was intended to be an interim measure.

10 However, there is evidence of malpractice in the sector and a number of complaints have been leveled at claims management companies. Common complaints included poor value for money, misrepresentation of the service offered to consumers, and reliance on nuisance tactics, such as unsolicited calls and texts. As a result, consumers have become distrustful of claims management companies, with 76% of the public having reported that they are not confident that the companies tell the truth to their customers.

11 At Summer Budget 2015, the Government commissioned an independent review, led by Carol Brady 4 , to examine claims management regulation and make recommendations to improve conduct in the sector. Following this review, the Government announced at Budget 2016 its intention to establish a tougher regulatory regime for claims management companies by transferring supervisory responsibility from the Ministry of Justice to the Financial Conduct Authority.

12 These clauses will make amendments to the Financial Services and Market Act 2000 to enable the Financial Conduct Authority to regulate claims management company activity as a ‘regulated activity’ under the Act.

13 These clauses also provide for the transfer of complaints-handling responsibility from the Legal Ombudsman to the Financial Ombudsman Service. This will allow the Financial Ombudsman Service to take over jurisdiction to investigate and determine consumer complaints about the service provided by the claims management companies.

14 The Financial Conduct Authority will also be given power to impose a cap on the fees that claims management companies can charge for their services.

15 The clauses will also include a power on the Ministry of Justice to put into place a transfer scheme for assets and liabilities of the Claims Management Regulation Unit to the Financial Conduct Authority, and a scheme providing for the transfer of staff.


Prepared 22nd June 2017