Culture, Media and Sport CommitteeWritten evidence submitted by Citizens Advice Bureau [NTC 012]

About Citizens Advice

The Citizens Advice Service provides free, independent, confidential and impartial advice to everyone on their rights and responsibilities. It values diversity, promotes equality and challenges discrimination.

The service aims:

to provide the advice people need for the problems they face; and

to improve the policies and practices that affect people’s lives.

The Citizens Advice service is a network of nearly 400 independent advice centres that provide free, impartial advice from more than 3,500 locations in England and Wales, including GPs’ surgeries, hospitals, community centres, county courts and magistrates courts, and mobile services both in rural areas and to serve particular dispersed groups.

In 2011–12 the Citizens Advice service in England and Wales advised over two million people on nearly seven million problems. Debt and welfare benefits were the two largest topics on which advice was given.

Nuisance Calls and Texts

Introduction

We welcome the opportunity to provide evidence to the Culture, Media and Sport Committee as it considers its inquiry into nuisance calls.

Almost everyone in the country with a phone has at some point been on the receiving end of a nuisance call or a nuisance text. They are irritating at best but they can cause alarm and distress to people who receive them.

Recent Ofcom research shows that consumers receive on average two nuisance calls per week with a quarter receiving more than 10 a month.1 Research carried out by Citizens Advice last year found that nine in ten people surveyed had received nuisance calls and texts within the previous 12 months.2

In 2012–13, the Citizens Advice consumer service received over 30,000 complaints about cold calling, with over half of these accounted for by professional and financial services.

The inconvenience, irritation and alarm caused by the calls themselves is compounded by the harm caused to people who end up buying goods or services as a result of cold calling which they would not otherwise have purchased. An analysis of complaints to the Citizens Advice consumer service about financial services between January and February this year found that in 35% of cases, the initial contact appeared to have been unsolicited. 97% of cases involving pension unlocking—which is a highly damaging scam—and 56% of complaints about PPI claims management stemmed from cold calls. 30% of the cases involving cold calling were scams.

We also see evidence of a trade of people’s personal and bank details by lead generators and other firms behind cold calling, with one in seven people in the same analysis saying their details were passed from company to company. This is likely to vastly understate the true scale of the phenomenon and highlights the loss of control of people’s data once firms like lead generators and credit brokers have someone’s details.

Tighter regulation and enforcement

Citizens Advice has been calling for firmer enforcement action on firms who break the law around direct marketing. While we have been reassured by our conversations with the Information Commissioner’s Office and Ofcom that they take the issue seriously and are now doing everything in their power to tackle it we have always been clear that existing powers are not enough.

We welcome the proposal by the Department of Culture, Media and Sport to consider lowering the threshold for the Information Commissioner’s Office (ICO) to take action against a firm breaching the Privacy in Electronic Communications Regulation (PECR). At the moment the bar is set too high and effectively allows firms to break the law with impunity.

There has been a lot of recent effort to make sure the ICO and Ofcom are working closely together on this issue, and the decision to legislate to allow the two regulators to share data will help enforcement action.

Ofcom’s prioritisation of silent and abandoned calls in its work plan for this year is also a welcome development.

The action being taken by DCMS, ICO and Ofcom is welcome and will help tackle some of the immediate issues. These changes will not by themselves be enough to stop the problem though and we believe the Government will eventually find itself having to legislate further.

We also believe that the ICO should be able to take evidence provided by Citizens Advice into account when considering the detriment caused by particular firms, rather than relying solely on complaints from the public. While we can attempt to contact clients and ask them to make a complaint to the ICO, it is extremely time-consuming and an inefficient use of resources when we already have all the details the ICO would require. We would propose that organisations with super-complainant powers should be able to pass on consumer complaints in this way.

Improving the ability to trace calls and texts

Finding a way to improve the ability of communications providers to track exactly who is making a call is essential. At present this a challenge due to the ease with which the true phone number of a caller can be obscured. There are some perfectly valid reasons for doing this. For example, if a phone call originates from a call centre it makes sense for the number which appears to the person being called to be the main customer service number for that company rather than the call centre handler who made the call.

That it is easy to abuse this facility is an issue only because tracking a call with a so-called “spoofed CLI” can be very difficult. The answer is not to ban the presentation of a phone number which is different to the line the call originates from.

The ability to more easily trace a call is essential if the ICO and Ofcom are to be successful in making greater use of their existing enforcement powers as well as to make a success of any powers they or the mooted single regulator may have in future.

There is also an issue about spam texts sent from unregistered SIM cards. At present the only way to track these texts is by tracking which mobile phone masts were used to send the texts. Firms or individuals engaging in large scale nuisance texting are generally aware that they are breaking the law and take steps to evade their location being found, either by moving around or constantly using new SIM cards. We believe there is a case for examining the ease with which large quantities of unregistered SIM cards can be obtained.

Consumer consent

One of the most problematic areas in the current regulations is around consent. PECR effectively allows firms to claim they have permission to contact someone when the person concerned has no knowledge or memory of giving their consent. In some circumstances the person will have accidentally ticked a box on a website which gives the company who runs the website permission to pass their details on to third parties. While this is legal it beggars belief that someone can be considered to have given consent to something when they believe they have not.

We believe that firms engaging in direct marketing should be required to be able to demonstrate that they have permission to contact every person they call or text under the opt-in parts of PECR. By law, recipients must have opted-in to receive marketing texts, recorded calls and faxes. They must opt-out to stop receiving live voice calls, either by informing individual companies they do not wish to be contacted again or by joining the Telephone Preference Service (TPS). In practice though, firms appear to be contacting people who have either not given their consent or have explicitly asked not to be contacted by joining the TPS. The ambiguity over consent plays an enormous part in enabling these firms to do so with impunity, and it is hard to consider it as anything other than an abject regulatory failure.

Tackling the issue around consent would also help reduce the market for and value of illicitly gained personal contact details since the risk of enforcement action would be significantly greater for any firm which used them for marketing purposes. Given that a murky industry of lead generating firms lurks beneath many nuisance calls and texts, putting a dent in their business model could only be a good thing.

Claims management companies

While tightening up regulation and enforcement of breaches of PECR will help reduce the incidence of nuisance calls and texts, we believe there is a case for restricting the ability of firms in some sectors to engage in direct marketing in the first place.

Chief among these are claims management companies (CMCs), who have spent the last few years bombarding the public with endless calls and texts exhorting them to reclaim mis-sold PPI or claim compensation for personal injury for example. PPI CMCs in particular have come to the fore in the last few years and show little sign of abatement given that the pot of money set aside by banks to pay for consumers’ compensation continues to rise towards £20 billion. Ofcom’s recent study of landline nuisance calls found that a quarter of all nuisance calls and half of unsolicited sales calls were from PPI CMCs.3 The same research found that 97% of people who received PPI calls found them to be “annoying”.

Consumers are harmed by CMCs not only by their persistent and often obnoxious marketing efforts, but also by their conduct. In the PPI market in particular, they are extracting fees of at least 25% from consumers’ compensation pay-outs for a process that people can do themselves without difficulty. They regularly fail to properly explain their fee structure, have been known to charge up-front fees and then refuse cancellation rights even after doing a sub-standard job, and inflate the likely compensation which can be expected. They also appear to automatically refer all cases rejected by the banks to the Financial Ombudsman Service (FOS), clogging up their processes and slowing down genuine appeals. Where their clients have an outstanding debt with the firm they are reclaiming PPI from, their compensation will be set off against the existing debt leaving the client to pay the CMC fees from their own pocket.

The Ministry of Justice Claims Management Regulator (MoJCMR) recently published new conduct rules, but it did not consider direct marketing or the relationship with lead generators. An argument we have encountered is that because debt management companies are not prohibited from direct marketing that it would be anomalous for a ban to apply to CMCs. We thoroughly disagree with this: debt management companies should be banned from direct marketing as well.

CMCs are constantly seeking out new markets. For example, we have begun to see cases involving attempts to claim compensation for mis-sold packaged accounts, a market where there may be a significant level of compensation due to consumers. Ironically, we also recently saw a case where a CMC had sent an unsolicited text offering help claiming compensation for nuisance calls. Any notion that the harm caused by CMCs will diminish as PPI compensation eventually tails off is likely to be naïve.

Given the persistence with which this market has resisted attempts to reform it and the significant level of detriment it causes, Citizens Advice believes there is a strong case for banning CMCs from direct marketing altogether. It would also be necessary to ban them from buying leads elicited from cold calling and texting by lead generators. The Ministry of Justice Claims Management Regulator already has powers to make rules to this effect.

August 2013