Culture, Media and Sport CommitteeWritten evidence submitted by Ofcom

Nuisance calls and messages are a significant problem and can be the cause of considerable concern and anxiety for consumers. This issue grew sharply last year, when there was a significant increase in the number of complaints about unsolicited live marketing calls to the Telephone Preference Service (TPS) and about abandoned and silent calls to Ofcom.1 So far this year Ofcom has received, on average, nearly 3,200 complaints about abandoned and silent calls a month. This is an issue we take very seriously and is a priority work area in our annual plan 201314.2

Various different types of nuisance calls and messages can cause harm to consumers, including:

Unsolicited live marketing calls. These are calls from a real live call centre agent who is trying to sell a product or service, such as insurance or home improvements.

Recorded marketing message calls. These are calls when a recorded message is played trying to sell something. For example, the message may concern mis-selling of payment protection insurance.

Abandoned and silent calls. An abandoned call is one that is terminated when you pick up the receiver. Instead of a person on the other end of the line you may hear a recorded information message from the organisation that is trying to contact you.3 A silent call is a type of abandoned call, where you receive a call but can hear nothing and have no means of knowing whether anyone is at the other end of the line.

Unsolicited marketing text messages. These are text messages marketing a particular product or service. Organisations may send such messages to generate “leads” which they then sell on to firms who offer the service provided in the message, such as companies that manage PPI claims.

Further information on these and other types of nuisance calls and message can be found in our Consumer Guides.4

Tackling the harm caused by nuisance calls and messages is complex. From a regulatory perspective:

The Information Commissioner’s Office (ICO) takes the lead in tackling unsolicited live marketing calls, recorded marketing message calls and marketing texts using its enforcement powers under The Privacy and Electronic Communications (EC Directive) Regulations 2003 (“PECR”).

PECR does not directly deal with abandoned and silent calls;5 therefore Ofcom has been addressing this type of harm using its powers to tackle persistent misuse of electronic communications networks and services under sections 128–131 of the Communications Act 2003.

Ofcom can also use these powers to tackle other forms of persistent misuse that are not covered by PECR, including number scanning (where calls are made to find out which telephone numbers are in service or not6); and the repeated use of invalid telephone numbers that do not enable the person receiving the call to identify the caller and return a message.7

Ofcom has responsibility under PECR for maintaining registers of the telephone numbers allocated to individuals and businesses that wish to opt out of receiving unsolicited live marketing calls or unsolicited marketing faxes. The Telephone Preference Service (TPS) has been appointed to maintain those registers on behalf of Ofcom.8 However, it is the ICO that has lead responsibility for ensuring compliance with the regulations in PECR, including the requirement not to make direct marketing calls to telephone numbers included on the TPS register without consent. Complaints made to TPS are regularly passed to the ICO to enable it to decide whether to take enforcement action.

Further information on the legal and regulatory framework relating to nuisance calls and messages is provided at Annex A.

In addition to the ICO and Ofcom, there are a number of other regulatory bodies and government agencies with an interest in this area: the Claims Management Regulation Unit of the Ministry of Justice (which regulates claims management companies, which are thought to be responsible for generating a significant volume of nuisance calls and messages), the Office of Fair Trading (in respect of debt management organisations and consumer protection more generally), the Advertising Standards Authority (in respect of misleading advertising), PhonepayPlus9 (premium rate number scams), Action Fraud10 (scams more generally), and the Serious Organised Crime Agency (where serious fraud is involved).

Reflecting the various regulatory responsibilities outlined above, the rest of this submission focuses on Ofcom’s role in tackling silent and abandoned calls.

What causes abandoned and silent calls?

The majority of abandoned and silent calls are not prank or malicious calls. They are usually caused by call centres using automated calling systems known as diallers to maximise the amount of time agents spend speaking to consumers. When an individual answers the call the dialler transfers the call to an agent; if no agent is available, then this can result in the consumer receiving an abandoned call. Ofcom expects that, where a call is abandoned, a recorded information message should be played, in line with Ofcom’s Guidelines (see below), so that the call is not silent. (A silent call is considered to be a type of abandoned call). Silent calls should not be made by call centres, if they are complying with Ofcom’s Guidelines, but they may still occur if, for example, a consumer picks up their phone just as a call centre hangs up; or due to inaccuracies of technology used to detect the presence of answer machines (where the technology thinks it has reached an answer machine but it is in fact a live individual).

How does Ofcom tackle abandoned and silent calls?

Ofcom has issued Guidelines11 that set out the steps it expects dialler users to take so as to avoid making abandoned or silent calls; and if such calls cannot be entirely avoided, to limit the consumer harm caused as a result. The Guidelines include a statement of policy on persistent misuse, pursuant to section 131 of the Communications Act 2003. This sets out our general policy with respect to the exercise of our powers in respect of the persistent misuse of electronic communications networks and services. These Guidelines have been consulted on and revised, most recently in 2010, and include measures to:

Limit abandoned calls—abandoned call rates should not exceed 3% of live calls made per call centre or per campaign over any 24 hour period. The 3% limit on abandoned calls aims to strike a balance between efficiency gains from using dialler technology (which in turn may feed through into lower prices for consumers) and consumer harm.

Help consumers identify the organisation calling them—if a call is abandoned a recorded message should be played which identifies the company making the call12 and includes a number for the consumer to call to be removed from the dialling list. Organisations need to make a valid and accurate telephone number (calling-line identification (CLI) information13) available so the call recipients14 can identify who rang them via caller display or by dialling 1471.

Limit repeat abandoned15 and silent16 calls—there are specific Guidelines which limit the circumstances in which repeat abandoned and silent calls can be made to the same individual.

Enforcement Action

Ofcom continually monitors complaints about abandoned and silent calls and can launch an investigation if it suspects an organisation is not complying with the Guidelines.

Ofcom takes both formal and informal enforcement action to ensure compliance with the Guidelines. Formal enforcement cases are resource intensive by nature. This means that we can only take on a limited number of formal cases in any given time period, but they have a wider deterrent effect. When investigating a company, Ofcom needs to gather all the necessary evidence to establish the facts. We must also follow due process and the legal framework requires that where we have reasonable grounds for believing that an organisation has persistently misused an electronic communications network or service, we must give that organisation an opportunity to make representations before taking a decision. Similarly, we would allow an organisation to make representations if we were to proceed and consider imposing a penalty on them. Annex B provides an overview of the process that we need to follow when taking formal enforcement action against organisation suspected of making abandoned and silent calls.

Until October 2010, Ofcom was limited to imposing a maximum financial penalty of £50,000 for the persistent misuse of electronic networks or services. Annex C provides a list of the formal enforcement cases taken and financial penalties issued. When we leveled the maximum (at the time) penalty of £50,000 on Barclaycard in September 2008 for making an extremely high number of silent calls, we said we would have fined them more if we had been able to do so.17

Parliament subsequently increased the maximum penalty for persistent misuse of an electronic communications network or service to £2 million in October 2010. We supported the change and believe the increased potential penalty acts as a deterrent and an appropriate punitive sanction. Since the start of 2012, we have issued fines of more than £1.5 million in total for making such calls:

£750,000 penalty on HomeServe for making for making abandoned and silent calls to UK consumers (April 2012).18

£60,000 penalty on npower for making abandoned calls and playing messages containing marketing content when calls were abandoned (December 2012).19

£750,000 penalty on TalkTalk for making abandoned and silent calls through two of its call centre operators (April 2013).20

Ofcom has also taken informal enforcement action against a range of organisations. In the first six months of 2013, Ofcom has taken such action against 11 organisations following consumer complaints about abandoned and silent calls.21 As a result, complaints linked to the telephone numbers used by seven of those organisations have stopped, and complaints in relation to the remaining four have fallen significantly.

Ofcom is currently investigating suspected abandoned and silent calls made by companies in the PPI/claims management sector.22 We are also considering enforcement action against organisations that fail to provide consumers with the information they need to contact the caller after receiving an abandoned or silent call.

Enforcement Only Part of the Answer

We have already taken strong enforcement action, and are using the full extent of our legal powers to address the issue of abandoned and silent calls. However, our enforcement action can only address part of the problem, because:

We face significant difficulties identifying the companies that generate abandoned and silent calls. In particular, many companies present invalid telephone numbers to consumers; others fail to answer the phone when called or seek to evade any contact or the provision of information.23 The position is further complicated by the practice of recycling telephone numbers.24 In some cases companies have used the phone number of a legitimate, but entirely unrelated, business.

Where a company is hiding behind an invalid telephone number it becomes necessary to trace the call to identify the organisation that made it. Such calls are typically carried across several networks before reaching the person being called, so in order to trace the call back to its origin, we may need to send a series of formal information requests to a number of different communications providers. We rely on our information gathering powers under section 135 of the Communications Act 2003 to do this. While this process can work successfully, it is dependent on cooperation from the communications providers concerned and links in the chain of requests may break down at any point. Furthermore, it can be particularly difficult to trace companies making calls over the internet using Voice over the Internet Protocol (VoIP) technologies.25 As outlined below, Ofcom is working with industry to improve call tracing processes as far as possible.

Nuisance calls are generated by a large number of organisations across a wide range of sectors.26 We have found that generally, larger, more reputable businesses appear to have improved compliance with Ofcom’s Guidelines on abandoned and silent call, but there has been a proliferation of organisations generating a small number of complaints each, amounting to a large aggregate number.

Some complaints are generated by less reputable companies whose business model may be based on a disregard for the law.27 These companies are unlikely to be affected by enforcement action taken against other companies, and are not likely to be concerned about damage to their reputation from enforcement action. Many may also be only too aware of how difficult it can be to trace companies making VoIP calls and use this to their advantage.

Consumer research

In light of these issues, Ofcom recently commissioned new market research to obtain a better understanding of the root causes of nuisance calls, so that we could identify the most effective means to tackle this problem. We asked over 800 consumers to keep a diary to record all unwanted calls received on their home landline over a four-week period. This measured the number, type and frequency of nuisance calls and gathered information about each call, where available; including the type of organisation making the call and whether the caller’s telephone number was identifiable.

Key findings included the following:

82% of consumers taking part in the research received an unwanted call. Among those consumers, the average number of unwanted calls received was 8.4 per person over the four-week period (or around two per week). A quarter (26%) reported more than ten nuisance calls over the four weeks. In addition, where older people (typically 55 years and over) and those not working reported receiving such calls, they reported receiving a higher number of nuisance calls than younger people and working adults. This is likely to be due at least in part to older and non-working respondents being more likely to be at home to receive nuisance calls.

Calls about PPI claims made up 22% of all nuisance calls, where the panellists were able to identify the product or service, rising to 51% of identifiable unwanted recorded sales calls. Energy (10%), market research (10%) and insurance (8%) were also among the most commonly cited sectors generating unwanted calls.

The most prevalent types of nuisance calls were live marketing calls (38%), followed by silent calls (34%) and recorded sales calls (14%).

Participants were only able to identify the name of the company calling in one in five nuisance calls (20%) and the telephone number in one out of every three nuisance calls (34%).

The majority of unwanted calls were considered “annoying” (86%) with PPI related calls found to be most annoying (97%). Conversely, 7% of unsolicited calls were not considered a problem and 1% were “useful”.

7% of nuisance calls were considered “worrying” while 3% were “distressing”. Calls from companies purporting to offer computer support or maintenance were the most worrying (31%) and distressing (13%).28

We published the findings of our market research in May 201329 and wrote to the Ministry of Justice to draw attention to the extent to which PPI claims appear to be driving nuisance calls as highlighted in the research. The research has informed our own enforcement work, as well as our wider nuisance calls work, in particular our current assessment of new proposals for tackling nuisance calls (see below). We intend to repeat this research next year.

How is Ofcom tackling the problem?

Ofcom is fully engaged in trying to tackle the issue of nuisance calls, in particular by taking strong, targeted enforcement action. And, given the limits on the extent to which enforcement action can resolve the issue, we have developed a broad-based approach to tackling nuisance calls, rather than focus solely on enforcement.

This approach was first set out in January 2013, when we published a five-point action plan outlining how we were working with regulators, industry and Government to tackle nuisance calls.30 This comprised ongoing enforcement to tackle the issue directly; measures to improve compliance; working with industry to improve call tracing to make it easier to identify companies behind nuisance calls; new research to provide better intelligence on the incidence of nuisance calls as well as the companies and sectors behind them (outlined above); and effective co-ordinated action with ICO and others. This plan has now been superseded31 by a joint ICO Ofcom action plan, which is attached at Annex D.

By way of summary, the key steps that Ofcom is taking include the following:

Improving compliance—Ofcom actively pursues informal enforcement cases to promote compliance in parallel with its formal enforcement cases. In addition, Ofcom and the ICO have written a joint letter to industry to warn them of the law in relation to nuisance calls and messages and the penalties for organisations that fail to comply.32

Ongoing, targeted enforcement action—Ofcom continues to take enforcement action where appropriate to ensure companies comply with our guidance on abandoned and silent calls. As outlined above, since April 2012 Ofcom has issued over £1.5 million in penalties to organisations making abandoned and silent calls.

Call tracing—Ofcom is working with industry to improve call tracing processes to track down those responsible for making nuisance calls and to look at ways to prevent such calls. Further details of this work can be found in the joint ICO Ofcom action plan.

Consumer research—As set out in more detail above, in May 2013 we published new research to get a clearer picture on the incidence of nuisance calls and the companies making these calls to improve our understanding of the root cause of the problem. This will be repeated next year.

Review of the TPS—The ICO and Ofcom will be carrying out an assessment of the impact of the TPS on the level of unsolicited live sales and marketing calls, to understand how well the TPS is currently working for consumers. This will focus on a new, in-depth piece of market research that is currently being commissioned and is likely to be completed spring 2014.

Information sharing with the ICO—We have asked Government to amend the information disclosure provisions of the Communications Act 2003 to make it easier for Ofcom to share information relating to nuisance calls with the ICO. We welcome the Government’s recent announcement in its Connectivity, Content and Consumer paper33 that it will do this.

New proposals for tackling nuisance calls– There is a range of more radical changes to the landscape of nuisance calls and the call centre industry which MPs and consumer groups have called for. We agree it is important to consider such options. With this is mind Ofcom is currently developing proposals to look at possible new ways of tackling the root causes of nuisance calls. Given the complexities and challenges involved, we envisage that a holistic package of measures is likely to be most effective and will consider a range of possible technical and non-technical measures, and assess how effective they might be in tackling nuisance calls. Ofcom plans to provide an update to Government on this work in autumn 2013.

Consumer advice—In October 2012 we published online consumer guides to tackling nuisance calls and messages in collaboration with other regulators and consumer groups, which have been viewed online over 159,000 times. These set out clearly which organisation the consumer should complain to and also provide advice on steps consumers can take to help reduce nuisance calls. The complex nature of the regulatory framework and the wide range of different types of calls and messages make such guidance of particular importance for consumers. In light of this, we intend to review the guides in discussion with consumer groups and, where appropriate, update them by end 2013.

Ofcom remains very concerned about the consumer detriment being caused by nuisance calls. We are using the full range of our powers to tackle the issue of abandoned and silent calls (where we have lead responsibility). This is a complex area to address and requires a wide range of actions, including joint action from a number of different agencies and Government. We have therefore been working with Government and other regulators to help drive a coordinated and more effective response to nuisance calls.

Annexes Attached to This Paper:

Annex A: Legal and regulatory framework.

Annex B: Overview of the process for investigations into the persistent misuse of electronic communications network or services that proceed to a penalty decision.

Annex C: Ofcom’s formal abandoned and silent calls enforcement cases and financial penalties levied.

August 2013

Annex A

LEGAL AND REGULATORY FRAMEWORK

This annex summarises the main aspects of the legal and regulatory framework applicable to nuisance calls and messages, focussing on the relevant provisions of the Privacy and Electronic Communications Regulations, the EU Directive on Privacy and Electronic Communications and the Communications Act.

1. The Privacy and Electronic Communications Regulations (PECR)

The main piece of UK legislation of direct relevance to the issue of tackling nuisance calls and messages is The Privacy and Electronic Communications (EC Directive) Regulations 2003, as amended (“PECR”),34 which implement parts of European Directive 2002/58/EC (see below).

Regulation 19 of PECR prohibits the transmission of automated recorded direct marketing calls without the consent of the called party.

Regulation 20 contains rules limiting the circumstances in which unsolicited direct marketing faxes are permissible, including the prohibition of sending such faxes to numbers included on an official register for that purpose.

Regulation 21 prohibits the making of unsolicited direct marketing telephone calls to subscribers who have notified the caller that such calls should not be made to their number or telephone numbers listed on an official register for that purpose.

Regulation 22 prohibits the sending of unsolicited direct marketing emails or text messages35 without consent of the recipient.

Regulations 25 and 26 require Ofcom to maintain and keep up-to-date the registers referred to in Regulations 20 and 21 in respect of unsolicited direct marketing faxes and unsolicited direct marketing calls, respectively. Regulations 25(5) and 26(5) permit Ofcom to make arrangements for their functions in connection with the registers to be discharged by a third party. Ofcom currently has contractual arrangements with Telephone Preference Service Limited (TPS) to carry out these functions on Ofcom’s behalf.

The Information Commissioner has primary responsibility for enforcement of PECR using his powers under the Data Protection Act 1998, as extended for the purposes of PECR (see Regulation 31); and may require third parties to provide information about another person’s use of electronic communications networks or services (Regulation 31A). The Information Commissioner may serve a monetary penalty of up to £500,000 on any person who breaches PECR (Regulation 31 and Schedule 1 of PECR, in conjunction with section 55A Data Protection Act 1998).

Although the Information Commissioner has primary responsibility for enforcing PECR using his powers under the Data Protection Act 1998, both the Information Commissioner and Ofcom may also enforce Regulations 19 to 26 of PECR by virtue of their designation as enforcers of certain consumer legislation in Part 8 of the Enterprise Act 2002. However, these powers may only be exercised through the Courts and do not include powers to impose financial penalties for breaches of PECR. As such, in most cases, the preferred route of enforcement will be the exercise of the Information Commissioner’s powers via Regulation 31 PECR.36

2. EU Directive on Privacy and Electronic Communications (Directive 2002/58/EC)

As noted above, PECR implements into UK law certain provisions of Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications), as amended (“the Directive”).37

The most relevant provision of the Directive, so far as nuisance calls and messages are concerned, is Article 13, together with Recitals 40 to 45, which deals with various types of unsolicited communications.

It should be noted that Article 13(3) permits Member States to choose between an opt-out system for unsolicited direct marketing calls (such as we have in the UK, under the TPS register system) or an opt-in system (whereby unsolicited calls would not be permitted without consent). It would, therefore, be possible to change the applicable system in the UK without seeking a change to the underlying EU legal provisions.

The Directive also includes rules on the presentation and restriction of calling line information (Article 8, together with Recitals 34 and 36).38 Article 8(1) of the Directive requires communications providers to offer the calling party the possibility of withholding their telephone number on a per-call basis and on a per-line basis. This provision applies to all calls and, in effect, permits organisations making direct marketing calls to suppress the making available of their telephone number to the persons to whom they are making calls.39

3. The Communications Act 2003

PECR does not deal explicitly with silent or abandoned calls. Where such calls are in fact made for direct marketing purposes, they ought to be caught by the provisions of PECR. However, if a call is silent or abandoned, it may by its very nature not be possible to establish the identity of the person making the call or the purpose of that call. Therefore, it may not be possible to establish whether a particular call is a direct marketing call subject to the rules in PECR.

Ofcom has used its powers in sections 128 to 131 of the Communications Act 2003 (“the Act”) concerning the persistent misuse of electronic communications networks or services to tackle the problem of abandoned and silent calls.

Section 128 of the Act gives Ofcom enforcement powers in respect of persistent misuse. Where Ofcom determines that there are reasonable grounds to believe that a person has persistently misused an electronic communications network or service, Ofcom may issue a notification to that person. Ofcom must allow the person concerned to make representations within a specified period, usually one month.

Sections 129 and 130 of the Act permit Ofcom to issue enforcement notifications and penalties for persistent misuse. The maximum penalty for persistent misuse is £2 million.40

Section 131 of the Act places a duty on Ofcom to prepare and publish a statement of our general policy with respect to the exercise of our powers under sections 128 to 130. Our current policy statement was published on 1 October 2010,41 annexed to an explanatory statement entitled Tackling abandoned and silent calls.42

Our policy statement on persistent misuse explains that, in addition to abandoned and silent calls, we will also use these powers to tackle other forms of persistent misuse that are not covered by PECR, including number scanning (where calls are made to find out which telephone numbers are in service or not43); and the repeated forwarding of inauthentic or misleading telephone numbers that do not enable the person receiving the call to identify the caller and return a message.

Annex B

OVERVIEW OF THE PROCESS FOR INVESTIGATIONS INTO THE PERSISTENT MISUSE OF ELECTRONIC COMMUNICATIONS NETWORKS OR SERVICES THAT PROCEED TO A PENALTY DECISION

The key stages in the process in a case where a penalty is issued are as follows:

Ofcom investigates potential instances of persistent misuse, including where appropriate issuing formal information requests to the person(s) under investigation and/or to third parties with relevant information.

Having assessed all of the information obtained in the course of its investigation, where Ofcom determines that it has reasonable grounds for believing that a person has persistently misused an electronic communications network or service, Ofcom will issue a notification under section 128 of the Communications Act 2003 (a s128 Notification) to that person setting out its determination.

That person then has the opportunity to make representations to Ofcom about the matters contained in the notification, in writing and/or at an oral hearing, within a specified period of not less than one month (or, in urgent cases, seven days).

Ofcom then considers those representations and considers what further action (if any) should be taken.

If Ofcom provisionally decides to impose a penalty for non-compliance, Ofcom will prepare a provisional s130 Notification and provide it to the person in question.

That person then has the opportunity to make further representations on the provisional s130 notification and the proposed penalty.

Ofcom considers these representations before making a final decision. Where that decision is to issue a penalty, a final s130 penalty notification will be issued.

Annex C

OFCOM’S FORMAL ABANDONED AND SILENT CALL ENFORCEMENT CASES AND FINANCIAL PENALTIES LEVIED

Table C1

FINANCIAL PENALTIES ISSUED BY OFCOM TO ORGANISATIONS FOR MAKING ABANDONED AND SILENT CALLS WHEN THE MAXIMUM FINANCIAL PENALTY WAS £50,000

Table C2

FINANCIAL PENALTIES ISSUED BY OFCOM TO ORGANISATIONS FOR MAKING ABANDONED AND SILENT CALLS SINCE THE MAXIMUM FINANCIAL PENALTY WAS INCREASED TO £2 MILLION (OCTOBER 2010).