Financial Guidance and Claims Bill [HL]

Written evidence submitted by ABTA The Travel Association (FGCB09)

 

Public Bill Committee

 

Consideration of the Financial Guidance and Claims Bill January 2018

 

About ABTA

This response is submitted on behalf of the membership of ABTA – The Travel Association. ABTA was founded in 1950 and is the largest travel trade association in the UK, with almost 1,200 members operating from over 4,500 locations. Our Members range from small, specialist tour operators and independent travel agencies specialising in business and leisure travel, through to publicly listed companies and household names.

Annually, ABTA Membe rs’ turnover is in excess of £3 7 billion. ABTA’s focus is ensuring that Members can operate their businesses in a sustainable and successful manner, enabling their customers to travel with confidence.

Introduction

ABTA welcomes the opportunity to respond to the Public Bill Committee as it considers the Financial Guidance and Claims Bill (FGCB). Our submission focuses on Part 2 of the Bill, which makes changes to the regulation of claims management companies (CMCs).

ABTA welcomes the transfer of regulatory oversight of CMCs to the Financial Conduct Authority (FCA). The transfer will enable more effective and rigorous rules, and result in tougher enforcement measures for regulated and unregulated CMCs, including clearer sanctions for breaches. ABTA engaged with Part 2 of the Bill during its passage through the House of Lords, as we believe better regulation of CMCs is part of a comprehensive solution to the promotion of false and exaggerated compensation claims, which have significantly impacted the UK travel and tourism sector in recent years.

The rise in false and exaggerated holiday sickness claims

Since 2013, ABTA Members have reported an average increase of more than 500% in personal injury claims relating to holiday sickness, with no corresponding rise in reported sickness levels in resort. ABTA believes this rise can be traced back to regulatory changes made through the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) in 2012/13. These changes fixed legal fees, reducing incentives for CMCs and law firms working on personal injury claims in other sectors. However, a blanket exclusion exists for overseas incidents, even where the claim is pursued through the UK courts - as occurs under the Package Travel Regulations, which leaves travel companies vulnerable.

The current Claim Management Regulatory Unit (CMRU), part of the Ministry of Justice (MoJ), has been dealing with travel claims as a priority area since autumn 2016. The CMRU has published a number of reports on CMC activity in this area, and has operated a specific sub-committee to target unscrupulous practices by CMCs in this area. The CMRU’s annual report 2016-17 notes the link between declining claims elsewhere and the rise in alleged holiday illness claims, and notes how there was a marked increase in marketing of CMC activity in this area throughout the year [1] . There have been a serious of enforcement updates on holiday sickness throughout 2017, with the latest notice noting enforcement action against 33 regulated CMCs providing holiday sickness claims, between October and December 2017. Of these investigations, seven were for rule breaches, four surrendered their authorisation prior to audit by the CMRU, and a further four surrendered their authorization post-audit, as they were unable to operate in compliance with the rules. In the same period, the CMRU identified 30 unauthorised businesses potentially involved in holiday sickness claims. [2] While ABTA welcomes the efforts of the CMRU to date, we believe the greater regulatory powers of the FCA will create a more robust, effective regulatory environment.

Since early 2016, ABTA has been working with the MoJ to provide data on the problem, and urge the Government to tackle the problem of fraudulent holiday sickness claims. We also launched a campaign, "Stop Sickness Scams", in June 2017, to raise awareness amongst policymakers and consumers of the risks of submitting fraudulent claims. These risks include reputational damage for UK holidaymakers, reduced consumer choice - as hoteliers withdraw product from the UK market, and potentially increased holiday prices. Individually, consumers can also face serious risk of prosecution, which can result imprisonment if found guilty of submitting a false claim. Recently, Paul Roberts and Deborah Britton, a couple from Wallasey, were sentenced to 15 and nine months imprisonment respectively, following a fraudulent claim submitted against tour operator, Thomas Cook.

ABTA welcomed the government announcement, in July 2017, that the Civil Procedure Rule Committee (CPRC) would review Court rules to bring holiday illness claims within a fixed cost legal regime. This process is ongoing, and ABTA is calling for urgent completion of this process in time for legislation to be adopted enabling a fixed cost regime to be in place for the summer peak holiday season. Bringing these claims into a fixed cost regime will provide a level the playing with other low-value personal injury claims, and importantly, will not restrict access to justice for genuine claimants.

Cold-calling and other unsolicited approaches to consumers

An important feature of the increase in false and exaggerated compensation claims in recent years has been the targeting of holidaymakers by CMCs. Activity by CMCs in relation to holiday sickness has involved touting in resort, and the making of approaches to holidaymakers through social media and other channels encouraging the submission of false claims for holiday sickness.

An ABTA commissioned survey of more than 2,000 consumers (fieldwork conducted by YouGov in December 2017), found that that nearly one in five people across the UK have been approached about making a false compensation claim for holiday sickness. The most prominent methods for these unsolicited approaches includes telephone calls (14%), text messages and emails (both 7%).

As such, ABTA welcomed the Government’s commitment at Third Reading in the House of Lords to bring forward an amendment to ban unsolicited approaches by CMCs. The Government Minister, Baroness Buscombe, promised to "bring forward an amendment in the other place to meet the concerns of this House." However, ABTA believes the proposed amendment, new clause 6, fails to address the concerns raised and will be ineffective in tackling the activities of CMCs or reducing false compensation claims. Our main concerns with new clause 6 include:

o ABTA believes the FCA must be the responsible body for enforcing the cold-calling ban as applies to CMCs: Regulatory oversight of the provisions within Clause 6 remain with the Information Commissioners Office. This does not follow the precedent of the cold-calling ban that currently applies to solicitors (the other party in pursuing claims), which is enforced by the Solicitors Regulatory Authority.

o Clause 6 does not increase powers relating to other methods of communication: For methods of communication beyond telephone calls, such as text messages and emails, the ban relies entirely on existing regulation. This regulation, and enforcement thereof, has proven ineffective.

· ABTA supported amendment 42 in the House of Lords:

Ban on unsolicited real-time direct approaches by, on behalf of, or for the benefit
of companies carrying out claims management services and a ban on the use by
claims management companies of data obtained by such methods

(1) The FCA must, within the period of six months beginning with the day on
which this Act comes into force, introduce bans on-
(a) unsolicited real-time direct approaches to members of the public carried
out by whatever means, digital or otherwise, by, on behalf of, or for the
benefit of companies carrying out claims management services or their
agents or representatives

(b) the use for any purpose of any data by companies carrying out claims
management services, their agents or representatives where they cannot
demonstrate to the satisfaction of the FCA that this data does not arise
from any unsolicited real-time direct approach to members of the public
carried out by whatever means, digital or otherwise.

· ABTA urges the government to consider either adopting this amendment, as was, or following the principles of this amendment more closely.

· In particular, ABTA believes it is important to address the issue of how CMCs receive, and manage consumer data, in order to restrict the operations of claims farmers. Amendment 42 included obligations for the FCA to regulate data processing by CMCs (42.1(b)), and ABTA believes the government should adopt similar provisions within the Bill.

Other issues for the Bill

ABTA also believes the Bill should commit the FCA to consulting on the full recommendations of the Brady Review, conducted in 2016; and require CMCs to signpost consumers to the availability of any free, or low-cost, alternative dispute resolution (ADR) schemes that are available in relation to their claim. This would enhance consumer choice and provide valuable information on their options for pursuing their claims. Unlike CMCs, who will take a fee in successful cases, ADR schemes enable consumers to retain 100% of any award.

Finally, ABTA believes proactive registration with the new regulator should be required, and not simply rolled over from the CMRU, and the process of handover must deliver stability in terms of internal processes and workloads.

Further information

ABTA would be happy to provide oral evidence, if required.

January 2018

 

Prepared 1st February 2018