Today (3 March 2021), in the House of Lords, I am putting forward an amendment to the Financial Services Bill which would increase protection for those who find themselves vulnerable to the sharp practice of ‘lead generators’ when they are seeking debt advice.
The amendment is designed to prevent practice of so called ‘lead generation’. This is the practice of actively seeking those in debt and selling those details to ‘debt advice services’ or ‘debt solutions services’.
People are being prayed on and tricked while seriously vulnerable. These pernicious practices, while often promising to help, are putting people in a much worse financial and mental well being situation.
My amendment to the Financial Services Bill seeks to put a full stop to this and would:
Insert the following new Clause—
“Regulation of lead generators for debt advice and debt solution services
In section 22 of the Financial Services and Markets Act 2000 (regulated activities), after subsection (1A) insert—
“(1AA) An activity is also a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and relates to—
(a) effecting an introduction of an individual to a person carrying on debt advice and debt solution services, or
(b) effecting an introduction of an individual to a person who carries on an activity of the kind specified in paragraph
(a) by way of business.””Amendment 111, Lord Holmes of Richmond, Committee Stage Day 4, Financial Services Bill, House of Lords, 3 March 2021.
What are so called ‘lead generators’?
Lead generators for debt management and debt solution services use online, paid search (PPC) and social media ads to gather details of people seeking help with debts. These leads may then be sold on to other lead generators (or ‘packagers’) or directly to firms providing debt solutions.
While the activity of introducing an individual to a credit provider (credit broking) is regulated by the Financial Conduct Authority [FCA], the activity of introducing an individual to a debt advice or debt solutions service by way of business is not.
Debt advice charities, such as StepChange and the Money Advice Trust continue to see problems with ‘lead generators’ making misleading claims in online, paid search and social media ads. They report seeing promotions that impersonate their services, infringe their brand and falsely claim to provide ‘Government debt help’.
Commonly, they hear from people who have been tricked into believing they were being helped by StepChange or National Debtline (run by the Money Advice Trust) when they were not. The problem is both pervasive and increasing.
In the voices of those most impacted, I offer:
Case study 1: “Whilst worrying about the state of my finances, I clicked on the following link [to a debt solutions lead generator online ad]. I received a call from this number … where the person who called me made me uncomfortable so I told him I was not going to speak to him… I then received the email below and I am wondering if all these things are connected and if this is part of a scam?”
This quote is from an individual who contacted StepChange worried that they might be exposed to a scam after responding to a lead generator’s online advert. The email was a fake letter from someone purporting to be a StepChange employee, using some details of an actual StepChange employee gathered from their Facebook page.
This highlights a degree of bad practice and the potential for harm when financially vulnerable people are exposed to unregulated promotions for debt solutions.
Case study 2: “I am just writing to you in connection with the amount of calls I am still getting from people claiming to be from yourselves. I am becoming increasingly frustrated and antagonised about this. I have stated many times, as well as my wife, that we have now managed to sort out my financial situation and we are now in control of all of my debts, which have now all but disappeared thankfully, I am still getting pestered and harassed. This constant bombardment of calls, which can be anything from 1 call a day through to about 5 or 6 EACH DAY, is starting to wear both me and my wife down and is having a detrimental effect on our mental health more so than any debt we’ve ever had.”
This quote is from an individual who contacted National Debtline after being bombarded with calls from companies impersonating the service.
Debt organisations state that, due to this poor practice, they have to constantly monitor search engines and social media platforms for misleading promotions, diverting precious time and resource.
In 2019, Google responded to their complaints about misleading paid for ads by requiring firms promoting debt services to be appropriately regulated; but this has not stopped all misleading promotions and is not the case across all search engines and social media platforms.
In 2020, the Money Advice Trust and Stepchange report that, across their two charities, they have found and reported at least 78 instances of trademark infringement by lead generator promotions. They estimate that as many as 10% of people using a search engine to search for help from StepChange Debt Charity may have been inadvertently diverted to a ‘lead generator’ site by misleading paid search ads.
It seems clear that these unregulated, so called, ‘lead generators’ can be little more than a gateway to harm for financially vulnerable people who are being passed on to a debt solutions market where a fractured regulatory framework is causing catastrophic outcomes for consumers.
The need for FCA regulation
Responsibility for regulating the Debt Solutions market is currently split between the FCA (which regulates debt advice and debt management plan providers) and the Insolvency Service / Recognised Professional Bodies (which regulate Insolvency Practitioners and the Individual Voluntary Arrangement (IVA) market). Responsibility for policing online advertising by unregulated providers is split between the Advertising Standards Authority [ASA] and the advertising platform providers (when they choose to act on the issue).
There have been some steps in recent years to try to address the problem. Two years ago, the FCA issued a ‘Dear CEO Letter’ to debt packager firms (a type of lead generator regulated by the FCA as debt advice providers), but it is clear that problems persist.
More recently, in January 2021 the ASA upheld complaints against two lead generation companies that were raised by the Money and Pensions Service on behalf of a range of not-for-profit organisations, including StepChange and the Money Advice Trust. The companies who made various misleading claims, in paid-for search ads and on their websites, about their services, reflected misleading practices right across the debt services sector.
The banned ads had claims by both advertisers that:
- Exaggerated the speed and ease with which debt can be reduced
- Misleadingly suggested associations with a genuine debt charity (StepChange Debt Charity) and/or endorsement by the Government or other third parties
- Misleadingly suggested that they were qualified to provide debt counselling (including suitability for bankruptcy) or that they did anything more than pass on leads
- Included misleading reviews and rating claims that did not make clear the risks associated with Individual Voluntary Arrangements
As a result of this, in February, the Insolvency Service published guidance setting out its expectation for both Insolvency Practitioners and Recognised Professional Bodies (who provide a form of regulatory oversight for Insolvency Practitioners), on their responsibilities for the advertising by lead generators who introduce customers to them.
However, this new guidance states that ‘concerns about misleading or irresponsible websites or other advertising generated by an unauthorised debt advice lead generator… should be reported to the ASA’, meaning there will continue to be a reactive approach to addressing ads only once they have been published.
The ASA rulings and Insolvency Service guidance are welcome, but do not fundamentally alter the problem with misleading and harm online advertising by unauthorised lead generators. The ASA can continue to investigate individual lead generator ads, but without a clear and binding regulatory framework for ‘lead generators’ problems re-emerge like a game of ‘whack-a-mole’.
While a key part of the client acquisition chain remains outside the scope of regulatory action. The problems with unregulated lead regulators, and the resulting risk of harm for financially vulnerable consumers, will continue unless firms carrying out this activity are required to seek authorisation by the FCA.
It’s time to get on the front foot, to bring in the right regulatory framework for ‘lead generators.’
It’s a matter of consistency and common decency. I call on the Government to adopt my amendment (amendment 111) and ask everyone to support it to ensure it makes it onto the statute book.
Financial Services Bill Amendments: Introducing a Review of Financial Services Regulations.
Financial Services Bill Amendments: Adding a Financial Inclusion Objective to the Remit of the Financial Conduct Authority
Financial Services Bill Amendment: Duty to Report on Environmental, Social and Governance Status of Funds
Financial Services Bill Amendment: The Case for Regional Mutual Banks
Financial Services Bill Amendment: Updating the Know Your Customer [KYC] -Identity Verification- Process
Financial Services Bill Amendments: To Ensure Statutory Debt Repayment Plan (SDRP) Arrangements are Timely and Well Funded
Financial Services Bill Amendment: Provision of Debt Advice
Financial Services Bill Amendments: Timetable and Funding for SDRP Arrangements
Financial Services Bill Amendment: Sale of Mortgage Loan Books
Financial Services Bill Amendment: Financial Policy Committee & Financial Exclusion
Financial Services Bill Amendment: Review on Cashback Without Purchase
Financial Services Bill Amendments: Ethical AI
Financial Services Bill Amendments: Fintech Strategic Review Recommendations
Financial Services Bill Amendments: Distributed Ledger Technologies
Financial Services Bill Amendments: Digital ID and Other Digital ‘Infrastructure’