Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2020

Lord Tunnicliffe Excerpts

Wednesday 6th January 2021 Grand Committee

[Lord Tunnicliffe (Lab) [V]]

My Lords, I am grateful to the Minister for introducing the order. As she outlined, it amends the regulatory framework for providers of prepaid funeral plan contracts, generally requiring them to be authorised by the Financial Conduct Authority. Intermediaries need not be directly authorised but will be expected to become appointed representatives, who are essentially overseen by an FCA-registered provider.

The provisions appear to offer a sensible conclusion to the consultation exercise launched back in 2018. We will certainly not oppose the order, though I would like clarity on a number of points.

The majority of providers act responsibly and sympathetically, and, for many, a prepaid funeral plan offers peace of mind. It is no surprise that the market has grown in recent years; it is perhaps more surprising that it has taken so long for the 2001 regulatory framework to be revisited. As the supporting documentation notes, the current voluntary regulatory system has not delivered the desired level of consumer confidence. We hope that the order sends a message to any unscrupulous actors that their behaviour must change. The ability to refer cases to the Financial Ombudsman Service is a particularly important inclusion. I hope the Minister can assure noble Lords that the department will follow early cases to ensure that the new regulatory regime has the desired effect.

Can the Minister offer any insight into how problem cases may be resolved under the new regime? If a provider or intermediary is judged to have fallen short of the FCA’s requirements, for example, will the funeral package remain valid with another player assuming responsibility for delivery? Those who have taken the time to spell out their wishes will want them honoured. If their plan were to be cancelled and a refund issued, it would be not only inconvenient but a potentially traumatic experience.

The Explanatory Memorandum and the information paragraphs in the 37th report of the Secondary Legislation Scrutiny Committee note that the new regime will not be fully in force until 18 months after the order is made. It clearly makes sense to give both the FCA and providers time to flesh out the detail and adjust to the new reality. However, can the Minister confirm what steps, other than those outlined in paragraph 2.3 of the Explanatory Memorandum, will be taken to prevent vulnerable customers being targeted or pressured into signing agreements in the interim period? Can she also confirm whether the Government plan to formally make this order shortly after the Commons has considered the draft on 13 January, or is there likely to be a delay to allow the FCA more time to begin its consultation?

Finally, could the Minister please outline the rationale for explicitly excluding local authorities from the regulated activities? I am not aware of local authorities clamouring to offer such services, but what if a specific need were to arise in a particular locality?

Once again, I thank the Minister and her department for introducing the order. I look forward to her response and, all being well, the FCA launching its consultation in due course.