- Campaign to improve ‘awareness’ of cold-calling is not enough to protect the public.
- Relying on people checking FCA registers or reporting scams will not stop the cold-callers!
- Financial Regulators must ban pension firms from using leads from cold-calling.
New ‘ScamSmart’ awareness campaign is welcome, but inadequate: The Pensions Regulator and Financial Conduct Authority (FCA) have launched an important public information campaign, warning about the dangers of falling for pension cold-calls. Such ‘awareness’ campaigns are welcome, but will not end the growing scourge of pension scams.
Pension customers lost an average of £91,000 in pension scams last year: Most pension scams originate from a cold-call made by unregulated firms – often offering a ‘free pension review’ or wonderful investment opportunity. These ‘lead generators’ sell people’s names and phone numbers or email details to pension companies. The cold-calling operations are highly sophisticated and FCA-regulated providers can use such leads and still trick people into losing their life savings or transferring into poor investments. The public don’t know the difference between a call on behalf of bona fide firms or fraudsters and the Regulators’ survey found one in three people would not know how to check if they were speaking to a legitimate pension adviser or provider.
Advertising campaigns are not enough: The Government’s campaign messaging suggests people ‘check the FCA register or call the FCA on 0800 111 6768, to see if a cold-calling company is from a firm authorised by the FCA. It also says to call ActionFraud on 0300 123 2040 to report a suspected scam. However, trying to get through to these ‘hotlines’ can take half an hour of holding on, which will deter most people. And most members of the public would not bother to check registration details. Therefore, it is also vital that more effective, stronger measures are put in place to implement a cold-calling ban as soon as possible.
Proper cold-calling ban is urgent, but Government is consulting again and measures won’t work: No doubt the Treasury and DWP have good intentions, but the proposed changes are little more than minor tweaks to existing rules which are clearly ineffective, with heavier penalties if the perpetrators are caught. The new rules will still rely on the Information Commissioner’s Office (ICO) to implement the ban and, unhelpfully, cold-calling in some circumstances will still be allowed. That makes it impossible to tell people that all unsolicited approaches are against the law. For example, calling someone and claiming to be from their pension provider would be an easy way to circumvent the new ban.
ICO powers are not up to catching most cold-callers: The proposed new rules still rely on the ICO catching and punishing cold-callers. By definition, this will only be after they have already been scammed. This will not deter determined cold-callers, so I believe it is essential to introduce better ways to prevent unregulated lead generators from obtaining and passing on people’s details. In the UK, such firms are normally small, fly-by-night operators who would fall below the radar of the ICO – which only goes for large-scale cases and relies on them remaining traceable for the 18 months it takes to conduct an investigation. Most of the companies, in any case, are based offshore, and will not be covered by the new rules, making the ICO’s powers inadequate to actually be effective.
To better protect the public, the FCA should ban firms from using leads generated by cold-calling: As well as banning all cold-calls about pensions, it is also important to ban the use of any leads obtained from cold calls. The FCA should instruct all regulated pension firms that they must not sell their products to people who have come to them via a cold-call. Of course providers need to market their products, but the unsolicited telephone call or text message to a private mobile or landline or email should not be seen as a valid way of doing so. If purchasing or using the lead generators’ information breached FCA rules, the FCA could then revoke the provider’s registration which would force firms to find other ways of selling their products, and ensure customers are much more effectively protected. This would not actually require new legislation. The FCA could change its rules now, to prohibit use of cold-calling leads. The sooner it does so, the better.