The government has again frustrated attempts to impose a ban on cold calling despite widespread support from members of the House of Lords.

Peers yesterday argued for an amendment to the Financial Guidance and Claims Bill, which proposes to transfer regulation of claims management companies from the Ministry of Justice to the Financial Conduct Authority.

Despite repeated calls from the legal and insurance sectors – not to mention the government’s own pre-election pledge – the legislation does not address the issue of cold calling, which is banned for solicitors but not for claims management companies.

Liberal Democrat peer Lord Sharkey (John Sharkey) attempted to insert an amendment forcing the FCA to introduce a ban within six months.

Currently the bill makes no mention of cold calling, except in its impact assessment to suggest that consumers will benefit from reduced demand from CMCs for leads through calls and texts.

Sharkey questioned whether the measures would have any effect on claims farmers and asked why cold calling should be tolerated at all. He acknowledged that ‘speculative and fraudulent’ whiplash claims are now reducing but that the claims industry had moved in bulk to holiday sickness claims.

Proposing the extended ban, he added: ‘We can get rid of a huge public nuisance, protect consumers and the travel industry and prevent people being lured into fraud.’

Labour’s Lady Drake (Jeannie Drake) insisted the government should not regulate CMCs out of existence but she described the way the industry operates as ‘clearly totally dysfunctional’.

But for the government Lady Buscombe (barrister Peta Buscombe) said the bill already addresses the activities of rogue CMCs and it was too early for the FCA to decide on specific rules for regulating the sector. She added that the Information Commissioner’s Office already took action to address unsolicited calls and texts.

‘Strengthening the regulation of claims management services should help reduce the number of unsolicited calls made by CMCs,’ she said. ‘We genuinely believe that the existing measures I have set out, alongside the new FCA regime, should help tackle CMCs conducting unsolicited direct marketing.’ The amendment was withdrawn.

The Conservative peer Lord Hunt of Wirral, (insurance solicitor David Hunt), also sought to make all credit hire organisations subject to the Financial Conduct Authority, and to extend regulation to all medical reporting organisations.

Hunt said the problem of claims management activity was ‘insidious, divisive and potentially ruinous’ which could leave the civil justice system ‘overrun and reduced to a laughing stock’.

The amendments were withdrawn after it was explained they would need further consultation and were not within the scope of the bill.

A further amendment, tabled by Lady Altmann (Ros Altmann), aimed to make losing defendants liable for any charges payable to a CMC. She argued this would provide an incentive for defendants to either proactively contact customers to offer compensation or to make the process of applying for compensation much simpler. Lord Young rejected this amendment as not all defendants would come under the scope of the FCA.

During the debate, it was claimed that some claims management companies are bringing solicitors on board so they are subject to regulation from the SRA rather than Ministry of Justice.

Labour peer Lord McKenzie of Luton (Bill McKenzie) suggested that SRA regulation was ‘less rigorous’ than the MoJ regulation of claims management companies and as a consequences some CMCs are changing their business structure to take advantage.