In May 2023, the UK government announced a major crackdown on fraud which includes extending the "ban" on cold calls to all financial products. This is with the aim of preventing fraudsters from "duping" people into buying fake investments. The released strategy, titled “Fraud Strategy: stopping scams and protecting the public” (available here) focuses on 3 Pillars, namely (1) pursue fraudsters; (2) block fraud; and . Within Pillar 2, there is the following proposal:
"We will extend the ban on cold calling to cover all financial products. Under the Financial Guidance and Claims Act 2018, this Government has already banned cold calls from personal injury firms and pension providers (unless the consumer has explicitly agreed to be contacted). But we want to do more to stop people being exploited by the practice of cold calling and we will consult on a wider ban on cold calls by the summer, with implementation to follow as soon as possible, so that fraudsters cannot dupe people into buying fake investments or financial products. This means that the public will know that cold calls about financial products are a scam and should have the confidence to hang up should they receive one of these calls."
Without any further detail, we consider existing restrictions for an indication of what any future "ban" may look like.
The current law
Claims management companies
The current laws apply stringent restrictions on when such calls can be made by claims management companies under The Privacy and Electronic Communications (EC Directive) Regulations 2003 (PECR). Direct marketing calls by claims management companies are prohibited unless the individual has previously given their specific consent to be contacted, or has subscribed to receive such calls. The exception to the above is only where an individual has previously notified the caller that for the time being they consent to such calls being made by, or at the instigation of, the caller.
Pension providers
PECR also governs unsolicited calls in relation to pension schemes, as unsolicited calls to an individual for the purpose of direct marketing in relation to occupational pension schemes or personal pension schemes, are similarly banned. The exceptions for pension providers include circumstances where the caller is an authorised person, or the trustee or manager of a pension scheme and the individual has previously notified the caller that for the time being they consent to such calls. Pension providers must make sure that they meet all the requirements of the specifically defined exceptions within PECR.
Impact of the proposals on telephone marketing practices
Any future "ban" (either with its own scope or by extension of existing restrictions) on telephone marketing in relation to all financial products is likely to have a significant impact on the financial services sector (including insurance).
The use of telephone marketing to develop new business by targeting prospects is common place in certain areas of the market and can be carried out in compliance with the already rigorous requirements in the UK GDPR and PECR. Any new restriction is likely to limit this activity, even with certain exceptions to any "ban" in place, which will be challenging for those organisation who rely on this channel.
It remains to be seen to what extent the proposals will achieve their aims of "blocking fraud". This could lead to a disproportionate outcome and organisations should instead work to adapt their marketing strategies, for example using social media and targeted advertising, to achieve the same objectives.
What's next?
There is a formal consultation of the proposed ban on cold calling over Summer 2023, which will set out the policy intentions and will invite comments on the draft regulations. We hope that any proposed ban is carefully scrutinised to ensure a proportionate solution to the threat posed by fraudsters.
