Govt consults on plans to ban cold calls for financial products

The eight-week consultation, published today (August 2), covers proposals to ban cold calls offering any financial products in order to clamp down on fraudsters seeking to trick people into buying fake investments. 

Once in force, people receiving a cold call offering these types of products will know that it is a scam, and fewer people will become victims, according to the government.

According to data from the City of London Police, fraudulent investment schemes represent a significant threat to the UK economy, consumers, and society, with victims losing £750mn between 2022-23.

As announced in the fraud strategy in May 2023, the government will extend the pensions cold calling ban to cover cold calling for all consumer financial services and products.

The measures include outlawing cold calls on financial products and Sim farms, as well as investing £30mn in a reporting centre and working with tech companies to simplify the process of reporting fraud online.

Andrew Griffith, economic secretary to the Treasury, said: “Cold calling for financial services and products has long been used by fraudsters to manipulate and trick members of the public into scams. 

“These cold-hearted criminals will often purposely target the most vulnerable and use a range of deceitful tactics to take advantage in any way they can.”

Griffith added: “We will ban cold calling for all consumer financial services and products, so the public can be sure that it’s not a legitimate firm if they get a call about a financial product out of the blue without their consent. 

“We want people to feel confident to put the phone down and report these illegitimate calls.”

Criminals often use telecommunication networks and services to commit fraud, including through cold calling the public. 

The government said banning cold calling for financial services and products will help block fraud attempts before they can cause harm. 

Wider scope

As part of the consultation, the government proposed that a wider scope would be simpler for consumers to understand, as any live, unsolicited direct marketing communication relating to financial services and products would be illegal. 

A wide scope will also limit fraudsters’ ability to adapt their strategies to avoid the ban and exploit any loopholes.

The government is inviting any views on the extent to which cold calling takes place on live, electronic communications, such as social media video or voice calls. 

This feedback will help determine what the impact would be of this cold calling ban specifically targeting telephone calls only. 

Scammers are adept at tapping into the cultural zeitgeist and exploiting the fear of missing out disposition to create believable stories that convince you to give them your money or personal details.

Myron Jobson, Interactive Investor

It is also interested in whether there are protections and integrated reporting processes in place via social media organisations that mitigate the risk of fraudsters using these channels to cold call. 

In this consultation, the government has focussed on the role and risks of live electronic communications rather than non-live electronic communications, such as text messages and emails. 

Additionally, it is taking other specific action to address the tactics employed in non-live electronic communications scams. 

These include banning SIM farms which are used by criminals to send thousands of scam texts at once, as well as empowering members of the public to forward any suspicious emails to law enforcement.

As this ban is not aiming to restrict business-to-business marketing, the government is also interested in views on whether sole traders and other types of partnerships should be treated as consumers or businesses in relation to this ban.

Some of the products and services that the government intends to fall in scope are:

• Any product or service of a banking or payment nature, including electronic money and cryptoassets.
• Mortgages and insurance, as well as white goods warranties and protection plans.
• Investments, including tangible items where these are marketed in the manner of an investment, for example, whiskey and wine.
• Credit and debt, including individual voluntary arrangements.

Plans welcomed

Myron Jobson, senior personal finance analyst at Interactive Investor, said: “Scam cold calls have become a begrudgingly accepted part of everyday life, causing financial and emotional distress to those who fall victim. 

“Any effort to prevent fraudsters from infiltrating their way into people’s lives is welcome.

“Scammers are adept at tapping into the cultural zeitgeist and exploiting the fear of missing out disposition to create believable stories that convince you to give them your money or personal details. 

“As well as a pounds and pence cost, falling victim to a financial scam has a broader psychological and emotional impact that can linger and cause distress well after the scam is over.”

Jobson said victims may feel violated and anxious, as their privacy is invaded, and they fall victim to deceitful tactics.

Trust issues may also arise, making it difficult to discern legitimate calls from potential scams. 

“There is anecdotal evidence that fewer people are answering their phones from numbers they don’t recognise in a bid to dodge scam calls,” he said. 

“The danger is that many legitimate and important calls from pharmacies, doctor’s offices or schools could be missed as a result.”

Tom Selby, head of retirement policy at AJ Bell, said two things need to happen for the cold-calling crackdown to work. This being tightly worded legislation, to ensure nefarious contacts are specifically targeted, and a legitimate threat of enforcement where someone breaks the new rules.

"The plans also need to go hand-in-hand with greater responsibility being taken by internet giants like Google for paid-for scam adverts, something which the online safety bill can hopefully bring into UK legislation," he said.

“The successful campaign to ban pensions cold-calling in 2019 was never supposed to be just about pensions. We have always warned that the vast majority of fraud takes place outside of pensions, usually in the form of investment ‘opportunities’ that turn out to be at best missold and at worst entirely non-existent.

“The ban on pensions cold-calling therefore needed to be seen as the beginning of a wider effort to tackle scams more generally and beef-up education."

sonia.rach@ft.com

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