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Cold call ban on financial products under consultation by government

The government plans to ban cold calls for financial products as part of their fraud strategy to protect consumers from scams and fake investments.

The government has announced plans to ban cold calls for financial products as part of their strategy to tackle fraud. The proposal aims to prevent fraudsters from tricking people into buying fake investments through cold calling. The ban will cover all types of financial products, including sham cryptocurrency schemes, mortgages, and insurance.

By implementing this ban, the government hopes to reduce the number of victims and protect people from falling prey to scams. Data from the City of London Police shows that fraudulent investment schemes have resulted in a loss of £750 million between 2022-23, posing a significant threat to the UK economy, consumers, and society.

Government announcement

In May 2023, the government announced that the ban on cold calling would be extended to include all consumer financial services and products, in addition to pensions. Aside from prohibiting cold calls on financial products, the proposed measures also involve addressing Sim farms and investing £30 million in a reporting center. Collaboration with tech companies will streamline the process of reporting fraud online.

Andrew Griffith, economic secretary to the Treasury, emphasizes the use of cold calling by fraudsters to manipulate individuals, particularly targeting vulnerable people. With the ban in place, the public will know that receiving an unsolicited cold call concerning financial products is a scam. Having the confidence to hang up and report these fraudulent calls is crucial.

The problem

Criminals frequently exploit telecommunication networks and services to commit various forms of fraud, including cold calling. Banning cold calls for financial products and services will be instrumental in preventing potential harm caused by fraud attempts. To ensure clarity for consumers, the government proposes a wider scope, making all live, unsolicited direct marketing communication related to financial services and products illegal.

The Plan

This comprehensive scope will prevent fraudsters from adapting their tactics and exploiting any loopholes. The consultation also seeks to determine if cold calling on live electronic communications, such as social media video or voice calls, occurs and if there are any existing protections and reporting mechanisms provided by social media organizations to counteract fraudulently solicited calls.

Given the consultation’s focus on live electronic communications, the government will address non-live electronic communications scams through specific actions. These actions involve the bans on SIM farms, which facilitate the mass sending of scam texts, and empowering the public to report suspicious emails to law enforcement.

Who will be exempt

While the ban does not extend to business-to-business marketing, the government is seeking feedback on whether sole traders and partnerships should be viewed as consumers or businesses in relation to this ban. The products and services falling within the ban’s scope include banking or payment-related products, mortgages and insurance, and investments marketed in an investment-like manner (e.g., whiskey and wine). It also covers credit and debt, including individual voluntary arrangements.

The government’s plans to ban cold calls for financial products have been welcomed by industry experts. Myron Jobson, a senior personal finance analyst, acknowledges the distress caused to victims who fall prey to scam cold calls and believes that efforts to prevent fraudsters from infiltrating people’s lives are necessary. Scammers often exploit fear of missing out and create believable stories to deceive individuals and obtain their money or personal information.

The psychological and emotional impact of falling victim to a financial scam can be long-lasting. Victims may experience violated privacy, anxiety, and difficulty identifying legitimate calls from potential scams. However, concerns have been raised that legitimate and important calls, such as those from pharmacies or doctor’s offices, might be missed if people become cautious of answering calls from unfamiliar numbers.

To ensure the effectiveness of the cold-calling crackdown, tight legislation specifically targeting nefarious contacts and meaningful enforcement of the new rules are crucial, says Tom Selby, head of retirement policy at AJ Bell. Selby also highlights the need for greater responsibility from internet giants like Google in tackling paid-for scam adverts. He believes that the successful campaign to ban pensions cold-calling in 2019 should mark the beginning of a broader effort to combat scams and strengthen education about them.