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Communications Act 2003 (Maximum Penalty for Persistent Misuse of Network or Service) Order 2010

My Lords, the order before the Committee aims to strengthen both consumer protection and the regulatory regime concerning persistent misuse of an electronic communications network or service. It covers a number of misuses but focuses primarily on silent and abandoned calls. Misuse, as defined in the Communications Act 2003, is when a person uses an electronic communications network or service such that it causes another person unnecessary annoyance, inconvenience or anxiety. Examples of misuse other than from silent and abandoned calls include the misuse of automated calling systems, number scanning, misuse of a calling line identification facility, misuse for dishonest gain and misuse of allocated telephone numbers. The order attempts to ensure that consumers are more adequately protected from misuse, especially silent and abandoned calls, and so makes the following provision: it raises from £50,000 to £2 million the maximum penalty which Ofcom can impose on anyone who persistently misuses electronic communications networks or services. Silent and abandoned calls are usually made by marketing companies, which use a computerised calling device that dials a telephone number and automatically transfers the call to an available sales agent whenever a call is answered. If, however, no agent is available, the line is disconnected, which results in the consumer receiving an abandoned call. If no recorded information message is played, it becomes a silent call. Your Lordships will no doubt appreciate that such calls are very annoying and can cause distress, especially to vulnerable consumers. The fact that a caller’s number is often withheld only adds to people’s anxiety or frustration. Such calls may also be generated by other organisations, whether in financial services or market research, or by companies engaged in number scanning activities, which dial a sequence of telephone numbers to find out which ones are in service; their purpose is to develop a ““clean list”” of numbers with commercial value. The impact of silent calls is more than anecdotal. Research undertaken by Ofcom between December 2009 and March 2010 found that 73 per cent of respondents were very or fairly inconvenienced by silent calls. More than 5,000 consumers contacted BT’s nuisance calls bureau in the three months to June this year. In the past month alone there have been more than 12,000 callers to the bureau who listened to recorded advice about silent calls. In the first half of 2010, Ofcom received 2,500 complaints about silent calls. I am sure, therefore, that your Lordships will agree that there is indeed a need for us to take effective action to protect consumers from unwanted calls. Last year, Ofcom asked the Government to consider raising the maximum penalty for persistent misuse from £50,000 to £2 million. Ofcom considered that the current maximum penalty was not high enough to serve as a real sanction or effective deterrent to those who persistently make silent and abandoned calls to consumers. In 2008 Ofcom dealt with a serious case, where Barclaycard was found to have made an extremely large number of silent calls over an eight-month period. Ofcom was constrained in only being able to issue the £50,000 maximum penalty. Ofcom has other penalty powers. These include turnover-based broadcasting powers, which it used in relation to the premium rate service phone-in scandal when GMTV was fined £2 million. Ofcom's view is that although harm is difficult to quantify in relation to silent calls, in that there is no financial loss, vulnerable consumers may still suffer. In such circumstances, a £2 million maximum penalty does not seem unreasonable. Indeed, a 12-week public consultation, which ran from 26 October 2009, found respondents overwhelmingly in favour of increasing the maximum penalty to £2 million. We believe that the proposed maximum penalty will provide a more substantial deterrent to most call centres that employee up to 400 employees. Although it is possible that larger call centres may not be fully deterred, it is likely that the adverse media attention of a £2 million penalty will deter the most persistent offenders from making silent and abandoned calls. Ofcom will work on a case-by-case basis where enforcement is necessary, taking a firm but flexible approach towards those who make silent and abandoned calls or engage in other forms of persistent misuse. Ofcom will monitor complaints and other cases that it receives. It will work closely with the different nuisance call bureaux to identify trends in silent and abandoned call rates, as well as the organisations making such calls. Where appropriate, Ofcom will use its formal powers to require information and is committed to taking decisive action, including the use of financial penalties wherever appropriate. One of Ofcom’s main duties is to act in the interests of consumers. Under the Communications Act 2003, Ofcom can take enforcement action when it has reasonable grounds for believing that someone has engaged in persistent misuse. Under Section 128 of the Act, it can issue a financial penalty to any organisation that it notifies, and it can notify a company whenever it has sufficient evidence to indicate that the company has not acted in accordance with its policy on silent and abandoned calls. The penalty level is assessed, taking careful account of the extent of the identified misuse, and this increased maximum penalty level will allow Ofcom to impose a more proportional penalty to better fit the seriousness of the offence. The order will ensure that consumers are better protected from silent and abandoned calls, by implementing a higher, more appropriate penalty that is more consistent with the harm that the calls generate. Additionally, the order will help to reduce the need for some consumers to purchase, at their own expense, devices that combat silent and abandoned calls. I beg to move.