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Advisers back claims management charge cap

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Advisers have welcomed a cap on the fees claims management companies charge consumers.

In this week’s Budget, the Government announced a fundamental review of the regulation of CMCs, led by Chartered Trading Standard Institute Board chair Carol Brady.

She will report to the Treasury and CMC regulator the Ministry of Justice by early 2016.

In addition, the Government says it will introduce a cap on the charges CMCs can apply to their customers, and will consult on how this will work in practice.

The Budget document says: “There is a case for reform of the fees that CMCs charge consumers, particularly in those instances where consumer complaints fall within the remit of the Financial Ombudsman Service.”

West Riding Personal Financial Solutions managing director Neil Liversidge says:“A cap on charges is needed because these people are making a fortune and are increasing the workload of the FOS. They should also have to contribute to the cost of the FOS.”

But Professional Financial Claims Association chairman Nick Baxter says: “There are lots of professional CMCs which employ qualified staff and charge similar rates to solicitors. If there is a cap it should also apply to solicitors work in the claims sector too.

“It should also take into account the fact that some types of claim involve more work and a higher skill level.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. I do not believe that CMCs should be allowed to operate without risk. If a claim is made to the FOS and is sponsored by a CMC then THEY should pay the FOS referral fee if the defendant is found to be not guilty. In this way CMCs will think twice about sending out bogus letters claiming for things which were never said or never happened. I am sure there will be some CMCs who operate professionally but it is far more obvious that there are many CMCs who do not think twice about the relevance of a claim and who give the industry a terrible name.

  2. Julian Stevens 9th July 2015 at 10:04 am

    From my own experience and from what I’ve read of those of others, the great majority of CMC’s are an unscrupulous and disreputable scourge on the industry. For this bloke Baxter to suggest they should be allowed to charge the same as solicitors is to accord CMC’s a level of respectability that they plainly don’t warrant by any stretch of the imagination.

  3. The moral compass has broken.

    It seems that everyone is at it these days, there seems to be no shame any more in being accused of lying as long as it means you can get what you want, when you want, from who you want!

    Parents are found lying to get their children into their school of choice; civil servants are accused of lying to Parliament (although I am sure that the lying track record of some politicians has influenced setting the bar at a new low for that to happen).

    What is it about the British psyche that leads otherwise sane, sensible people to lie and in may cases quite big time? Science is trying to learn more to help counter the opportunist idiot that lurks within with lie detectors, face scanners and voice recognition software but still has a way to go.

    So when does that little white lie turn into something darker that will, if it works, result in considerable sums of cash being collected as the individual “passes go.

    Researchers have found that the average Briton tells, on average, four lies every day. But I suspect that researchers would have some way to go to beat the insurance industry for finding opportunistic master-classes in the subject of fraud.

    In 2009 fraudulent insurance claims hit a record high of some £730m with more than 100,000 fraudulent claims made and yes, the recession was blamed.

    Dishonest home insurance claims were the most common types of fraud and in a separate survey carried out by YouGov for the ABI, stunningly 20% of respondents said they would not rule out making a fraudulent claim in the future.

    David Hertzell, the Law Commissioner leading the England and Wales consultation project on insurance claim fraud in July 2010 said: “insurance fraud is relatively common and should be discouraged. But the law we have for dealing with it is confusing and contradictory. If the law is to act as a deterrent, it must be clear and easy to understand.”

    False claims managed to plumb new depths in 2011 for sheer stupidity.
    Take for example the convicted con artist Julie Pullman who served 38 weeks in jail. She was sent to prison at the end of September 2011 for defrauding her pet insurance company of some £37,000. In this case though, she had invented the dogs, all eight, and their injuries. Not content with that she then faked the vets’ bills — even having a special stamp made up at her local stationery store to make the invoices look “kosher”. In the end, she was rumbled after her insurer, RSA, on a hunch that all was not right, called the vet only to get through to Ms Pullman instead.

    Or what about a case in November 2011 of a British man accused of faking his own death as part of a £1.25 million life insurance fraud. Authorities had been searching for Hugo Sanchez a.k.a. Alfredo Sanchez, for six years. He was accused of fraud after police allegedly found his fingerprints on his death certificate.

    Life assurers are not immune. They are finding an increasing problem with clients who either fake disability to make a claim or despite having a clearly fraudulent claim for CI dismissed for blatant non-disclosure then take the case to the FOS who exert, some may say, unfair pressure on the company to pay out despite clear evidence of client wrongdoing- lies in fact.

    IFAs frequently see fraudulent attempts at gaining compensation. These days’s the claims will often focus on miss-selling of some sort that are driven by the CMC ambulance chasers.

    IFAs take complaints seriously and will always be happy at a rejected outcome but dismayed at the cost and stress involved plus the time spent proving innocence when the complainant has failed to prove guilt twice- once when the complaint was rejected by the firm and a second, case fee generating stage at the FOS.

    With this in mind, it was interesting to look back to issue 21 of the Ombudsman News from October 2002 on the subject of fraudulent and dishonest claims.

    The then Ombudsman, Walter Merricks, stated that “fraudulent and dishonest claims are a major problem for the insurance industry and fraud is alleged in a number of the cases we see. These can be difficult to assess. To establish that fraud has taken place, some concrete evidence of lies, inconsistent statements or acts of deception must be present. The fact that members of a firm’s staff are personally satisfied of the claimant’s bad faith is not sufficient proof of dishonesty’.
    But surely it is a starting point?

    He went on to say, “The essential components of fraud are intent to deceive and desire to induce the firm to pay more than it otherwise would. Establishing these points can require an analysis of the claimant’s motives. Inevitably this is a largely subjective exercise. Where a firm suspects fraud, it should make its views known to the customer, who can then respond to the allegations. We are unlikely to support a firm’s position if, instead, it uses a separate and spurious reason to justify rejecting a claim”.

    Where fraud is suspected by a CMC firm, a process should exist within the regulatory framework to deal swiftly with it yet it seems time and again that despite clear evidence often being available the FOS either cannot or will not see it.

    As Douglas Adams famously said, “If it looks like a duck, and quacks like a duck, we have at least to consider the possibility that we have a small aquatic bird of the family anatidae on our hands”.

    With fraudulent CMC complaints the same logic applies and this is great news.

  4. Douglas Baillie 9th July 2015 at 10:34 am

    A number of CMCs and legal firms are simply sending out very technical ‘form letters’ to advisers without any relevant details about their client’s claim, and ‘threatening’ a referral to FOS if compensation is not paid.
    This is not in keeping with the FOS – “your guide to the Financial Ombudsman Service”.
    In particular it says: “The FOS won’t consider a complaint against your business until you’ve first had the opportunity to deal with it yourself”.
    CMCs are trying to bypass the entire process in the hope of creaming of a large % of the compensation, and if that doesn’t work, they will simply use FOS as a ‘free clearing house’ to review their cases at no cost to the CMC.
    But the complaint still counts as chargeable to the adviser firm.
    This is a scattergun approach that has nothing whatsoever to do with the merits or otherwise of the alleged complaint.
    Many such claims and referrals sent to FOS made by some CMCs are vexatious, disingenuous and poorly documented.
    There is a lot of work and time involved in advisers ‘proving their innocence’, and it seems very unfair that advisers have to pay, and the CMC doesn’t.

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