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Aifa calls for FCA to regulate claims firms

Chris Hannant 480

Aifa has called for claims management firms to be regulated by the Financial Conduct Authority.

In August, the Ministry of Justice published a consultation paper which proposed new rules for CMCs that will require them to obtain signed contracts from consumers and force them to provide “unambiguous” information about relevant ombudsman schemes.

In its response to the paper, published today, Aifa policy director Chris Hannant says: “The real problem within the claims management industry is not that the rules are wrong, it is the lack of enforcement. The current regime is under resourced and ineffective. For example, banned companies can often reappear in another guise shortly after being banned.

“However, in the interests of consumer protection, we must ensure that sufficient resources and expertise is applied in this area. This means transferring regulation of CMCs to the new regulator, the Financial Conduct Authority.”

In July, Conservative Lord Flight, Labour Treasury spokesman in the Lords Lord Eatwell and Labour peer Baroness Hayter tabled an amendment to the Financial Services Bill proposing that claims firms are regulated by the FCA from next year.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Rob Derry (Brunel Mortgages & Loans) 4th October 2012 at 4:16 pm

    I have been very concerned with the activity of many of these claim firms but I don’t thinking switching the regulator is a good thing.
    The claims process is a legal matter, not a financial one. It just happens at the moment that they are predominantly pursuing the mis-selling of financial products. But they also do accident claims and the like.
    What needs to happen is for the current regulator (the Ministry of Justice) to get a grip on what they are supposed to be regulating and stamp out the poor practices that we see every day from a lot of these firms (the worst one being not even trying to ascertain if the client has bought a product they are complaining about).
    Where the FSA/FCA could help is in questioning the business model of some of these firms. Many of them are operated by FSA authorised individuals so they are both poacher and gamekeeper. There is one firm that is pursuing claims for PPI and then they have a sister company that sells income protection policies.
    Is that not a conflict of interests?

  2. Derek Bradley ceo Panacea 4th October 2012 at 5:19 pm

    @Rob Derry Some good points, perhaps the easiest solution if CMC regulation fails advisers with spurious claims ending up with the FOS is to disallow such process to CMC’s, instead ensuring their claims end up in a court where real evidence will be needed and the less than scrupulous/ false claims that of course will fail see costs awarded to the adviser firm.

    Just a thought.

  3. @ rob Derry re: conflicts

    I do see your points however surely there is only a conflict where they investigate claims against their own sister company. otherwise i can’t see this would be a conflict.

    I have come across a firm on my travels who have a CMC and IFA practice under a group. Mis selling claims raised at the IFA were refered to the CMC once founded – now that’s a conflict! lol how some of these firms operate does beggar belief.

  4. Rob Derry (Brunel Mortgages & Loans) 5th October 2012 at 11:55 am

    Derek: Good idea. At the moment, the CMCs are on a free ride. It’s the business being complained about that pays the FOS complaint fee as well as funding it through annual fees. Even if the complaint is unfounded.

    Compliancy: Here’s a potential conflict that I was thinking of (I’m not saying that this actually happens – it is simply a potential conflict). The CMC makes a successful PPI claim. They then know that the customer a) has money and b) has no protection, so the IFA firm sells them income protection.
    Whether this is happening or not is irrelevant in the eyes of the FSA. We’ve seen that with the commission bias row. It’s the potential conflict that is the issue.

  5. As far as I’m aware, no explanation has ever been published as to why the FSA shucked off the job onto the MoJ in the first place. The MoJ has never in the past been a regulatory body and, even now, regulates no industry other than CMC’s, all of which is decidedly fishy, not least because the FSA is forever calling for more resources, more powers and, of course, more of OPM. Why wasn’t it interested in this particular hot potato, other than of course because the FSA itself is largely responsible for having created the very environment on which these parasites can proliferate and flourish?

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