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Alan Lakey: Crackdown on claims chasers gathers pace

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I was recently chastised for likening claims management companies to the biblical plague of locusts – an analogy that I still feel is sound. 

The antics and creativity of CMCs continue to astound so I thought it wise to caution advisers about the latest shenanigans.

One particular claims-monger is focusing on execution-only cases, presumably on the basis that they may provide easier pickings than other types. A number of these complaints have been escalated to the Financial Ombudsman Service and the CMC is arguing that because the confirmation of execution-only was not in the claimant’s own handwriting (the claimant signed a letter provided by the adviser), the confirmation is not
legally valid.

This is an interesting and devious variation whereby the CMC’s aim is to ensure that the FOS accepts the complaint within its jurisdiction because it knows this provides about a 40 per cent chance of success.

My own MP, David Gauke, who is a junior minister at the Treasury, recently responded to my submission that CMC supervision should come under the auspices of the FCA. He dismissed this idea on the basis that many CMCs also work within employment and personal injury areas. He advised that the Claims Management Regulator has recently raised its fees, enabling the hiring of additional staff and ancillary services, and the CMR has confirmed that staffing is up by 30 per cent since April 2013.

Pertinently, Gauke added: “The CMR also aims to bring firms into compliance, for example, where CMCs have not undertaken adequate investigations into the existence of PPI and non-compliant marketing, without necessarily resorting to use of its statutory enforcement powers.”

The CMR revised and reissued its publication policy in the summer, enabling it to be more transparent over its investigation and enforcement activities. Gauke advised that auditing and monitoring have focused initially on 50 priority CMCs. The CMR now names those companies under investigation or subject to enforcement action and details can be found at http://www.justice.gov.uk/claims-regulation/enforcement..

The CMR advises that between July and September it conducted 41 audits, issued 25 warnings, commenced 11 investigations, cancelled 109 licences and visited 407 CMCs.

It seems that a much greater scrutiny is taking place and most of the conmen will be pressured out of the industry. Overall, the number of CMCs fell by 23 per cent during the
six months to September and is now less than 70 per cent of its 2010/11 high. As at September, 1,128 firms were authorised in financial services, of which 1,050 were allowed to function in the PPI arena.

The main focus of the CMR is to ensure that consumers do not suffer due to CMC mischief and deceit. The impact on firms and insurers has historically taken a back seat although the CMR offered the following encouragement: “We are developing further proposals to tighten the conduct rules for CMCs to help tackle more effectively poor CMC business practices when presenting financial claims. The proposals take into account the problematic behaviours identified by the financial services industry, the FCA and the FOS. 

“We have begun informal consultations with representative bodies from the financial sector, banks, the FOS and the FCA. We intend to launch a public consultation by the end of 2013 and aim to implement any amendments to the rules during 2014.”

Let’s hope this plague also results in a mass exodus.

Alan Lakey is partner at Highclere Financial Services

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  1. Whilst I agree (as usual) with much of what Alan says, his emotive choice of language detracts rather than adds to his argument. “The main focus of the CMR is to ensure that consumers do not suffer due to CMC mischief and deceit” – is this in the same way that the main role of the FCA is to “ensure that consumers do not suffer due to adviser mischief and deceit ?”. No, surely the role of both the FCA and the CMR should be to regulate the areas that they have responsibility for in the hope of maintaining and improving standards, although I appreciate that we all have our views as to how well they do this. Personally, what few dealings I have had with the CMR, discussing bad practice amongst other CMC’s has proved much more constructive than my dealings with the FSA / FCA discussing regulatory breaches by lenders.

    As always, if you have any problems with CMC’s the CRM should be your first point of contact. You may also be interested to see their latest publication which suggests that a further tightening of regulation is in hand

    http://www.justice.gov.uk/downloads/claims-regulation/cmr-bulletin/cmr-bulletin-dec-2013.pdf

    Anything which improves customer outcomes and improves standards can only be welcome and if we all continue to report bad practice to the CRM this will ensure that those firms who operate poorly are those visited by the regulator

  2. The sub-editors chose to remove an introductory paragraph which said

    “I was similarly rebuked for averring that they were lower than a weasel’s belly, although one poster suggested that such an association had libelled the entire weasel population.”

  3. I might add that I am in regular dialogue with the CRM Unit and they are doing a reasonable job given the nature of the people they have to deal with.

    I make no apologies for my choice of words – most of these CMCs are deceitful, fraudulent scum-bags who should be serving time.

  4. CMC Manager excepted though I think Alan as this poster seems pretty decent. It remains a pity he chooses to post anon. Hey ho.

  5. @Philip Castle

    I post anonymously as my contract of employment places certain restrictions on what I say in public forums and I once had a rather uncomfortable conversation with an ex-employer over a TV interview I had given.

    @Alan Lakey

    If you have evidence that a particular CMC behave inappropriately then report it to the relevant authorities but please don’t make the generalisation that all (or most) are “deceitful fraudulent scumbags” unless you have had dealings with the majority of the 1128 firms authorised for financial services. I think you would genuinely be pleasantly surprised at how many in the CMC industry share your view that standards need to be improved. The problem is that, if you have always sold properly you won’t ever hear from a decent CMC because that CMC will have looked at and declined any claim that has been raised against you without the need to submit it.

    Lets just agree that the CRM unit are doing a decent and improving job and this is slowly driving out the undesirables – we can also agree that there is a long way to go.

  6. @ CMC Manager

    Fair enough, I’ll drink to that.

    Have a great Christmas

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