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
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