It is rare to find a topic that everyone in the financial services sector agrees about but claims management companies appear to have succeeded in uniting opinion.
There are degrees of emphasis that people might dispute, but I think all would agree that the CMCs are out of control.
There is a proper role for CMCs as they could be said to perform a useful function in encouraging and supporting consumers to get their due but they have gone too far.
While they may be able to draw a legal distinction between themselves and the companies that generate leads but this points to something that is very rotten in the sector.
You only have to mention PPI and people will tell you of the irritating torrent of texts and phone calls making fraudulent claims as to your past loan history (it’s a surprise to me that I’m not bankrupt given the volume of money I am supposed to have borrowed).
They are not merely misleading, they are categorically false, with the sole aim to generate leads.
The problem is that it is not just an irritant to individual consumers (although they certainly are), they are a costly distraction that will harm the industry and consumers. There are now signs of CMCs grown fat on PPI looking for new targets.
The cost of dealing with a new wave of fraudulent or vexatious claims is one the financial services sector can ill afford. And all of this will ultimately be paid for by consumers.
What is to be done? The Ministry of Justice has recently consulted on some changes that will help tighten up the rules. But the MOJ does not have the resources or the competence to take action.
On top of this is the problem of the patchwork of other agencies that have responsibility for some of the symptoms or the problem – the annoying lead generation.
The Information Commissioner’s Office regulates unwanted text messages. The Telephone Preference Service is supposed to prevent unsolicited phone calls.
However, stopping texts from one number just displaces it to another. And being registered with the TPS doesn’t seem to stop calls.
There is a need for better coordination and a more effective response. There are many fine words and good intentions coming from the MoJ. It claims to have sufficient powers to take on the CMCs and their agents that generate the noise. I am doubtful, but perhaps they should be given time to provide some concrete results.
However, if we’re all still being hounded to make fraudulent claims in the New Year, then the MoJ’s promise is obviously an empty one. Then we must see the government put the proper resources in place to tackle this plague.
Chris Hannant is policy director at AIFA