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FOS rejects calls for claims firms to pay case fee

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The Financial Ombudsman Service has confirmed its intention to increase the number of free cases firms are allowed before having to pay a case fee from three to 25 per year, but rejected calls for claims management companies to pay a fee.

Currently, firms have to pay a £500 case fee for the fourth and subsequent cases referred to the FOS over the course of a year.

The new case fee structure will be introduced from April 2013. The FOS calculates it will see just 1 per cent of businesses paying case fees.

The free case limit will apply to networks as a whole rather than each appointed representative.

Large businesses with more than 2,000 cases referred to the FOS in one year will not qualify for any free cases and will be subject to a new group account arrangement that aligns fees to the amount of cases generated.

The FOS rejected industry calls to introduce fees for CMCs submitting claims.

It says: “We do not believe it would address the underlying issues in the claims management sector, not least because the costs would ultimately be borne by consumers.”

Forty Two Wealth Management partner Alan Dick says: “CMCs should be brought into scope because they are largely responsible for the frivolous claims made.”

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  1. Why are all the member firms of a network deemed still to fall under a single regulated entity? To all practical intents and purposes, each member firm is individually responsible for its activities so, unless a particular network has an almost impossibly small number of cases referred to the FOS, this new rule is of no value whatsoever. Meanwhile, a directly regulated firm, however small, will be able to get away with a quite disproportionately large number of referred complaints without having to pay any case fees.

    I can see why CMC’s exempt from having to pay case fees, as they aren’t the entities being complained against. But, on the other hand, the very modus operandi of CMC’s is actively to incite complaints (often with total disregard for the MoJ’s Code of Practice, e.g. by cold calling via unregulated “marketing” companies) and, at the drop of a hat, to refer rejected ones to the FOS. This results in a gross distortion of the FOS’ workload to the detriment of many other referred cases of considerably more justifiable merit. Such practices clog up the whole system, which cannot be right, yet the MoJ seems to be doing nothing about it.

    I was listening yesterday to a programme on the radio and one interviewee said a CMC had secured him £82,000 of compensation for having been mis-sold PPI ~ of which he then had to pay the CMC £26,000! If that isn’t dodgy vulture practice then I’m hard pressed to think of a worse example.

    And still we don’t know why the FSA shucked off onto the MoJ ~ which, hitherto, has never been a regulatory body and which, even now, regulates nobody other than CMC’s ~ responsibility for regulating CMC’s. Perhaps our “open and transparent regulator” would care to comment?

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