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Govt claims firm crackdown won’t address ‘vexatious’ advice complaints


The Government has unveiled plans to cap the fees claims management companies can charge consumers as part of a radical overhaul of the sector.

However, advisers have been left disappointed that the majority of the proposals – including a ban on claims firms taking any fees where no relationship is found between a consumer and a lender – will be limited to complaints about payment protection insurance and packaged bank account misselling.

The reforms, published for consultation today by the Ministry of Justice, place a heavy emphasis on discouraging large-scale claims affecting banks and building societies.

The MoJ wants to cap the maximum completion fee at 15 per cent (including VAT) of the final compensation awarded for PPI and PBA claims with a lender, where the net value of all relevant claims is £2,000 or less.

In addition, the MoJ proposes limiting the overall charge for PPI and PBA claims worth more than £2,000 in total to £300.

Similarly, a maximum cancellation fee of £300 has been proposed for bulk claims when a customer ends their contract with a CMC after the initial 14-day “cooling off” period.

At the same time, CMCs making PPI or PBA complaints will be prohibited from receiving or making any financial payment to a third party.

A proposal to ban CMCs from taking a fee where there is no relationship between a customer and the firm – designed to discourage “speculative” complaints – will not be extended beyond PPI and PBA sales under the plans.

For non-PPI and PBA claims – which includes complaints linked to pensions, mortgages and investments – the MoJ proposes capping fees at 25 per cent (including VAT) of the final compensation amount. It will also ban CMCs from charging upfront fees before carrying out any work.

The MoJ says the proposals aim to “protect consumers from high charges and to reduce the level of speculative claims lodged with lenders and the Financial Ombudsman Service”.

Justice minister Lord Faulks says: “We want to do all we can to get consumers a fairer deal.

“Some claims management companies charge as much as 40 per cent of the final compensation awarded for very little work. This has got to stop, and this Government is taking action to make sure people aren’t being taken advantage of by these greedy practices.”

However, Apfa director-general Chris Hannant says the Government should go further to discourage CMCs from making speculative complaints against advisers.

He says: “Claims management firms are a menace and their business model is just hurl enough mud and hope it sticks. It wastes people’s time and it costs consumers and the industry huge amounts of money. It’s good that the Government have recognised the need to clamp down on vexatious claims but you can get those in any walk of life.

“The claims management companies should not get a free ride for wasting everyone’s time, and we have argued they should pay a fee to the Ombudsman if they are going down that route to incentivise them to only bring cases that have merit.

“Advisers are subject to speculative claims in other areas but not really relating to PPI or packaged bank accounts.

“There is a strong case for introducing analogous provisions not just for advice claims, but for any claim full stop.”

Highclere Financial Services partner Alan Lakey adds: “Clearly the MoJ is not so worried about the investment side of the claims management industry but I have seen some appalling adverts in the past from claims firms.

“We need some form of differentiation between what is a true complaint and what is an opportunistic one. It is not good enough that a CMC is allowed to write to me saying they think their client has been missold a product, without first checking the plan exists.

“But the adviser is obliged to create a complaint when that happens and tell the FCA about it. It is a real pain for the industry.”



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There are 10 comments at the moment, we would love to hear your opinion too.

  1. Is vexatious a posh word for lie? If so, a minimum requirement should be that claims be substantiated, you know, such as happens in a court of law, then there would be no vexatious claims, just lies! 🙂

  2. I know one or two people who are registered as CMCs and who actually quite professional in pursuing complex complaints. No seriously, I do. One is a qualified but non-registered Barrister, the other a Scots Solicitor, who cannot do contingent fees with his Law Society hat on i.e. people small-scale professionals who tend to act against Banks and Providers, rather than just firing moronic mail-merged complaint letters at IFAs…

    In the main however, the bulk of CMCs are non-lawyers who have no interest in looking through a case, assessing it objectively, and arguing a case (only if they actually have one). Instead, they just act as postboxes and mailing companies: they chase leads, they hoodwink people into signing agreements, then they just fire letters unthinkingly, ignoring the replies and progressing to the FOS.

    Whilst I know many people will want to see real action against these CMCs, I would humbly suggest that such demands miss the real fault here: the FOS. The FOS purports to ‘investigate’ claims. It does this without charging a fee and without asking the complainant to prove their case or indeed to make an argument. It does it on the basis of what they think feels right (‘fair and reasonable’) rather than on those rules and standards that IFAs try to follow. There are no ‘pleadings’ and no ‘expert evidence’ required. And it does all this even where a complainant is paying to be represented – where a complainants representative could reasonably be expected to argue and prove their case according to the Rules. (If they’re not capable of this, how come they get to charge anything?)

    So why I know plenty of people want more regulation of CMCs, I would suggest its the wrong answer: its just more regulation to correct faults caused by existing regulation. We have CMCs because we have a dysfunctional FOS.

    If we want a nice customer-centric solution that also works for IFAs, the answer is (1) give up on regulating CMCs, but (2) scrap FOS – and make represented claimants go to something akin to a proper Court: with Court fees, the requirements for statements of case, a burden of proof, use of expert evidence and so forth.

  3. Should a complaint be made/received, one should ask them and their customer to substantiate their accusations and remind them that to make unjustifiable complaint without evidence or to deliberately make misleading statements with a view of obtaining compensation may well be slanderous and financial fraud and will be acted upon most vigorously.

    • That is what we did with or only complaint as all our meetings are recorded. Surprisingly enough after the former clients solicitor put the claims in writing an we resent them a copy of the recordings and transcripts which the former client had forgotten to tell the solicitor existed, they solicitor dropped the case like a hot potato

  4. Agree that something needs to be done re CMCs but can’t agree it’s all the fault of FOS. Scrapping FOS and making all complainants go to court won’t work as the majority of complainants won’t be able to afford court fees. The fact is that the majority of complaints against advisers are not upheld, it’s the banks that tend to have the complaints upheld against them. The majority of advisers don’t have to pay case fees. If you are not a bank or a network and you have more than 25 cases go to FOS in one year then you have a problem.

  5. If the CMC are told to submit a £300 fee along with their complaint to FOS it should reduce the vexatious claims at once and everyone is a winner. The part at which the complaint is made does not have to trawl through so much crap to find there is no basis for the initial complaint, the FOS does not need to spend many, many man hours chasing non existent policy complaints and the CMC’s know that those complaints they actually input are genuine. Who loses? If the claim is legitimate and they win the case, it can be repaid to the CMC. It is not exactly a hard thing to do so why does someone not just take a leaf out of the old Nike ad (other sports companies are available) and JUST DO IT!!!!!!!!!!!!!!
    This is so typical of a quango tale lost of action, short of actually doing something.

  6. What’s that smell? Is it…? yes, it is, hypocrisy is choking the air supply. Let’s look at this objectively. IFA’s are up in arms about all being tarred with the one brush that, yes, there are some who are unscrupulous and/or incompetent but not all IFA’s are like that. One has to say that is true. But those same IFA’s who complain about being unfairly maligned then start shouting that all CMC’s are the same. Not some, not most, all CMC’s. Really guys, think about it.

    And no less a personage than the Apfa DG (as quoted above) proclaims ”Claims management firms are a menace and their business model is just hurl enough mud and hope it sticks..” Really? Does anybody among the much-maligned IFA community think that just maybe that may be a bit too broad in terms of a generalisation? Now if the Apfa DG is shouting things that cannot be substantiated how does that help the case?

    Get a grip and cut out the hyperbole and perhaps there would be more chance of some sensible proposals being listened to. Firstly, recognise that the only reason there are CMC’s is because there are claims. Why are there claims? Exactly. Don’t forget it.

    Secondly recognise that no, not all CMC’s are run unscrupulously.

    And thirdly accept that people who have been treated unfairly and cheated (in some cases) by your own profession deserve a right of reply, without putting barriers in their way, financial or otherwise. And there are more than just a few like that.

    My own view, just to clarify for those of you jumping to conclusions, is that yes, CMC’s most certainly should be regulated and should be obliged to show both expertise and professionalism. But enough with the ‘hang them in the morning’ cries. Remember why they exist…….

  7. Reviewing my previous post I don’t think I made myself clear in fairness, I do think there are an awful lot (the majority?) of CMC’s that are run in an unscrupulous manner and that the current regulation of them (because yes, they actually are subject to a basic form of regulation) is not sufficient, but making sweeping statements that are obviously wrong and also forgetting why they came into existence in the first place is just silly and counter-productive.

  8. Knowledge Seeker…welcome to the club…Not pleasant when everyone has their reputation sullied by the ‘few’ is it?

  9. General Rule 2 of the Conduct of Authorised Persons Rules 2014 published by the MOJ and effectively the CMSs’ equivalent of the FCA handbook says:

    “A business shall conduct itself responsibly overall including, but not limited to, acting with
    professional diligence and carry out the following:
    a) Take all reasonable steps to investigate the existence and merits of each element of a
    potential claim before presenting it to a third party.
    b) Make representations to a third party that substantiate and evidence the basis of the claim,
    are specific to each claim and are not fraudulent, false or misleading.”

    I have yet to see a complaint from an ambulance chaser that complies with this.

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