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Labour and Tory peers push for FCA regulation of claims firms

Howard Fligh 200
Howard Fligh

Labour and Conservative peers are pushing to amend the Financial Services Bill so claims management companies are regulated by the Financial Conduct Authority.

The bill, currently in the House of Lords, will see the FSA broken up and replaced by the Prudential Regulation Authority and the independent market regulator, the FCA.

Claims management firms are currently regulated by the Ministry of Justice, although there has been industry concern about the resources at its disposal.

The amendment, tabled by Conservative Lord Flight (pictured), Labour Treasury spokesman in the Lords Lord Eatwell and Labour peer Baroness Hayter, would see financial CMCs added to the 27,000 firms set to be regulated by the FCA,

Highclere Financial Services partner Alan Lakey says: “This sounds like a good idea. With the FCA’s more hands-on approach, they could have one high-profile thrashing of a major offender and that would send out a tough message.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 26th July 2012 at 1:55 pm

    The first question that needs to be answered is why, in the first place, the FSA shucked off onto the MoJ responsibility for the regulation of CMC’s.

    To the best of my knowledge, the MoJ has never before been a regulator and, even now, regulates no organisations other than CMC’s. Isn’t that extremely fishy?

    Additionally, a quick look at the MoJ’s Code of Practice for CMC’s (http://www.justice.gov.uk/downloads/claims-regulation/MoJ-Conduct-of-Authorised-Persons-Rules-20061.pdf/) reveals, amongst much else, the following rules:-

    A business must not engage in high pressure selling.

    Cold calling in person is prohibited (are machines okay? I receive about half a dozen cold calls every week).

    CMC’s must not offer an immediate cash payment or a similar benefit as an inducement for making a claim. In the past 24 hours I have received text messages from two CMC’s, both stating specific levels of likely compensation, one in respect of mis-sold PPI and the other in respect of an accident. I’ve never had either. Okay, these aren’t offers of an immediate cash payment but they’re certainly an inducement to claim and to do so in respect of things I’ve never had.

    Where a claim is one that falls within the province of the Criminal Injuries Compensation Authority, the Financial Ombudsman Service, the Housing
    Ombudsman Service or any other recognised dispute resolution procedure, the business must not suggest that a claimant will have a more favourable outcome if he uses the services of the business.

    A business must make explicit to the client his right to seek further advice or to shop around, subject to any time limits within which a claim must be made.

    Clearly, most CMC’s completely ignore this Code of Practice. Although the MoJ has banned a few firms, these bans appear to have made little or no difference to the way in which CMC’s routinely operate. Cowboy outfits seems to be a barely adequate description for most of them.

    Yet all this is still happening under the very nose of the MoJ and people and companies are being ripped off left, right and centre.

    For its part, the FSA appears to be much more interested in skewering IFA’s in the wake of the KeyData and ArchCru debacles, whilst keeping very quiet about its own failings.

    It all stinks, doesn’t it? Perhaps Hector Sants has more integrity than we give him credit for and got out because he just couldn’t stand it any more. BTW, does anyone know just why he decided to bail out when he did?

  2. @ Julian

    I see your point but in fairness, did the FSA ‘shuck’ its responsibilities onto the moj? Is that how it happend…..?

  3. To the best of my knowledge, no explanation has ever been given as to why the FSA didn’t take on responsibility for the regulation of CMC’s and why instead the task was handed to the MoJ which has never before been a regulatory authority. Even now, the MoJ regulates (pretty poorly) only CMC’s and no other business sector. As this article states, ” there has been industry concern about the resources at its disposal” and now we learn of calls from both Labour and Conservative peers for the FCA to do the job. Isn’t that all very odd? Perhaps, as “the open and transparent regulator” that the FSA on its website claims to be it could shed some light on the issue? After all, Adair Turner is forever calling for more more powers, more resources and more money ~ so why didn’t the FSA want this particular hot and rotten potato?

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