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New powers force claim firms to pay redress to consumers

Consumers will be given access to redress for complaints about claims management companies from today, after the Legal Ombudsman began accepting complaints against the firms.

The service will be free to consumers and the ombudsman will have the power to deal with complaints about any claims firm regulated by the Ministry of Justice.

The Legal Ombudsman can order compensation or make firms reimburse costs where it finds there has been poor service.

Legal Ombudsman head of CMCs Simon Tunnicliffe says: “This is great news for claims management customers as we have significant powers of redress to help protect them. I would encourage anyone who has made a complaint to their CMC without success to contact our scheme straight away.”

The scheme says it plans to work with firms and the MoJ to tackle common issues in the sector.

Which? executive director Richard Lloyd says: “This is a positive change for consumers. We have campaigned for years for the Legal Ombudsman to handle complaints about CMCs so that consumers who are treated badly will get access to independent dispute resolution and compensation.



“CMCs have a poor reputation, especially over rip-off payment protection insurance claims, so this will tip the scales back in favour of consumers, drive up standards and help clean up the claims industry.”

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Comments

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

  1. An Ombudsman to determine complaints about firms who procure complaints to an Ombudsman?

    The line from the guy from Which? is superb – this new Ombudsman power tips the balance back to consumers!?!

    Maybe somebody should ask themselves what the root cause of bad practice in the claims management industry is. Why is bad practice so prevalent relative to (say) litigation lawyers? Could it perhaps be a function of this so-called investigative FOS, the absence of any claim fees by FOS and their power to make ‘fair and reasonable’ decisions – all meaning that CMCs need no real skills to bring claims and earn?

  2. Excellent news. How long until we see adverts encouraging people to make claims against claims firms, with the help of a claims firm? Then the claimant will claim against the claims firm that helped them claim against the orginal claims firm, aided by yet another claims firm. Of course, if that claim goes wrong they’ll need to find a claims firm to make claim against the claims firm that represented them against the claims firm that helped them claim against the claims firm that handled their original claim.

    I’m going to lie down for a bit.

  3. Derek Bradley ceo Panacea Adviser 28th January 2015 at 9:48 am

    A great move and I would like to think that Alan Lakey and I had some hand in this. Here is a link to our podcast on the subject. http://www.panaceaadviser.com/main/st6865.htm

    As far as the ‘Which’ comment, it is about time that there was a redress opportunity for firms plagued by frivolous complaints, after all along with consumer rights go responsibilities.

    Perhaps this is it?

  4. Nice one Neil, haven’t laughed out loud like that in ages!

  5. If a claims firm ceases trading in order to avoid paying compensation, who will pick up the tab?

    Other claims firms or the FSCS?

  6. I operate both as a solicitor advising IFAs re FCA regulatory proceedings and also as a CMC pursuing consumer complaints against authorised firms and FSCS claims.

    Just for the record I have never undertaken any PPI or endowment complaint – consumers are perfectly able to deal with these themselves. Apart from that, they would bore me to death.

    I do not entirely agree with Jonathan Purle.

    In most cases, a CMC doesn’t need any qualification nor any great skill to bring complaints to the FOS beyond a basic command of English.

    In many of not most cases the CMC simply points a complaint to FOS and shoots from the hip expecting the FOS to do the rest. The CMC really doesn’t need to understand the investment he is complaining about, or the advice process under FCA rules that lead to the investment, or indeed the DISP rules that govern the complaint handling.

    One of the major issues that I have encountered time and again is that the FOS adjudicator, or the FSCS case handler and assessor, simply do not understand the nature of the investment nor the advice process.

    But where the complaint is about a complex investment, and/or where there are multiple investors with the same generic grounds of complaint or where the respondent firm is economical with the truth in its sale process or in its handling of the complaint ( and that happens just as often as selective memory on the part of the investor complainer), then an investor will need to consider professional assistance.

    I have dealt with and am dealing with 5 “class action” (for want of a better description) multiple complaints to FOS and multiple claims to FSCS about complex investments:
    • to FOS against London Capital Group re Integrity forex,
    • to FSCS re Direct Sharedeal contracts for difference,
    • Clydesdale Bank under a voluntary scheme re Arck LLP investments,
    • FOS re complaints against Clydesdale Bank re cases it rejected under its Arck scheme
    • to the Official Receiver and thereafter to FSCS re HD Administrators LLP

    I do not mean to belittle the ability of the lay investor, but there is no way that the vast majority of them could handle complaints of the nature and complexity that any of the above cases presented – nor the process problems arising from the manner in which FOS and FSCS handle(d) matters.

    And where the investor may have rights of claim against more than one party – against the IFA re the advice and/or against the Bank or provider re the product provided – or where the investor has a portfolio of investments the structure, sale or governance of some or all of which may be questionable and actionable there are serious pitfalls awaiting the unwary investor who heeds the FOS/FSCS advice that they do not need a solicitor or CMC to advise them. Raising complaints to FOS or claims to FSCS in the wrong order can be a very costly error.

    But by far and away the biggest issue is, in my view, that the MoJ rules are woefully inadequate.

    I could read the whole of the MoJ rule book for CMCs whilst having my breakfast – indeed, I once did so whilst awaiting the MoJ inspectors one day to carry out an inspection.

    MoJ rules are improving but, to a solicitor used to the rule book the Law Society of Scotland applies, they are a joke. IFAs would be open mouthed with shock if they read them.

    I do not for a second suggest that CMCs need to be regulated by anything akin to the solicitors’ or IFAs’ rule books but I feel that, for a start, MoJ could borrow heavily from both re the need for some qualification and from both, especially the FCA, on specific threshold conditions and fitness and propriety rules.

    The fees charged by MoJ on application for registration and annual authorisation fees are or until recently were minimal. When I last completed the MoJ online survey I argued for quadrupling all fees.

    Yes, the FOS rules may be such that no special skills are needed but, to me, the root causes are the qualifications, training, fitness and propriety of persons allowed to be registered as claims managers in the first place.

  7. Alasdair – I don’t think you even need a basic command of English to be a CMC pursuing PPI complaints.

    Having seen one in which the letter said “Our client was a ” it is clear that you do not.

    In that instance not only did their client apparenty not have an occupation, they didn’t have any PPI either.

    My thought is that if your CA says you will charge for frivolous, vexatious or fraudulent complaints by a client or their CMC you can respond to the client by saying “here’s the bill and here’s the complaint letter to get your CMC to pay it for you”.

  8. A useful post from Alistair and I agree with Peter Turner re billing consumers for spurious, fraudulent or vexatious complaints and enclosing draft letters for the consumer to send complaining about the CMC where the complaint is spurious or inept on the part of the CMC who has not checked any facts. Not that I have ever been contacted by a CMC as an adviser to my knowledge I hasten to add, just as a consumer who never bought PPI and keeps being told I can claim!

  9. Do what I did.

    If you receive a letter from a CMC which states that you mis-sold a PPI plan for the following reasons – and there is not any PPI plan that you have sold – bill them and then follow up with a summons when they refuse to pay.

    Hitting them in the pocket is a wonderful thing.

  10. I think we can go further, Phil.

    Encouraging your clients to make formal complaints to CMCs about unsolicited phone calls and spam e-mails then passing them on to the Ombudsman should start to make them think about whether it is worth it.

    The Ombudsman will get swamped, of course, but will then have to take on the contractors currently at FOS and pass the cost on to the CMC.

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