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Regulators urge caution on claims firms

Regulators have urged consumers to think carefully before agreeing to pass their complaints to claims management companies and to ensure they understand the fees they will be charged.

The FSA, the Claims Management Regulator, part of the Ministry of Justice, the Financial Ombudsman Service and the Financial Services Compensation Scheme have jointly published guidance for consumers and businesses on claims firms and financial services complaints.

The guidance sets out the various roles of the different bodies, and reminds consumers that they can go to the FOS for free to settle complaints.

It says claims firms can charge “significant” fees for their services, pointing out that in some cases consumers can be charged one third of the total compensation awarded.

The guidance also says consumers should be aware that compensation may be awarded in the form of a lump sum or as a reduction on amounts they owe, such as payment reductions on an outstanding loan.

A claims firm’s fees may therefore be higher than any lump sum compensation received by the client.

Claims firms must not engage in unsolicited electronic marketing, face-to-face ‘cold calling’ or in any form of high pressure selling.

The guidance tells consumers: “If you are considering a claims management company you should not be pressured into making any on-the-spot decisions, make sure you understand the fees the company will charge, and seek independent advice about making your complaint.”

It also reveals that less than 1 per cent of the FOS’ total caseload for 2010/11 was dismissed as ‘frivolous or vexatious’.

Firms who feel they are being unfairly targeted by claims firms can inform the claims management regulator.

The MoJ published its annual report on claims management regulation for 2010/11 yesterday. It reveals the MoJ refused nine applications from would-be claims firms, and suspended 10 firms due to factors such as fraud charges, irresponsible conduct and poor sales practices.

A total of 349 claims firms have had their authorisations cancelled by the MoJ over the past year.

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Comments

There are 12 comments at the moment, we would love to hear your opinion too.

  1. Leanne Caddick 19th July 2011 at 1:47 pm

    This may interest you.

  2. regulators, speculators more like, dont give a tinkers kiss

  3. “A total of 349 claims firms have had their authorisations cancelled by the MoJ over the past year.”

    That seems a very hgih proportion!

    If 10% of the advisory market was struck off, it would be all over the press.

    After such a high level, shouldn’t the MoJ be doing something control their members – rather than just stricking them off – some active regulation would seem to be in order (i.e. these Claim Managment firms seem to be getting away with murder).

  4. “Claims firms must not engage in unsolicited electronic marketing, face-to-face ‘cold calling’ or in any for of high pressure selling.”

    Are text messages classed as electronic marketing? Just that I receive about 1 a week saying that following my injury at work I am entitled to £3500 compensation!

  5. Agree

    I get asked if I want to claim for something or other at least three times a week. Is it possible that these organisations are inciting fraudulent claims?

  6. “Claims firms must not engage in unsolicited electronic marketing, face-to-face ‘cold calling’ or in any for of high pressure selling.”

    I have recieved several phone calls regarding the recent injury I suffered. Problem is I cant remember it. Claims Firms get away with murder, perhaps its time some challenged them via the Courts, perhaps for fraud

  7. Yes clients can deal directly with the regualtors for complaints handling AFTER the final decision notice has been received.The issue is not so much dealing with the regualtors, but knowing how to deal with the wriggly product providers who try every which way to avoid the accepting a complaint.

    Through our network of claims handlers, several of whom have previously worked for the FSA we are able to secure compensation for a client in a far more expeditious way.

    By the way, we do charge for our services, sometime amounting to several thousand pounds and yes clients are alwys appreciative when we obtain the result the are looking for.

  8. Roger Chadbourne 19th July 2011 at 3:57 pm

    There have always been “ambulance chasers”, and as we become a more litigious society it will get worse.
    They do play on public fears and media hysteria, whether it be the “Endowment Scandal”, the “Pensions Mis-selling/Opt-Out Scandal”, or the latest “PPI scandal”. Most of these firms have simply rebranded themselves to take advantage of the latest Sun headline “scandal”.
    I suspect that they will rebrand again when the next “Scandal”, the “Contracting-Out/APPS mis-selling” scandal breaks across the tabloids in, I suspect, 18 months/2 years time.
    You ain’t seen nuthin’ yet!

  9. When I worked at a large ifa network complaints team for a short while the standard of the complaints submitted by the claims party was of an extremely low standard anyway.
    They were extremely generic and obviously all put together with copy and pasted paragraphs often without any personilsation other than a one liner from the clients anyway.

    Money for old rope!

    Then of course, the case would be referred to FOS as a matter of course…

  10. Ironic that these companies are encouraging people to complain about anything and everything. One such letter I received from one of them stated “it is blatantly obvious that this sale was commission driven”. The advice related to a life and critical illness policy that actually paid out as Mrs had a heart attack and not a PPI as they stated in their letter, yet they then take one third of the compensation they receive from the client. I have seen some who charge 40%!! Who are the parasites here!!

  11. Anonymous quotes”The issue is not so much dealing with the regulators, but knowing how to deal with the wriggly product providers who try every which way to avoid the accepting a complaint”- Non-sense, the insurers laid over and paid out endowment claims with ease. Thankfully the IFA sector challenged many fraudulent claims leading to many Claims chases avoiding claims against IFAs, as it wasnt as straight forward.

  12. “The FSA, the Claims Management Regulator, part of the Ministry of Justice, the Financial Ombudsman Service and the Financial Services Compensation Scheme have jointly published guidance for consumers and businesses on claims firms and financial services complaints.

    But who is paying for this consumer guidance. You can bet your bottom dollar it is not the Claims management firms”.

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