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Trio in plea to Clarke for MoJ to crack down on claim firms

Which?, MoneySavingExpert.com and the British Bankers’ Association have written to Justice Secretary Ken Clarke calling for tougher regulation of claim management companies.

CMCs have been criticised for charging clients up to a third of their compensation payouts when consumers can submit their own claims to the Financial Ombudsman Service for free. The letter, sent this week, says regulation has failed to keep up with the growth of the sector and suggests there is “significant evidence” of rule-breaking by claim firms.

It says much of the compensation set to be paid out over payment protection insurance misselling will be distributed this year so “urgent action” is needed.

It calls on ministers to meet with the three bodies to discuss how the Ministry of Justice can bolster CMC regulation.

It says: “The Government has a critical role to play to help consumers and the industry by ensuring third-party complaint handlers are properly regulated and bad practice is stamped out.”

Earlier this month, Financial Conduct Authority chief executive designate Martin Wheatley backed a marketing campaign by Which? and MoneySavingExpert. com against claim firms that charge consumers a fee without saying there is a free alternative.

In March, justice minister Lord McNally admitted the department has to do more to crack down on “dodgy practices” used by some CMCs.

Clarke Robinson & Co managing director Steven Robinson says: “Some of these firms hassle vulnerable people so the MoJ needs to tighten up regulation.”

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  1. Julian Stevens 17th May 2012 at 1:16 pm

    Does anybody know if the MoJ regulates ANY firms at all other than claims instigators? I’ve tried to find out by looking at its website but, unlike that of the FSA, there appears to be no register of regulated firms or individuals.

    Clearly, the MoJ isn’t a regulator in the same sense as the FSA yet surely the activities of claims instigation companies are such that they ought to fall within the FSA’s remit?

    After all, they “advise” people (after the event) on the suitability or otherwise of certain personal protection products, they undertake claims on their behalf and they take a cut of any proceeds (commission) ~ often a pretty hefty cut.

    The very fact that the FSA shucked off onto the MoJ responsibility for regulating these firms is in itself extremely fishy, perhaps driven by the potential perception of some sort of concomitance (as opposed to conflict) of interests.

    If nothing else, one might reasonably expect the MAS to offer “guidance” on how to go about checking whether or not somebody’s PPI policy is appropriate. Are claims instigation companies really necessary at all? They certainly don’t appear to offer value to consumers.

    As things presently stand, a whole army of claims instigation companies seems to have sprung up almost overnight and is busy causing mayhem. Meanwhile, the MoJ seems to have been landed with the job without having had time to draw up any sort of regulatory framework or code of conduct for these vultures.

    And, we wonder, is there anything at all in the FSMA about the MoJ acting as a regulator alongside the FSA?

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