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.”