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‘Urgent action’ needed over claims firm regulation

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

CMCs have been criticised for charging up to a third of compensation payouts when consumers can submit their own claims to the Financial Ombudsman Service for nothing.

The letter, sent today, says regulation has failed to keep up with the growth of the sector and suggests there is “significant evidence” of rule breaking by claims firms. It adds that much of the compensation set to paid out to those missold payment protection insurance will be distributed this year so “urgent action” is needed and calls on ministers to meet with the three bodies to discuss how the Ministry of Justice will bolster CMC regulation.

It says: “It is essential that urgent action is taken to encourage better supervision, self-regulation, tighter regulation and enforcement against CMCs by the MoJ.

“We believe 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.”

Last week, the MoJ committed to improving its supervision of CMCs after a meeting with Labour peer Lord Kennedy. The meeting was the result of an oral question from Kennedy in response to which Lib Dem peer and justice minister Lord McNally admitted the department had to do more to crack down on “dodgy practices used by CMCs.

Earlier this month, FCA chief executive designate Martin Wheatley backed a marketing campaign by Which? and MoneySavingExpert.com against unscrupulous claims firms that charge consumers a fee without telling them there is a free alternative.

He said: “A significant proportion of these complaints have been driven by claims management companies, and I am sure they annoy you as much as they do me. There is no need for consumers to use a claims manager where it is free and easy to complain to a firm directly, so I welcome banks getting together with Which? and Money Saving Expert to make the process clearer and simpler for consumers.”

Financial Services Compensation Scheme figures published in January show 75 per cent of PPI claims were brought by claims management firms. The letter says that recent research by MoneySavingExpert.com and Which? found that only a quarter of people knew claims firms took a fee and only half knew they would be no more likely to have a successful claim by using a CMC.

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Comments

There are 15 comments at the moment, we would love to hear your opinion too.

  1. I wonder if this will be the next mis-selling scandal…. would be interesting to see CMC’s having claims aginist them for the excessive fees THEY charge… let them pay the levy the obudsman charges for any claim against them…

  2. Derek Bradley ceo PanaceaIFA 14th May 2012 at 3:00 pm

    Recently we highlighted concerns over the seemingly unchecked proliferation of claims management companies and noted that “the financial services industry is going through one of the most radical overhauls ever seen yet while all this is going on, the more ‘Wild West’ the legal system is becoming and one must question whether the MoJ is turning into a version of “Rock Ridge” where the town is out of control with no Sherriff”.

    So it was with a certain sense of ‘Schadenfreude’ that I noted an FOI request has confirmed that the Ministry of Justice has some 734 “Stinking Badges” from these firms in the year to the end of March. This represents almost 20% of this toxic, parasitic industry of ‘pushers’. And to cope with flushing out the rest of the 3,018 PPI and Whiplash fuelled ‘Tapeworms” the staff tasked with doing it at the MOJ are being doubled.

    The FSCS reckons that 75% of claims came from this source and the FOS almost 50%.
    Only last month I had a call from a claims management firm (0207 627 9502) asking me if I had been miss sold PPI insurance. This seems to have breached the Telephone Preference Service barrier too.

    I am not alone in being cold called. As Harry Katz noted:

    “Not only e-mails, but phone calls and text messages. There has even been a stall in our local shopping mall with a ‘representative’ chasing shoppers down the road haranguing them to make a claim.

    This is just redolent of the ‘Compensation Culture’ which has become so common. With regard to whiplash for example the lawyers and the Insurance companies are also complicit.

    We all know about the lawyers; but the insurance companies get kick backs from car hire firms and repair garages. Doctors are involved – from both sides. They earn from the ‘injured’ and from the insurance companies who often want claimants examined. Hospitals also now charge a fee for those admitted as a result of a car accident in the knowledge that they too can cream off something from an insurance company. So there are a multitude of snouts in the trough.

    And what is underlying it all that has helped to encourage this venality? Well I guess it began in earnest with the ‘pensions mis-selling’ review and was further encouraged by the FOS and FSCS. Now I’m not saying that in principle these are not worthy institutions, but as ever the law of unintended consequences comes into play and as so often in trying to ‘do good’ you merely let the feckless, the venal and the plain crooked off the leash”.

    For these firms ‘Ethics” is a county north of the Thames. I could not put it better and hope that 2012 will see a further demise in these firms and more “Stinking Badges” reclaimed.

  3. I took my cub pack pond dipping a couple of weeks ago.

    One of the told me he had found a leech so I asked him how he knew it was a leech.

    He said “it told me I had been missold PPI”.

  4. Can`t help wondering if this is not the best scenario for our finacially and otherwise uneducated masses who have been deceived by their banks into taking out useless products over the years. 70% of something is better that 100% of nothing if you are unable to write a letter.

  5. I’ve had 3 automated PPI claim phone calls and a text msg today alone… per week I receive approx 7 or 8 I’d say.

    I’m on the TPS list too and have never actually had PPI cover.

    I also recently had a computerised one saying press ‘1’ to collect a new payment of £1,000 relating to the Govt’s new pension bonus.

    ‘click’….

    It beats calls from 10’s of BDM’s ‘checking to see how I am’ mind you as the former are dealt with more quickly!!

  6. The TPS i believe is only mandatory for those firms that are “voluntarily” regulated by the Direct Marketing Assoc (DMA). Therefore if a firm does not prescribe to their code of conduct, and does not receive the TPS/FPS data to use on their diallers, you logging your details has not effect….

    This used to be the case when i worked in a call centre many years ago where we used a dialler system….if anyone know if this is no longer the case please inform, but i think youll find this is still the case, mores the pity.

    Compliance with the code should be compulsory, not voluntary.

  7. Julian Stevens 14th May 2012 at 8:41 pm

    But why is the regulation of these parasitic, opportunist, scumbag companies the responsibility of the MoJ in the first place? Since when was the MoJ a regulatory body?

    From the RMA Returns that the banks have to submit every year, the FSA must have known what was going on yet, as usual appears to have done nothing about it until it had become a full-blown mass mis-selling scandal and then, in time honoured fashion, without admitting any regulatory negligence, has launched yet another hindsight review, damaging yet further the public’s opinion of the Financial Services industry.

    Surely, any competent and responsible regulator should see problems such as this developing and take appropriate action to nip them in the bud before they reach epidemic proportions.

    The systems appear to be in place, but the FSA does nothing with the information gathered through those systems until the brown stuff has well and truly hit the fan. It really is a chronic indictment of an organisation that extorts over half a billion pounds a year from an industry that seems now to have a worse reputation in the eyes of the public than it did before regulation kicked off over 20 years ago.

    But never mind, the RDR will sort everything out and we’ll all live happily ever after in a scandal-free Utopia. Not.

  8. Stephen Yates 14th May 2012 at 9:16 pm

    @big ears: Quoting TPS’s website: “The Telephone Preference Service (TPS) is a central opt out register whereby individuals can register their wish not to receive unsolicited sales and marketing telephone calls. It is a legal requirement that companies do not make such calls to numbers registered on the TPS.
    The original legislation was introduced in May 1999. It has subsequently been updated and now the relevant legislation is the Privacy and Electronic (EC Directive) Regulations 2003.”

  9. As soon as the banks start to squeal they all come out of the woodwork in unison.

    CMCs are in general the pits, almost as bad as the banks and the product floggers who created the claims culture.

  10. When we move to a flat rate State pension which will mean that anyone who has contracted out of SERPS is actually better off; will all the compensation that has been paid out be paid back?! I have just received a PPI and a SERPS complaint – both of which are complete works of fiction, yet I now have to waste time getting files out of storage, formulating replies and dealing with some illiterate chimpanzee who can’t even write a decent letter! Just passed my last exam yesterday, but I do wonder why I would want to stay in this industry!

  11. Exasperated Me 15th May 2012 at 2:46 pm

    @DP

    You passed which exam?

    It makes me wonder what makes the FSA think higher qualifications will prevent consumer detriment when advisers still think PPI and SERPS were/are a good idea.

  12. If a consumer has been ripped off by a CMC they can come to me and make a claim against that firm.

    Must be some justice out there… 😉

  13. I am surprised that the wider press have not gone to task on this. Or should the greater surprise be the amount of advertising revenue that the main stream press appear happy to accept promoting the services of these vile companies?

  14. The reason these companies exist is due to the lack of the trust in the banks.I personally used one of these companies as the bank i had PPI with were not playing ball and i just didnt have the time to keep chasing them.The company i used provided a great service and i was more than happy to pay the fee for them to manage my case rather than not get anything from the bank in question.

  15. Re the ambulance-chasing calls: if you’re registered with TPS it is a breach of the marketing codes of practice to call your number. The MoJ rules for CMCs also make it an explicit requirement to to comply with the code, so they’re in breach of MoJ rules too.

    My personal experience indicates the MoJ don’t like being reminded about this point, but if you’re persistent you will eventually get through their standard responses and goad them into doing something.

    In terms of spam texts, forward them to your telco’s dedicated spam number (37726 for Three, and I think it’s 7726 for all the others); your telco will block those numbers at source so no-one gets hassled by them again.

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