Lakey and Bradley take on claims companies with MoJ
Alan Lakey, partner for Hertfordshire-based Highclere Financial Services and Derek Bradley, founder of PanaceaIFA, met with senior officials from the Ministry of Justice claims management regulation division who explained the difficulty in regulating claims management companies.
The officials said although licences continue to be revoked, little can be done about CMCs which re-launch using a third party or relative.
Mr Bradley said: “Mr Lakey and I had an interesting and hopefully productive session with the MoJ.
“They were not aware that fraudulent claims from CMCs hurt IFAs in terms of case fees, investigation costs, lack of client records creating a difficulty to defend and the long-stop effect.”
Mr Lakey and Mr Bradley made a number of suggestions during the meeting, which the MoJ said it would consider as it updates the regulation of CMCs.
They suggested that any CMC-managed claim should be placed with the courts, rather than with the Financial Ombudsman Service, so that a complaint is treated in the same way as a case that goes to trial.
Mr Bradley said: “That way any complaint would need evidence to succeed. Innocent until proven guilty as the starting point and not the reverse as in a Fos investigation.”
They also suggested a levy on CMCs, similar to the financial services compensation scheme levy, to protect victims who have been defrauded by unscrupulous firms.
They also proposed higher regulatory costs for setting up CMCs and a requirement for clients of CMCs to sign a document stating clearly that making a false declaration with a view to seek or gain compensation is a criminal offence that could result in prosecution.
Mr Bradley said: “Amazingly this is not a requirement. The MoJ started regulating CMCs in April 2007. It is a growing and innovative industry that is always looking at new opportunities.”
They also discussed the difficulty in controlling CMC cold calls from outside the UK and how firms often use agents for lead generation who either are not aware or ignore the rules and are based offshore.
Other key points that were raised include:
-The low costs to start up a CMC
-CMCs are only investigated when complaints to the MoJ start to build up
- The MoJ has little control over CMCs which encourage fraudulent claims, but it can in severe circumstances refer them to the police
Mr Bradley added: “The MoJ will accept complaints from IFAs about CMCs and Mr Lakey left a number of very clear examples provided by IFAs for them to investigate.”