The policy director for trade body the Association of Professional Financial Advisers, said members want to see firms shut down immediately if they make fraudulent claims.
Apfa has also called for “higher standards of approval” in the sector, similar to those required for businesses regulated by the FSA, and asked the Ministry of Justice to double the number of staff that supervises CMCs.
Mr Hannant said: “The best CMCs provide a useful service to consumers that need it. However, we are seeing more and more examples of claims being submitted by CMCs where there was no product or where there is no evidence of any mis-selling.
“This is fraud. We’re also concerned that the methods being used to obtain new business have become increasingly intrusive.”
Advisers are being urged to report bogus complaints to the Ministry of Justice, as well as informing Apfa, which is compiling a dossier of wrongdoing among CMCs.
Apfa also wants its members to dissuade clients from using CMCs, pointing out that neither the Financial Ombudsman Service nor the Financial Services Compensation Scheme will charge consumers if they make a claim.
Last year, a financial adviser forced a CMC to pay him reparation for time wasted following a false complaint about mis-sold payment protection insurance. Paul Morris, IFA for South Yorkshire-based Metro Financial Solutions, told Financial Adviser in September 2012 that he received £250 as a settlement from Oracle Legal.
Adviser view:
Alister Mellor, director of The Financial Management Group in Buckinghamshire, said: “There isn’t any real regulation of CMCs at the moment. There needs to be much tougher action over fraudulent claims – that means fines or even prison – and IFAs should always make a complaint to the Ministry of Justice.”
