Both the Personal Finance Society and Association of Professional Financial Advisers have united against Claims Management Companies negative impact on both advisers and their clients.
The debate was reignited last week by Apfa’s chairman John Gummer, who rallied against the increasing time and cost burden for advisers in having to deal with complaints brought to the Financial Ombudsman Service via CMCs.
This week, FTAdviser gave the chairman of one such company the right to reply, with The Claims Bureau’s Peter O’Donnell who said companies like his give clients a chance to be heard in an industry where they have no representation.
Chris Hannant, director general at Apfa, responded by pointing out that CMCs will take half of any potential award, adding the Fos itself urges consumers to fill out applications on their own to ensure it is a free service and they get all of any money back.
“Some of our members tell us that they regularly see claims with little merit coming through, as it costs CMCs so little to submit cases, so they just keep on firing them at the Fos to see what sticks.”
Keith Richards, chief executive of the PFS, commented that the tactics of CMCs over the past few years has tarnished the reputation of the sector and it is time that much stricter regulation was introduced.
“Whilst CMCs can provide a valuable service to consumers, there is little doubt that the overall culture to manufacture claims to earn a fee is a form of commission bias by a different means.
“It is therefore time to address this conflict of interest by separating the cost of the CMC service from a claim and create greater transparency and claimant responsibility – the no win, no fee culture must be stopped.”
Douglas Baillie, director at Douglas Baillie Wealth Management, called CMCs the greatest potential threat to advisers next year.
“The prospect of something for nothing has huge public appeal, and many consumers will simply chance their luck and will tell untruths and make wild accusations, irrespective.
“This is leading to a tsunami of vexatious and meritless claims, often submitted in very generic, unspecific terms, to an unsuspecting IFA who is then forced to process that complaint in accordance with the onerous FCA complaints management processes.”
He complained that CMCs are using the Fos dispute resolution process “as a free clearing house”, adding that to make matters worse, “if the CMCs complaint is rejected by the Fos and the adviser has paid dearly to prove innocence, then the complainant can appeal the decision in common law”.
Earlier this week, the Fos published a decision where an ‘ambulance chaser’ was ruled against in a case brought against Positive Solutions.
peter.walker@ft.com
