Tougher regulation of the claims management industry is needed to stem problems in the sector including spurious and fraudulent complaints, the Association of Professional Financial Advisers has said..
Apfa supported proposals recently put forward by the Ministry of Justice - including capping completion fees at 15 per cent - but said more needs to be done to crack down on vexatious complaints put forward by CMCs.
Citing research by FTAdviser, Apfa said 78 per cent of cases brought to the Financial Ombudsman Service against advisers by a CMC were declined, compared to cases against advisers in general, which had an uphold rate of 34 per cent in 2015.
Apfa said these figures pointed to the quality of claims companies being disproportionately low.
Chris Hannant, the trade association’s director general, said he was concerned about speculative or false claims against advisers.
“Our members regularly report cases where they have received claims which upon investigation, proved to be unsubstantiated,” he said.
“Such claims amount to a costly and time-consuming burden for firms and consumers. If CMCs were made to pay a fee when submitting a claim to Fos, refundable if the claim is legitimate, this would go some way to discourage vexatious claims, without causing any consumer detriment.”
As well as being charged a fee, Apfa said CMCs should be required to get confirmation from their clients all the information provided in support of their claim is correct to the best of their knowledge.
A declaration stating as much forming part of the documentation submitted to the firm along with the complaint.
If a fraudulent claim is found, Apfa said, it should be reported and the CMC’s authorisation suspended.
The MoJ consultation on CMCs closed this week, after asking whether completion fees should be capped at a maximum of 15 per cent of the compensation awarded.
It would also ban CMCs from receiving or making any financial payment for referring or introducing a consumer to a third party in relation to a PPI or packaged bank account claim; something Apfa said should be extended to all claims.
In this year’s Budget, regulation of CMCs was handed over to the FCA after concerns former regulator, the Claims Management Regulation Unit, lacked sufficient powers and resources to supervise the market properly.
