Life is about to get a whole lot tougher for the claims management companies (CMCs) and the people who run them, or as most financial advisers refer to CMCs, the ‘ambulance chasers’.
As a result of the Budget, they are to be more highly regulated and their oversight is moving from the Ministry of Justice to the Financial Conduct Authority (FCA).
Nobody wants to prevent clients with a genuine grievance from receiving fair treatment and, if they have been disadvantaged, compensation – which is why consumers continue to have free and unfettered access to the FOS and the FSCS.
What we have witnessed in recent years, however, is the development of a whole new industry built on encouraging, and sometimes inventing, claims and grievances, purely for its own self-interest.
Millions of automated phone calls and texts are being spewed out from call centres, much to the annoyance of consumers.
In a personal experience, on one of the rare occasions it was a real person at the other end, I said: “I don’t have a PPI policy.” The caller replied: “You can claim anyway as the banks are not bothering to check the validity of the claims.”
I am sure most financial advisers would have liked to see the transfer to the FCA take place immediatelyThe National Audit Office recently estimated CMCs have raked in between £3.5bn and £5bn of the £22bn paid out on payment protection plans alone.
This is clearly a ridiculous situation, when the reality is that all consumers have free access to compensation and will receive all the help and support they need from organisations such as the FOS or Citizens Advice.
In essence, ambulance chasers are parasites who prey on the ignorance of consumers, and it is excellent news that their activities are going to be curtailed.
To quote from the Budget papers: “The Government is clamping down on the rogue CMCs that provide bad service and bombard customers with nuisance calls. The new regime will be tougher and will ensure CMC managers can be held personally accountable for the actions of their businesses.” In addition, the government is going to cap the amount CMCs can charge.
I am sure most financial advisers would have liked to see the transfer to the FCA take place immediately. However, the key point is that it will happen and in less than two years.
I am convinced a cap on fees, personal liabilities for the managers and the transfer of the sector’s regulation to the FCA will benefit consumers and eliminate, or at least drastically curtail, the ambulance chasers and their unsavoury practices.
Ken Davy is chairman of SimplyBiz
