The Association of Independent Financial Advisers has called for the incoming Financial Conduct Authority to regulate claims management companies.
In its response to the Ministry of Justice’s recent consultation paper, Claims management regulation: Amendments to the conduct of authorised persons rules, Aifa warned that the real problem with the claims management industry is not that the rules are wrong, but that there is a lack of enforcement.
In August the MoJ’s Claims Management Regulator launched a consultation proposing tough new rules on claims management firms, including plans to end the practice of agreeing verbal contracts to submit complaints before fees are taken.
Neil Liversidge, Aifa council member and managing director of Castleford-based West Riding Personal Financial Solutions, recently wrote an open letter to prime minister David Cameron warning that a “free money” culture driven by ubiquitous CMC advertising is catalysing a trend of false claims against financial services firms.
Chris Hannant, policy director at Aifa, said that the current CMC regime is “under resourced and ineffective”, claiming that banned companies can often reappear in a different guise shortly after being banned.
He said: “We welcome the move for a full ban on claims management companies offering financial rewards or similar benefits as an inducement to make a claim.
“However, in the interests of consumer protection, we must ensure that sufficient resources and expertise is applied in this area. This means transferring regulation of CMCs to the new regulator, the FCA. Failing that, the Ministry of Justice must be more proactive in monitoring and enforcing claims management companies’ compliance with the rules.”
