Regulated claims management companies should be forced to de-authorise and then made to re-apply under far stricter criteria as the Ministry of Justice admits there are fraudsters pretending to be CMCs, Neil Liversidge, IFA and council member of the Association of Professional Financial Advisers, has argued.
In a series of letters to the Ministry of Justice, seen by FTAdviser, Mr Liversidge says CMCs are encouraging fraudulent claims in cold-calls to potential customers.
In one example, Mr Liversidge claims a CMC firm which cannot be named for legal reasons works with a firm in India whose sole objective is to “coach” potential customers what to say to CMC firms.
The firm that Mr Liversidge named is regulated by the MoJ to deal with financial products and services including payment protection insurance, but the MoJ said that Mr Liversidge could have been contacted by a fraudulent firm who was using its name.
The letter said: “There are scam calls currently being used by fraudsters who falsely claim to be from a legitimate regulated business offering PPI claims. Over the past year, the MoJ had received complaints from people who have fallen victim to scams run by illegitimate businesses pretending to be regulated CMCs or individuals claiming to be working for the MoJ.”
However, Mr Liversidge does not believe this is the case. In his response to the MoJ, he said that the same CMC has now contacted him twice, has sent him paperwork to fill in and has not asked for cash upfront as many scammers do.
His letter said: “The tone of your letter suggets you cannot believe a regulated CMC would behave in such a way. Well, guess what? They do behave in precisely that fashion and they are not untypical. Far from it. Thoroughly typical more like. You need to de-authorise every claim fabricator today and make them all re-apply on a far stricter criteria.”
Mr Liversidge has also urged the MoJ to set up a number for all those that receive texts stating that they are entitled to a PPI refund so the ministry can investigate the source.
His letter said: “The impression I have of the MoJ is that of Little Bo Peep trying to regulate a pack of wolves. While you guys are mucking about, these fraudsters are de-capitalising the banking system and swamping the Fos with spurious claims to the extent that genuine claims are backing up in the system. This is fraud on a collossal scale.”
This follows on from Mr Liversidge’s recent 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.
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.