Regulation  

Apfa lobbies Fos over upfront fee for spurious CMC claims

The Association of Professional Financial Advisers has launched a campaign for a rule change to force claims management companies to pay an upfront fee to the Financial Ombudsman Service in an effort to limit spurious claims.

At a meeting with the Fos, Apfa proposed that CMCs should be forced to pay a non-refundable fee when submitting a complaint to the Fos, which would be returned if the complaint turns out to be valid.

In an email update to members, Apfa said it will press the Financial Conduct Authority and the Fos to adopt this measure.

Fos should remain free to use for the public but CMCs who use it for their own commercial ends should have to pay, Neil Liversidge, Apfa council member and managing director of West Riding Personal Financial Solutions, told FTAdviser.

He said: “The Fos was not set up to be a tool for claim-farmers but that is what it has become, a lever by which they can exert undue influence on advisers and impose on them undeserved costs.

“If the rules are changed to force CMCs to pay the Fos fee up front they will be forced to properly pre-vet cases. This will reduce the Fos workload, reduce the cost to the sector and also ensure that genuine claims are not unnecessarily in the pipeline behind spurious and fraudulent claims.”

Mr Liversidge proposed this in a meeting held yesterday between the Apfa council and Tony Boorman, interim chief executive of Fos. Alan Lakey seconded it and “it was carried unanimously”, Mr Liversidge said.

A Fos spokesperson said: “We have regularly said that we do not believe charging claims managers would prevent claims being made, as inevitably those costs would be passed on to consumers.

“Additionally, the number of frivolous and vexatious complaints that are made to the ombudsman by claims managers remains incredibly low.”

Mr Liversidge added: “The Fos think that CMCs will cease being a problem once PPI is exhausted. How naive.”

An update from the Apfa council, sent to members, said: “Amongst the issues discussed were CMCs; how the number of free cases affects network members; how Fos ensures complaints are treated consistently by different adjudicators; whether adjudicators look beyond the events complained of by the consumer when reviewing cases; and whether Fos will make ex-gratia payments to firms if it makes a mistake when assessing cases.”

The council also discussed the Money Advice Service’s project to improve its signposting of consumers to regulated financial advice.

The update, seen by FTAdviser, said: “Apfa will continue to work with Mas to ensure it gets better at explaining the benefit of taking professional advice and how consumers can go about it.”

Apfa also discussed an initiative by Marsh UK to look at the feasibility of pooling the risk of legacy liabilities for advisers.

FTAdviser previously reported that a number of large advice firms and networks are involved in early-stage talks with Marsh UK, a subsidiary of US-based Marsh and Mclennan, to provide cover for legacy advice.