RegulationFeb 12 2014

Frivolous claims by CMCs are rare, says Fos

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An eight-page joint document from the Ministry of Justice, the Financial Services Compensation Scheme, the FCA and Fos said that while Fos was taking the conduct of some CMCs seriously, it did not find that complaints generally were spurious.

The document said: “The Ombudsman service has the power to dismiss complaints considered to be frivolous or vexatious, but in practice it finds such cases to be relatively rare.

“The claims management regulator (the MoJ) is strengthening its regulation to tackle poor behaviour among CMCs by tightening the rules of conduct by which CMCs abide.”

This would include shutting down non-compliant firms and seeking to introduce a power to fine, although a CMC is still exempt from paying a fee should it take a complaint to Fos and lose; the costs are passed on to the financial sevices provider.

Last year, Alan Lakey, partner at Hertfordshire-based Highclere Financial Solutions, together with Derek Bradley, founder of online intermediary forum Panacea Adviser, took a file of complaints against CMCs to the MoJ, citing unfair treatment of advisers and their clients.

Their aim was to encourage the MoJ to crack down on this largely unregulated industry, especially as many claims against advisers were not just spurious but also often fabricated.

In response to this latest document, however, Mr Lakey said that, a year on, nothing had changed. He said: “This latest document is just a reaffirmation of the procedures and requirements, and is nothing new.

“It is sad, but the main aim of the CMC is to get the case in front of Fos, as 40 per cent of these complaints are upheld. Because Fos has an inquisitorial remit, this allows it to go beyond the actual complaint and look at other matters that the client or CMC has not mentioned.

“I have seen cases where the actual complaint has been rejected, but the FOS has upheld a complaint that it has effectively levelled itself about some aspect of the case it did not like.”

Mr Lakey, who last year won damages against a CMC in the small claims court over a false claim, added that a new “fad” was the subject access request, whereby a CMC requests the client file so that it can pore through it looking for some element to complain about.

He added: “This really should be outlawed as it is a ‘fishing expedition’ designed purely to maximise CMC revenue.”