CMCs with poor success rates could see permissions revoked

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
CMCs with poor success rates could see permissions revoked

Low levels of uphold rates for complaints submitted to the Financial Ombudsman Service could work against claims management companies when applying for authorisation, the financial regulator has stated. 

The Financial Conduct Authority sent a dear CEO letter to CMCs this week, in which the City-watchdog said it had seen an increase in "problem cases" in the industry and moved to remind recipients of their regulatory responsibilities. 

Jonathan Davidson, director of supervision of retail and authorisations, said the FCA was aware of an increase in cases where CMCs submitted claims in the names of "fictitious" customers or acted on behalf of a consumer without consent or letters of authority. 

The regulator has also seen a growing pattern of claims where there is no relationship between the customer and the provider receiving the claim. 

The FCA assumed control of CMC regulation at the beginning of April, taking over from the Claims Management Regulator, and more than 900 claims management companies have registered to continue trading while they go through the authorisation process under their new regulator. 

But this week Mr Davidson warned failure to comply with the FCA's rules could see a CMC's temporary permission removed or the regulator refuse to authorise an application. 

Mr Davidson said the regulator would consider a "range" of evidence when making the assessments and warned high levels of Fos uphold rates for complaints against a CMC, or low levels of uphold rates for complaints submitted by CMCs to the ombudsman on behalf of consumers, could indicate a firm is not complying with the rules. 

Since April the Claims Management Ombudsman, a new service run by the Financial Ombudsman Service, has taken on responsibility for resolving complaints about CMCs from the Legal Ombudsman.

The FCA stated it had found examples of advertising by CMCs which does not comply with the regulator's rules, including offering services on a 'no win, no fee' basis but failing to set out the fees charged by the firm and neglecting to identify the company offering the service as a CMC. 

The regulator also found some CMCs were failing to tell customers they could also make a claim through a statutory ombudsman or compensation scheme without paying a fee. 

Mr Davidson warned the FCA would use its powers to impose requirements on CMCs found to be in breach of its rules. 

Last month FTAdviser reported advisers who helped steelworkers transfer out of the British Steel Pension Scheme were now being targeted by CMCs, after the names of some of the IFAs became public knowledge during the pension debacle. 

Two CMCs have since been referred to the regulator over alleged rule breaches after they asked for personal information without client consent, including one which cold-called a British Steel worker and turned up on the steelworker’s doorstep 24 hours later.

The other CMC was found to have approached Intelligent Money, a provider of investments and self-invested personal pensions, with a 'subject access' request without the clients' knowledge.

Intelligent Money has since written to former Active Wealth clients who are invested in its products to offer assistance in obtaining redress without the need of a CMC

rachel.addison@ft.com

What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.