22nd March 2021

We don’t need no stinking badges 4

Claims management companies have, in the eyes of many in the IFA world, managed to portray a world of plenty to hard pressed consumers in the troubled, distressed worlds of 2020 and 2021.

Indeed, many of you read Alan Lakey’s excellent piece, Nightmare On Compensation Street last week on CMC’s as a case in point.

In times of hardship where else on earth can a path be laid to such potential riches as that carefully manicured by CMC’s with the assistance of regulations designed to, in part stop it happeneing.

I had thought that when their regulation passed to the FCA that some success would be achieved in rooting out the rogues and vagabonds that roamed the Blazing Saddle's Like Rockridge world they had thrived in.

But amazingly, some still appear to be regulated by the Law Society

CMC’s are supposed to make clear that you can make complaints to the FOS for free. Having heard a number of radio adverts recently, I am minded to conclude that the airwaves have produced another seam of human opportunity to be mined.

This is one firms way of creating that awareness in the small print of one! Fees at 40% plus VAT

“You do not need to use a claims management company to make your complaint to your bank, and if your complaint is not successful you can refer it to the Financial Ombudsman Service for free”.

So, you only need to go to a free source of resolution after the paid for one has not worked out?

Now as we all know, if you want to complain to the Financial Ombudsman Service there is a time limit of six years from when you were sold the product, or three years from when you noticed (or ought reasonably to have become aware) something was wrong – whichever is later.

A radio advert from a CMC sowing the seeds of compensation expectation casts a net wider, fees 25% plus VAT.

This was their strap line: “If you bought life, savings or pension policies between 1988 and 1996, you may be entitled to compensation. Even if the policies concerned are no longer in force and you consequently have no paperwork relating to them”.

They even go on to name now defunct provider firms and state that you can be holding the compensation cheque in just 7 weeks!

Their approach is “holistic. If you have been mis-sold one product, you may well have been mis-sold others. We provide a free audit of all your financial portfolio in order to ensure that no potentially mis-sold cases are overlooked”.

This is simply put a ‘fishing expedition’, how can any firm, advisory or CMC determine a miss sale on a transaction 23 years ago with no paperwork or knowledge of the clients circumstances, needs and aspirations.

All this going on in a week when the FOS boss resigned, consultations start for some 150 FOS redundancies while so many complaints are unresolved.

As an industry, we continue with the struggle to restore trust in what we do. And all it takes to damage those aspirations are the actions of CMCs who prey on the vulnerable, promising thousands in ‘compo’ for an event that is so far in the past that you do not even need any paperwork!

For some period of time I have fought against this lot, with the valuable support and intellectual input of Alan Lakey. We were responsible in no small part for having the regulation of CMCs put under the FCA remit.
Advisers should realise that an estimated 75% of complaints to the Financial Services Compensation Scheme come from CMCs and 50 per cent of claims to the Financial Ombudsman Service are from CMCs.

Many may be aware that the FOS cannot investigate a case if legal action has been initiated by the client. If a CMC works on the basis that “if your complaint is not successful you can refer it to the Financial Ombudsman Service for free” then the regulatory view should be that CMC engagement is the same as starting legal action and they lose that fall back? 

Just a thought.

FOS, Regulation, Panacea Comment