Claims firms "will disappear at the worst time"

Up to 80% of the financial management companies (CMCs) could disappear as the regulation of the sector would intensify, warned their commercial organization.

These companies accept claims for financial compensation – often for poorly paid Payment Protection Insurance (PPI) – and accept a reduction in payment.

Their regulations have been replaced by the city's watchdog, the Financial Conduct Authority (FCA).

All claim firms will need to register with the FCA and submit to new rules.

Some will welcome this decision because they consider CMCs as a nuisance.

• Wonga: Estimate the amount of compensation claims multiplied by four

Claims companies are not strangers to criticism. Consumer advocates pointed out that most people can claim compensation for a poorly sold financial product, such as PPI, without resorting to a claims management company that can receive 25% of any payment.

There was frustration at the number of nuisance calls from the area.

Wonga payday lender also attributed the drop in claims submitted by the CMCs.

But Simon Evans, chief executive of the Alliance of Claims Companies, said that Wonga's disappearance was the result of his own lending practices, that some bad operators were responsible for unwelcome calls and that CMCs allowed to millions of people to access justice. .

Nearly £ 34 billion was paid by the banks in compensation for induced IPP sales, and Mr Evans said that it was possible that only half of the eligible applications had been made.

He said CMCs help those who were unable to make a claim or who wanted to use a third party to do it for them.

In November, the commercial body stated that some customers had been misinformed by their bank that they had never had a PPI policy. It is only later that the PMCs have received a payment for poorly sold PPIs.

The deadline for filing IPP claims is August 29 and Mr. Evans stated that – companies being occupied by records – it was "worse than possible" for CMCs to deal with new ones. regulatory charges.

These companies had to apply for a temporary authorization to the FCA, which resumed since Monday the regulation of the sector with the Ministry of Justice. A full licensing process will begin in the coming weeks.

A similar procedure was followed when FCA hired debt management companies, which resulted in an exodus from this sector.

Mr. Evans expressed concern that the same thing would happen with CMCs, with 50% to 80% of the 670 companies offering financial debt management services, especially small businesses, choosing to stop rather than cope with additional bureaucracy.

"We have always said that we welcome regulatory compliance and strongly oppose any reprehensible behavior," he said. "But fewer companies could mean less chances of access to justice for consumers [who have been mis-sold financial products]. "

New rules

FCA has stated that its new regulatory regime aims to eliminate all "cowboys" from the sector.

He said that more than 900 CMCs, covering various sectors, had applied for a temporary operating license. The new rules, covering England, Scotland and Wales, should mean:

• Prevent companies from encouraging customers to make fraudulent, frivolous or vexatious claims
• Clients receive clear and up-to-date details about fees
• A summary document describing the services provided is proposed before the client's registration.

Jonathan Davidson, FCA, said: "Many CMCs play an important role in helping to get compensation for customers, including those who would otherwise not be able to make a claim.

"The new regime is focused on consumer protection and the professionalism of CMC, which means that customers will be protected from cowboy claims management and will benefit from a better offer."

The Association of British Insurers, which has often criticized some sectors of the CMC sector for encouraging fraudulent claims of road accidents, said the crackdown on "compensation cowboys" was "long overdue" .

"Too long, too many calls have been harbaded by unsolicited calls, text messages and emails from companies that often try to encourage dishonest compensation claims to the detriment of customers honest, "said James Dalton, of ABI.