MoJ should focus on the financial market CMCs in review, says First4Lawyers
Insurance industry told to put its house in order and take a zero-tolerance approach to challenging dubious claims
Regulation governing claims management companies (CMCs) operating in the financial products market should be the main focus of a review by the Ministry of Justice (MoJ), according to First4Lawyers.
In October, the MoJ announced it was considering moving the regulation of CMCs to the Financial Conduct Authority (FCA) following calls for a major review of the regulations and a cap on the charges CMCs can apply to customers.
Responding to the call, First4Lawyers opined that the widespread practice of businesses selling on client data to third parties – when permission has been given and the purpose is to seek potential claims – should be banned.
It also called on the insurance industry to ‘put its own house in order’ and take a zero-tolerance approach to challenging all dubious claims in court, rather than ‘seeking to get rid of them as quickly and cheaply as possible’.
‘We believe that there are effectively two CMC markets – financial products and everything else,’ said Qamar Anwar, managing director of First4Lawyers.
‘To be clear, First4Lawyers has no involvement or interest in the financial market, but we are concerned that there could be unintended consequences as a result of extra regulation aimed primarily at the activities of financial CMCs.’
Anwar continued: ‘We are also concerned that there is a lot of generalisation and perception around the CMC market, but not so much data. We hope that this review will identify robust evidence sources and then share them with stakeholders for comment before reaching any conclusions.’
Evidence published by the Claims Management Regulator and the Legal Ombudsman (LeO) suggests that financial CMCs are the major cause of consumer complaints and dissatisfaction.
In the last six months, the LeO reported that 94 per cent of consumer complaints were related to financial CMCs.
As a result, First4Lawyers argue that any new measures should be for the financial sector alone citing how it has been the subject of just two complaints to its regulator since 2008, both of which were rejected.
Also in its response to the MoJ, First4Lawyers called on the FCA and the Solicitors Regulation Authority ensure their communities were complying with the ‘raft of regulation that already exists’.
Matthew Rogers is an editorial assistant at Solicitors Journal matthew.rogers@solicitorsjournal.co.uk