The Claims Management Regulation Unit (CMRU) is “still not tough enough” in tackling the behaviour of financial services claims management companies (CMCs), a leading consumer credit specialist has said.
Kate Briscoe, founder of the LegalBeagles web forum, said the CMRU had been “taken by surprise” by the number of CMCs set up to handle PPI claims and had been “playing catch-up” ever since.
Ms Briscoe – who is also a litigation executive at QualitySolicitors Howlett Clarke – said although CMCs had been “badly damaged” by not being able to charge up-front fees, banned since last summer’s conduct of authorised persons rules, they were still not legally required to have client accounts.
“If a law firm goes under, there are all sorts of protections in place. It is bizarre that CMCs do not have to ring-fence their money if they go under. Clients are only protected if they pay by credit card.”
Ms Briscoe warned that the “gritty underbelly” of the claims management industry could be on display again after her firm’s victory in a bank charges case.
The firm successfully represented Oliver Foster-Burnell earlier this summer against Lloyds TSB in a case at Taunton County Court. The bank was ordered to reimburse Mr Foster-Burnell with the £743 it had charged, plus interest, and a further £1,000 for damaging his credit reference file.
“The CMCs keep an eye on our legitimate legal work,” she said. “I would not be surprised if, in the next two-to-three weeks, they start sending texts promising to get people’s bank charges back. We’ve seen some horrendous things.”
Ms Briscoe said she had been involved in meetings for the past three years with the CMRU, based at the Ministry of Justice (MoJ). “They are sincere and they are trying, but their efforts have at times been a woeful failure. CMCs get notices that their licences will be revoked. They appeal and make things difficult for the MoJ.”
Ms Briscoe said that when CMCs were shut down, phoenix companies could be set up by the same people and take over the old claims. “When CMCs are still trading and ripping people off, it is very frustrating to have to wait three, four or five months for action to be taken.”
Ms Briscoe said she could not see an end yet to the wave of PPI activity, though the “low-hanging fruit” had been picked and things had slowed down a bit.
She added that despite the introduction of the power to fine CMCs, expected to come into operation later this year, the CMRU had still not got “the regulatory underpinning it needs to be tough enough”.