Complaints about claims management companies continue to fall

Complaints: Funding review

The number of complaints made against claims management companies (CMCs) continues to fall, the Financial Ombudsman Service (FOS) revealed yesterday.

It has also asked for evidence of whether professional representatives – in this case, mainly CMCs – make so many frivolous or vexatious complaints that they should be charged a fee for each complaint they make.

FOS received just 703 new complaints about CMCs in the year to 30 March 2022 – of which 30% were upheld – compared to 1,113 last year and 1,558 the previous 12 months.

FOS has had jurisdiction for CMCs since 1 April 2019, when the Financial Conduct Authority (FCA) took over their regulation.

Some 477 of complaints in 2021/22 related to payment protection insurance (PPI) claims – many from customers unhappy with their CMC’s actions in chasing fees – with accident management (130) the next most complained-about area of work.

FOS said the number of cases relating to PPI have started to decline, following the FCA’s deadline for making a PPI complaint.

But complaints about accident management CMCs have similarly declined – there were 231 and 352 in each of the previous two years.

FOS also received 728 complaints relating to legal expenses insurance and 78 on commercial legal expenses insurance.

Separately, FOS has issued a discussion paper on possible changes to its funding model, such as replacing the flat fee per case it currently charges with differentiated fees depending on the stage at which a complaint is resolved and the type of product it relates to.

Looking longer term, the paper raised the prospect of charging professional representatives a fee to bring complaints.

“The thinking is that it will stop ‘frivolous or vexatious’ claims and make sure that representatives bring better-quality submissions to us. We hear a lot of claims from financial services businesses and trade bodies about high numbers of baseless cases from representatives that are unworkable due to information gaps.

“But we do not see evidence to validate these claims and it is very rare that we see ‘frivolous or vexatious’ cases.”

The FCA told FOS that it has received a small number of complaints about such behaviour by CMCs, but “seen limited evidence to support them and none have so far resulted in formal action being taken”.

The paper continued: “Parliament set up the Financial Ombudsman Service to be free to consumers. There is a risk that a fee to a professional representative could become a barrier to legitimate complaints because it is passed on to the consumer.

“In any event, the Financial Services and Markets Act 2000 does not presently give us the power to charge CMCs or other professional representatives a fee.”

If FOS considers that a complaint is frivolous or vexatious, it already has the power to dismiss it and the complained-about business does not have to pay a case fee.

The paper asked for evidence to demonstrate “problematic behaviours” from CMCs and views on whether a charge from FOS would prevent them.

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