New rules regulating Claims Management Companies do nothing for 'beleaguered banks'.
The Claims Management Regulator (CMR) announced new Conduct Rules governing CMCs this week and immediately faced criticism for failing consumers and banks with its lackluster approach to enforcement.
Described as 'tough new Conduct Rules' that come into force this summer, the CMR has banned all verbal contract arrangements meaning of CMCs must agree contracts in writing with their clients and CMCs must refer to their regulatory status as being regulated by the claims management regulator rather than the MoJ, which until now could be misconstrued as MoJ and government endorsement.
CMCs must inform clients if they are suspended or if restrictions have been imposed on their business within 14 days of the enforcement action being taken. Additionally, all inducement advertising (where individuals are offered cash inducements for signing up to use their services) is now banned.
CMR head Kevin Rousell said: "I want people to have time to think through their arrangement and be happy and clear about exactly what the deal is before they part with any money. These new rules will root out poor practice and ensure consumers are better protected by making contract terms much clearer."
However Paul Clark, CEO, Charter UK, counters that these measures will do nothing to help the UK's beleaguered banks, who continue to be plagued with vexatious claims. "Bad practice by some (CMCs) has plagued the financial industry for far too long, which is why we have been campaigning for a fairer approach to regulation in this area for some time," he says.
"Many of the UK's largest banks are making real progress in improving their complaint management processes, and these organisations should have the opportunity to resolve any genuine complaints quickly and efficiently, safe in the knowledge that CMCs are not making this process any more difficult than it needs to be.
"More still needs to be done to rein in CMCs in the financial services sector, as some of these firms have been allowed to put undue strain on the banking system for years. This bad behaviour not only has negative consequences for the firms concerned – particularly with regard to time and resources which could be better spent resolving real issues for customers – but also for the consumers being used as pawns in these CMCs' money-spinning games."
Meanwhile Consumer Groups have slammed the Conduct Rules as being 'very disappointing'. The Citizens Advice wanted CMCs to be barred from cold-calling, banned from charging up-front fees, to have to agree all contracts in writing and for charges and fees to not only be in proportion to the compensation gained but to be taken when the consumer is paid out.
Gillian Guy, Citizens Advice Chief Executive said it was shocking that banning verbal contracts was the only recommendation the CMR has seen fit to introduce. "Too many people have been ripped off by these predatory firms who use underhand tactics to make money from people who often don't have a claim to make," she said.
"The new Conduct Rules are extremely disappointing. The regulator has let consumers down by not banning upfront fees, barring firms from cold calling or making sure fees are in proportion to the compensation gained."